During the Hack Seasons Conference, we had the unique opportunity to engage with him. original article for precise information. In Brief With a rich background spanning over ten years in the cryptocurrency domain and managing a fund worth billions, Wo offers an unparalleled viewpoint on both the historical and contemporary state of the market. His investment strategy ranges from foundational infrastructure to the intersection with AI, giving us a look inside the thought process of a seasoned expert in the field.

Many entrepreneurs are inspired to enter their industry due to defining moments. What sparked your journey into Web3?

My foray into Bitcoin began in 2013 after a conversation with a friend during my college years. Back then, I was just a student, and the topic intrigued me immensely. I made my first Bitcoin purchase in 2014, ten years ago. Although I faced some losses initially during a bear market, my interest deepened as I explored Bitcoin further, realizing, 'This is something quite fascinating.'

I launched DFG in 2015, with my mother’s backing. We kicked things off with a $20 million fund, essentially functioning as a family office without outside investments. In 2016 and 2017, I started channeling more funds into various early-stage ventures like Circle, Brave, and BitSo, all of which are now unicorns.

Could you elaborate on your investment strategy? 

Between 2018 and 2019, we directed our investments towards Layer 1 protocols, backing early-stage contenders like Solana, Polkadot, and Near when valuations were incredibly attractive. These investments turned out to be lucrative for DFG.

We thoroughly enjoyed the bullish trends of 2021; however, we learned a lesson due to over-diversification. Our portfolio expanded to over 100 projects across virtually every sector, which led to inefficient capital allocation due to inadequate due diligence. Managing so many portfolio companies presented its own set of challenges.

In the past couple of years, we’ve slightly adjusted our strategy to a more calculated approach, focusing on primary market investments. On average, we’re participating in one deal monthly or every other month, investing between $1 million and $5 million, and concentrating our efforts on mid to later-stage opportunities in infrastructure, Layer 1, and Layer 2.

In total, we oversee assets worth about a billion dollars, predominantly in liquid forms, amounting to 80% in secondary markets. Nonetheless, we're actively scouting for promising projects in the primary market.

What sectors dominate your portfolio focus? 

Given our investment size and expertise, DFG primarily zeros in on infrastructure and protocol-level initiatives. There are significant existing challenges in this realm, particularly regarding scalability and other unresolved issues, signaling tremendous potential for future infrastructure advancements.

Our concentrated focus on this niche is also rooted in our technical competencies. Our adept tech team meticulously examines all code involved. We don’t possess the same level of expertise in gaming or diverse types of protocols. Hence, it makes strategic sense for us to emphasize infrastructure and protocol-level investments.

What insights have you gained from your early Ethereum investments? 

We've realized the importance of focus, especially considering our limited time. It’s clear we can’t afford excessive diversification—this becomes evident especially from our experiences during the last bull run. A critical takeaway is the necessity of retaining tokens right from the onset.

What's your viewpoint on Layer 2 solutions? Are there any developments exciting you in this area, and are you open to investing in it? 

Layer 2 solutions are a hot topic in the industry. We do have interests in some Layer 2 ventures, notably Metis Network, which we invested in during 2021 and has since risen among the top 10 performers. We've also recently backed Mode Network, which targets DeFi Layer 2 while leveraging the OP tech framework.

The Layer 2 landscape is bustling with builders striving to create new protocols. However, it’s crucial to discover a unique angle that meets market demands; otherwise, it's pointless to add yet another Layer 2 amidst the existing multitude. A solid tech framework or a focus on a specific sector can better facilitate application development atop your protocol. Your Layer 2 solution's success hinges on that specificity.

Currently, among the top 10, we maintain our holdings in $MODE and $METIS. We're certainly on the lookout for more promising Layer 2 projects to invest in.

Are you considering investments in AI? 

The AI trend excites us greatly. Unlike passing fads, I believe this is a long-term narrative poised to shape the upcoming decade. We’re currently investing in some notable AI projects, including Near and Render Network, and engaging with Gensyn Network, evaluating additional AI ventures worth our investment.

Are you planning to incorporate AI into your investment methodologies? 

Absolutely! If AI solutions can address our challenges—like those we face in trading or optimizing our activities on decentralized exchanges—we will undoubtedly implement them. Our fund is driven more by tech and product efficiency than trading expertise.

When it comes to allocating capital to purchase a specific cryptocurrency in a particular market, we lack the expertise to maximize our trading efforts. Hence, if AI solutions emerge that can enhance our trading operations, we will be quick to adopt them.

I'm confident many investment funds share similar needs. This is merely one area where AI can provide solutions, and there will be countless others offering benefits to firms across the industry.

How do you manage risk, particularly amidst the recent volatility in the cryptocurrency sphere? 

For us, adopting a long-term perspective is key to mitigating risk as we're not swayed by short-term fluctuations. We also avoid the use of leverage. While many traders are enamored with the thrill of leveraged futures trading, it significantly heightens risk for capital investments.

We will never engage with leverage. Even if prices dip slightly in the short term, we're comfortable with that, provided we hold valuable tokens over a longer period. In the end, this long-term vision positions us for success.

What are your thoughts on Central Bank Digital Currencies (CBDCs) and their influence on the cryptocurrency ecosystem? Do you believe CBDCs will affect the crypto market? 

I believe stablecoins play a pivotal role within the market. They act as a necessary gateway, crucial for attracting investors from outside the crypto sphere into Bitcoin, Ether, and other assets.

Given the inadequate support from banks and financial institutions directly tied to the crypto industry, stablecoins serve as an essential bridge for investors entering the sector.

James Wo

We steer clear of memecoins, as we view them as lacking long-term value—our focus is more on long-term investments. While traders or retail investors may pursue them for substantial short-term gains and speculation, that’s not our approach.

However, memecoins do play a significant role in promoting crypto awareness. Many people recognize Bitcoin and even some memecoins like DOGE or PEPE, which helps retail investors familiarize themselves with cryptocurrencies. This foundational knowledge can pave the way for deeper exploration into the crypto landscape.

You mentioned that your fund emphasizes infrastructure. What potential do you see within the DeFi landscape? How does your company fit into this sector? 

We've backed a DeFi initiative named Parallel. However, investing indiscriminately in every DeFi project doesn’t align with a viable strategy. Many projects resemble pipe dreams rather than realizable ideas.

It’s essential to pinpoint specific sectors where merging with crypto is logical. Hence, our investments will depend on the feasibility and practicality of the presented DeFi solutions. Without a concrete, realistic plan, I find it challenging to justify investing in a multitude of DeFi concepts.

Can you share any standout investment accomplishments or key lessons learned from your previous ventures? 

Investing in Bitcoin has always been considered one of the smartest financial moves. Personally, the Bitcoin I acquired back in 2014 stands out as my most lucrative investment to date. While there are plenty of other investment avenues, one that particularly stands out is Render, which we purchased in 2021 when it was trading at a fraction of its value. That decision has really paid off, yielding us a remarkable 100-fold return. This success can be attributed largely to the incredible team behind it, as they are continuously developing a fantastic product.

Our extraordinary returns of 100x stem not just from luck, but from a key strategy: holding on to our assets from the moment we acquired them all the way through. If you jump ship and sell tokens right after purchase, you’ll miss out on significant gains like these. So, the key takeaways and our achievements really boil down to two important points: choosing high-quality projects and committing to a long-term holding strategy.

Could you provide insights into the fund’s roadmap and your future plans?

Our fundamental goal is to expand the assets we manage while keeping our team lean and efficient. We believe that a small, dedicated group can effectively oversee substantial assets. Currently, we’re managing around a billion dollars, but we’re setting our sights much higher, aiming for a massive 5-10 billion dollars within several years. Our aspiration is to elevate our asset management to the next tier and ensure sustainable growth for the fund in the long haul.