OnePiece’s Kezheng Jia and Langrenus’ Joey Kong on Web3 Investments

In this captivating discussion on The Silicon Dreams, Kezheng Jia (KJ) and Joey Kong, two of the VC frontrunners in the Valley, share their valuable insights on the transformative potential of the Distributed Ledger Technology (DLT) with host Sonia Ahuja, the CEO and founder of Orbis86. The insightful dialog aired on Radio Zindagi, and underlines the current scenario of Web3 startup investments.

Kezheng (KJ) Jia is the co-founder of OnePiece Labs, a Silicon Valley-based Web3 incubator venture capitalist fund. The company is due to launch its third batch of incubators in August 2023. He was also the former Web3 investment branch lead of UpHonest Capital, a tech VC fund.

Joey Kong is the co-founder of Langrenus Fund, a Web2 and Web3 investment firm, and a former employee of OKX Ventures, the investment fund of the leading cryptocurrency exchange OKX. He started out his career as an investment manager at JP Morgan Chase, a New York-based financial services multinational company.

What are Venture Capitalists Looking For in Web3 Startups?

Web3 projects are receiving funding from many investors and VCs. But KJ and Joey follow their own thesis of investment plans and criteria, in collaboration with their respective teams at OnePiece and Langrenus.

KJ explains his upcoming incubator, “We have done the first two batches last year. This time we’re going to work with another layer 1— Sei. In the previous batches, we only worked with the founders, this time we have the ecosystem supporters who can come in, we can work together to provide better resources for our founders and help them grow.”

KJ also tells about the company’s mentorship program for budding enterprises— “The curriculum is a little bit different this time. (Earlier) we used to do a lot of public lectures. This time we also have a mentorship program for individual problems.”

Emphasizing focus on developing Web3 apps as publicly usable as Web2 apps, he adds, “We’re going to focus on three subjects— GameFi, SocialFi, Web3-plus-AI. The common thing about those three subjects is that they could all bring real traffic from Web2 to Web3.

Actually there’s a story. So I was like debating with a friend from AI— saying where Web3 is, where’s AI, where we are… there’s one thing I cannot beat him— he said AI has a real use case. He asked me if I use ChatGPT every day; yes. I don’t need interns for the summer because I have ChatGPT. So this is a real use case (of AI).

(But) what about Web3? There’s a lot of good things about Web3, but there’s not one thing that everybody can use every day. That’s why I’m thinking… People native to Web2, like my parents, can actually use it everyday.”

Joey Kong talked about founding Langrenus Fund and key areas of focus while investing in enterprises. He said, “Through the early years after my graduation, I was focusing on primary market and secondary market trading. I’m a finance guy, always worked with people from product or tech (background).

Through the last two years, I got thinking that Web3 is a big opportunity to enter… So we just started our own venture studio, grow this long healthy relationship with our cohorts like our portfolio companies. We’ve been investing since July last year (2022), and we end up doing 10 deals including two in the AI region, and decided to see more founders in AI and Web3…

I guess we’re focusing all verticals in those two regions, nothing particular. As for this time frame, we want to be focusing more on Web3 games, something like Legends, or AI applications…”

Joey talks about what investors in the Valley are particularly looking for, “I want to go in depth just to give a perspective about our thesis. The early funders are the key to success. I mean many people have the ideas but they have to build at least an MVP (Minimum Viable Product). Just illustrate some demo to prove the point that you can build something great in the future.

If they choose certain factors (of their proposed product/service) that are like too competitive, they have to have at least two to four different features that we don’t see in other products. And they have to be fully committed and have this vision… So we build these connections and resources worldwide for a great deal of sourcing platform…”

He also gives advice for verticals that are too narrow and competitive— “When you see something way too competitive, the solution is not to build something inside this vertical, rather build something like one step forward. That’s the key. We see so many (Web3) builders traveling around the world and pitching to investors (with repetitive ideas). We just don’t see the efficiency of it.”

Although he avoids taking names, he cites an example of an AI product that his company has recently invested in— “Kids don’t read books; 2010 or 2015-born ones only want to watch the videos. So if you tell them four or five sentences to describe a story and use generative AI, you can create a video out of it. And I think animated videos can represent the future. So if I just put in those words or voice messages in whatever ways and generate animated videos, it could be exciting to see.”

Naming the projects that his company recently invested in, KJ talks about SparrowSwap, the largest decentralized exchange on Sei network. He explains why he picked it— “I made the decision not only because I’m a big fan of Sei…

There’s a lot of referrals (of SparrowSwap, from other people in the market). I talk to different web3 investors and connections. And people just put good words on the founders (of this project)…

Another reason is that DEX (Decentralized Exchange) is very important to the chain and usually it works closely with the chain-people. So I also talked to the founder of Sei– Jeff (Feng), and to the rest of the team— their Head of Growth, Head of Marketing; And I always got very good feedback… (They can solve tough) tasks, do more research, (there’s constant) improvement, show (great) execution skills…”

He also keenly describes another project his company has invested in— “It’s a Web3-plus-AI (project) called Path Integral, but they use the product name ‘txyz.ai’. They have built a plugin on ChatGPT, and were the first batch of the (AMEK EQ) 200 Plugin.

So ChatGPT can summarize news or some regular papers, but when it meets a very academic paper (like a) research paper, it has a problem. So they (Path Integral) used their own algorithm to better summarize and do research on the research papers. That’s the AI part.

The Web3 part is that they’re gonna build tokenomics. They’ll connect universities, professors, researchers, students, PhDs. They need to do research (for txyz.ai). They will use tokenomics to connect everybody and provide a very efficient and healthy reward system.

The reason I want to invest in this project is not because AI is a buzzword; I think it has a real use case. I consulted many Ph.D. candidates and they usually spend 15 days reading a paper and afterwards, they feel like ‘oh damn, I didn’t learn anything’, or ‘it’s not a good thing’, or ‘I have to read 2, 3 or 5 papers and then do the comparison’. Path Integral makes everything much easier. There’s a real use case.

The founder of this project is a research influencer himself, who has more than 10 million followers. So he can really help promote the product himself. He also recruits very good teams all over the world. The execution, good market strategy, and the use cases… those things helped me make a quick investment.”

Centralized Exchange vs Decentralized Exchange

The speakers also talked about the difference between Centralized Exchange (CEX) and Decentralized Exchange (DEX). They agreed centralized exchanges are important, and are aligned with the principle of blockchain technology.

KJ differentiates between CEX and DEX— “Big names you have heard, say Coinbase, Binance, OKX, are centralized exchanges. They’re convenient and efficient. It’s a good exchange, good service, good UI-UX. Everything’s great but the problem is you don’t own those cryptos. If you bought one Bitcoin on any of those centralized exchanges, you can mostly sell it but in some situations, for example, in FTX, you just cannot sell your assets, you cannot take your money away because it’s centralized.

So I highly suggest everybody should use decentralized exchange because that’s your key, you own the crypto, and you can move it, transfer it anytime you want. Decentralized (exchanges) are a little bit inconvenient for use, but on the other side, you own the crypto you have. SparrowSwap is one such DEX.”

Once you purchase crypto from a CEX, it only gets issued out in the exchange’s native wallet linked to your account. But you cannot use it. You need to transfer it to your crypto wallet, in order to use it for various DeFi activities, or convert it into fiat. All of these transactions incur fees. The exchange could also face issues while transferring your crypto. It could be exploited to commit fraudulent activities due to the lack of real-time connectivity with the wallet address.

Unfortunately, currently we can only use CEX for fiat conversions, as there aren’t any DEXs that enable crypto to fiat conversion or vice versa. All the current DEXs only operate crypto-to-crypto. Nonetheless, various CEX disasters like Celsius’s collapse, FTX scandal, and Mount Gox’s Bitcoin tumbling, are excruciating.

It is therefore advisable to use centralized exchanges only for off-ramp. And if you swap cryptos, you should immediately move it to personal wallet.

Advice for Novice Crypto Investors

Joey had advice for users who are new to the world of crypto trading. Exemplifying with his own shift from a high-paying job in traditional finance (TradFi) at JP Morgan-Chase, “I got very different opinions, especially from the TradFi pals. They were like you got a secure job in JP Morgan; one of these days, you may get into some high executive levels…

But I didn’t really make a hard decision when I transitioned from TradFi (to DeFi), and luckily got into OKX. It was a pretty good journey for almost four years, going back and forth— Hong Kong, Singapore, other places, not only for investments, but also for finding brokers, market-makers. Sometimes I’m also gonna be responsible for the retail yielders’ growth. I’ve seen so many people, so many perspectives… so many made a fortune (in DeFi)…”

He continues, “The first thing in terms of whatever trading you want to do— centralized, decentralized, NFTs, you gotta ask one thing— ‘what if I lost all of the money I’m gonna invest?’… So don’t invest all of your money, don’t bet your house, other savings… reserve the money; only invest the money that you can afford to lose.

And do remember, all the money that you invest can’t (always) have a good return. You have to do your research; don’t listen to the influencers. I think they just want their followers to like make the right decisions, but at the end of the day, it is you who has to be responsible for your money. Do like day trading or some low investments, early deals…

Also, ‘do your own research’ doesn’t mean that (do everything) just by yourself. There are so many tools, resources, platforms. Don’t be just like, one day research and then you say okay this is it, I’m gonna do it.

Talking about asset management (in general), you don’t want to put all of your money into too risky areas. Make very reasonable portions, maybe 20 percent risk, other 20 percent of your assets into something like real estate, and some of it like 20 or 30 percent to your friends– you want to do some LPs (Liquidity Provisions); (and then) it’s the other money you invest in, some day trade or something, just to see if you really got it…

I always see that the personal day traders cannot outperform professional teams (who manage high-profile portfolios, use heavy software, indicators, etc.). (It’s because) they execute without emotions. Run as per what you have decided in the first place as your strategy. The strategies (should also) change over time… just that the human nature is something you don’t want to touch.”

Joey emphasized the age-old verse of “Don’t put all your eggs into one basket”, especially for crypto, a high-risk asset class. An interesting point raised was that of influencers. Influencers often act connivingly to generate cycles of hype around certain projects, make huge profits for themselves, and then exit surreptitiously, when prices fall due to the lack of natural value.

Memecoins such as Pepe, Doge, and Shiba Inu, are classic examples. They saw periods when they were turned into behemoths, due to influential people hyping them. But their value has now significantly dipped.

Another trend with the influencer hype is that there’s a great possibility of the hype reaching you at the time when the whales are exiting their positions. You might act out of fear of missing out. But this is the time when everybody else is exiting from the market, which means that the price of your purchased asset will likely go down. So instead of making a profit, you end up becoming exit liquidity for the early investors. Hence, “do your own research” is paramount.

Disclaimer: The article is a transcription of the interview conducted by RJ Soniya Ahuja. No statement or comment in the article is a direct or indirect portrayal of the writer’s views or opinions. The interview does not intend to promote, demote or demean any organization or community. It also does not intend to give the readers any financial or investment advice.