In charge of more than 1 billion US dollars: Demystifying the top blockchain investment institution Polychain

Editor's Note: This article comes fromEditor's Note: This article comes fromCarbon chain value (ID: cc-value)

, Author: Hydrogen 3, Editor: Jiang Xiaoyu, reproduced by Odaily with authorization.

For Chinese people, the name Polychain may be a little strange. But in the Western blockchain investment circle, this name is undoubtedly a heavyweight.

Polychain is an investor in star public chain projects such as Nervos, Cosmos, Tezos, and Dfinity, and is also an investor in the famous digital currency exchange Coinbase. In addition to these star projects, the legendary background of the founder of Polychain and the high rate of return in 2017 have made it an investment institution that cannot be ignored in the blockchain circle.

However, in 2018, with the gradual deepening of the bear market, doubts about Polychain in the investment circle are gradually increasing. Many people think that it just caught up with the trend of digital currency, so it flutters in the wind; when the market cools down, it starts to fall in the wind.

Olaf Carlson-Wee is only 29 years old this year, less than 30 years old; Polychain Capital has only reached its third year, and there is still a long time to go. The market will eventually give an answer.

On January 3, 2009, the genesis block of Bitcoin was born, and the Bitcoin network is no longer just a theory. At this time, the famous Ross Ulbricht has not yet graduated. Ulbricht had a smooth academic career, but his career path was extremely bumpy. In 2011, after he knew about Bitcoin, Ulbrich decided to do a big thing: set up a transaction platform Silk Road in the dark web (Dark web) that uses Bitcoin as a means of payment.

The emergence of the Silk Road was like a spark, which not only ignited a group of people who wanted to do evil, but also ignited a group of enthusiasts. These include Li Qiwei, the founder of Litecoin who was a Google engineer at the time, and Olaf Carlson-Wee, a college student at the time.

At the time, Carlson-Wee was a prospective graduate in his junior year and about to enter his senior year. He saw information about Bitcoin on the dark web "Silk Road" Gawker's blog, and then became fascinated. When he graduated, Carlson-Wee wrote a sociology thesis on Bitcoin, against the advice of his advisor. It is worth noting that Carlson-Wee studied at Vassar College in New York, a well-known liberal arts college in the United States with a very high acceptance rate for law schools and medical schools. Yet Carlson-Wee went to work as a lumberjack as soon as he graduated, without a trace of graduate anxiety.

Carlson-Wee's love for Bitcoin is not just about joining the industry. Starting in 2013, he insisted on living on Bitcoin for three years until his understanding of the industry began to change.

secondary title

02 Primitive accumulation

Carlson-Wee started at Coinbase in the customer service department, and then served as a product manager and risk director, responsible for the operation of the company's products, account security and fraud prevention. This work needs to face users directly, review and analyze and identify a large amount of data. Work has enabled him to have a relatively deeper understanding of industry trends and users. As the first employee of Coinbase, Carlson-Wee also witnessed and participated in the process of Coinbase from 0 to 1. This experience made Carlson-Wee think that he is capable and can come out to invest in cryptocurrency.

2016 was a big year for discerning investors. After the DAO incident, ETH underwent a hard fork, forming two chains, ETC and ETH. Bitcoin rose from $400 at the beginning of the year to $600 or $700. However, the proportion of Bitcoin in the entire market began to decline. At the beginning of the year, the market value of Bitcoin accounted for 90%-95% of the entire encrypted digital currency market, while altcoins only accounted for 5%-10%. For altcoins, this is an opportunity.

At this time, Olaf Carlson-Wee saw the momentum and decided to create a digital currency hedge fund. In addition, two venture capital firms, Andreessen Horowitz (a16z) and Union Square Ventures (Union Square), early and heavy participants in Coinbase, were recruited for financing. This is the origin of the famous Polychain. The general partner of Andreessen Horowitz serves on Polychain Capital's board of directors.

Later, Danhua Capital, Abstract Ventures and several individual investors invested in Polychain Capital.

In hindsight, Carlson-Wee's departure on the eve of Coinbase's take-off seems like a big pity. In fact, Polychain Capital participated in Coinbase’s Series E round in 2018. From former employees to shareholders.

03 Investment Genius

From 2016 to February 2018, Polychain Capital became the first cryptocurrency fund to manage more than $1 billion at the time. Fund statistics include all assets, including digital currency held in the account, raised cash that is still unused, and so on.

For the full year of 2017, Polychain Capital’s return was 2303%, adding approximately $800 million to clients’ assets. Carlson-Wee became a star in the investment world, and was even compared with George Soros (quantum fund) and John Paulson (the first hedge fund person) at one time.

The surge in income also brought a management fee return of US$150 million to the founder Carlson-Wee. Before the establishment of Polychain, Carlson-Wee's personal wealth was only US$14,502.

Unlike the high rate of return, Polychain Capital and Carlson-Wee are extremely low-key and never actively disclose the projects they invest in.

From the public information, the carbon chain value has obtained investment projects passively disclosed by Polychain Capital:

According to publicly disclosed information, among the projects invested by Polychain Capital, there are 7 protocol projects, accounting for 36.8%. Infrastructure and protocols belong to the underlying structure in the entire blockchain industry. Compared with other projects, it is limited by the development of the industry, with a longer payback cycle and a slower payback time.

Afterwards, in the environment of the overall industry decline, investing in projects with slow returns in the basic industry also brought losses to Polychain Capital.

Whether Carlson-Wee is an investment genius is unknown in 2017 or even early 2018, but he is indeed standing on the wind and blowing in the wind.

The scale of 1 billion may be the brightest moment of Polychain Capital so far. After entering 2018, the entire digital currency investment circle has begun to change. The timing is different, and traditional venture capitalists no longer need to covertly enter the circle of digital currency. At the end of 2016, due to knowledge reserves and legal restrictions, the willingness of traditional venture capital to invest in digital currencies was generally too low. Of course, the main reason is that the entire digital currency market is too small, too much energy has been devoted, and the input-output ratio of traditional venture capital is not cost-effective.

However, everything has changed since 2018. Traditional venture capitals have set up funds and subsidiaries specifically for the blockchain industry. The reason is because in January 2018, the market value of the entire digital currency reached 800 billion U.S. dollars. Who wouldn’t want a share of such a big market?

The market began to turn cold in 2018, and the long decline has just begun. The internal conflicts of Polychain Capital also began to erupt one after another. The conflict actually arose as early as 2017, but the astonishing rise in the currency price before covered up the conflict within the team.

As early as 2017, Carlson-Wee asked Polychain's early investors to invest hundreds of thousands of dollars in cash, which first angered early investors and forced several investors without cash to leave.

Later, Carlson-Wee banned Pantera Capital from browsing information about Polychain Capital on the grounds that Pantera Capital had also established a cryptocurrency fund, and forced Pantera Capital to sell its holdings.

Early investor Harry Greenhouse also sued Polychain Capital, claiming that when he asked for a refund, he returned the cost price and the price at the time of payment, not the price at the time of asset sale.

Carlson-Wee withdrew $60 million of the $150 million it received in cash. The blow to investor confidence was devastating. You know, Carlson-Wee insisted on not using any cash for 3 years in 2013. Even if cash is needed, he pays BTC to friends, and friends pay cash on their behalf.

In November 2018, Ryan Zurrer, the entrusted venture partner who joined the company when it was founded in 2016 and also known as the second person of Polychain, resigned from Polychain Capital and shifted his career focus to the realization of a serverless decentralized Internet. The Web3 Foundation.

image description

Image source: LinkedIn

The change of the founder's attitude towards Bitcoin, the change of core personnel, and the contradiction between the company and early investors are just the corner of Polychain's negative news. The highlight is that the asset portfolio invested by Polychain has experienced a huge decline in 2018. ——Just as the wind blows past, the pigs flying into the sky also fall under the action of gravity. In the face of market doubts, Polychain responded: Although more than a quarter of the company's projects are deployed in Ethereum, the decline in the company's asset portfolio is less than that of Ethereum. But in fact, in 2017, the increase of Polychain asset portfolio was much smaller than that of Ethereum.

In 2018, Polychain Capital changed to a new office and left a fake office address in public documents. Carlson-Wee put down his phone and went on a 90-minute no-tech hike in Oakland, California.

This scene seems to have happened before. Before the subprime mortgage crisis came, the hedge fund Scion Capital shorted subprime loans, but the subprime loans continued to rise all the way, and the fund suffered heavy losses. The founder Michael J. Burry prohibited investors from redeeming shares , and shut myself in the room listening to the loud noise, enduring the losses caused by the market's rise.

Scion Capital lost more than 200% at its highest loss, followed by the outbreak of the subprime mortgage crisis, and Scoin Capital gained an unprecedented $2.69 billion profit. This story was later adapted into the movie "The Big Short", which allowed people to observe this hedge fund up close.

Could Polychain Capital be the next such hedge fund? It is still unknown. Capital always speaks for the result. Since Carlson-Wee wants to gamble on the road of digital currency even if the digital currency market returns to zero, Polychain Capital has made similar plans.

[1].Ross Ulbricht.https://en.wikipedia.org/wiki/Ross_Ulbricht

[2].Vassar College Sociology Department.https://www.facebook.com/vcsociology/posts/our-old-student-olaf-carlson-wee-wrote-his-sociology-senior-thesis-on-the-new-di/984495811621359/

[3].How Olaf Carlson Wee’s Fund Transformed $4 Million to $1 Billion in Crypto.https://www.newsbtc.com/2018/07/30/how-olaf-carlson-wees-fund-transformed-4-million-to-1-billion-in-crypto/

[4].Employee #1: Coinbase.https://blog.ycombinator.com/employee-1-coinbase/

[5].This Man Has Been Living On Bitcoin For 3 Years.https://www.forbes.com/sites/laurashin/2016/01/07/this-man-has-been-living-on-bitcoin-for-3-years/#74e4a1426973

[6].Polychain Capital.https://www.crunchbase.com/organization/polychain-capital#section-overview

[7].He Turned $14,502 Into $800 Million: Now The World's Biggest Crypto Hedge Fund Is Hurting.https://www.zerohedge.com/news/2018-09-11/he-turned-14502-800-million-now-worlds-biggest-crypto-hedge-fund-hurting

[8].Olaf Carlson-Wee Rode the Bitcoin Boom to Silicon Valley Riches. Can He Survive the Crash?https://www.wsj.com/articles/olaf-carlson-wee-rode-the-bitcoin-boom-to-silicon-valley-riches-can-he-survive-the-crash-1536681364