The era of ‘spray and pray’ investing is cooling down, says crypto VC

Episode 14 of Season 4 of The Scoop was recorded remotely with The Block’s Frank Chaparro and Darren Lau of The Daily Ape and Not3Lau Capital.

Listen below, and subscribe to The Scoop on Apple, Spotify, Google Podcasts, Stitcher or wherever you listen to podcasts. Email feedback and revision requests to [email protected]

This episode is brought to you by our sponsors Fireblocks, Coinbase Prime & Chainalysis
Fireblocks is an enterprise-grade platform delivering a secure infrastructure for moving, storing, and issuing digital assets. Fireblocks enables exchanges, lending desks, custodians, banks, trading desks, and hedge funds to securely scale digital asset operations through the Fireblocks Network and MPC-based Wallet Infrastructure. Fireblocks serves over 725 financial institutions, has secured the transfer of over $1.5 trillion in digital assets, and has a unique insurance policy that covers assets in storage & transit. For more information, please visit www.fireblocks.com.

About Coinbase Prime
Coinbase Prime is an integrated solution that provides institutional investors with an advanced trading platform, secure custody, and prime services to manage all their crypto assets in one place. Coinbase Prime fully integrates crypto trading and custody on a single platform, and gives clients the best all-in pricing in their network using their proprietary Smart Order Router and algorithmic execution. For more information, visit www.coinbase.com/prime.

About Chainalysis
Chainalysis is the blockchain data platform. We provide data, software, services, and research to government agencies, exchanges, financial institutions, and insurance and cybersecurity companies in over 60 countries. Our data powers investigation, compliance, and market intelligence software that has been used to solve some of the world’s most high-profile criminal cases and grow consumer access to cryptocurrency safely. Backed by Accel, Addition, Benchmark, Coatue, Paradigm, Ribbit, and other leading firms in venture capital, Chainalysis builds trust in blockchains to promote more financial freedom with less risk. For more information, visit www.chainalysis.com.

For crypto venture investors, 2021 was a landmark year. 

The flood of capital that poured more than $28.65 billion into crypto firms last year was propped up by new billion-dollar fund launches, a ramp-up in venture investing among crypto firms, and investor appetite for a general risk-on environment, giving way to a new class of angel investors in the market.

But 2022 has been more risk-off, with the crypto market shedding billions of market cap on news that inflation could lead to a hike in interest rates, plus the addition of geo-political uncertainty, which has caused its own price gyrations across markets. 

This pullback has begun seeping into the private crypto market, according to venture capital investor Darren Lau, who founded crypto educational resource The Daily Ape and runs VC firm Not3Lau Capital. Lau has backed projects including Nansen, Trader Joe, and Mixmob. He was also an early Solana investor.

“I talked to a few projects recently, like just this week, and they were telling me like how even though these VC’s were committing to the round a month ago, two months ago, they’re pulling out of the deals based on how the market looks right now,” Lau said on the most recent episode of The Scoop.

They’re also being much more selective compared to previously. “So back then a lot more VC’s were spraying and praying,” added Lau.

The “spray and pray” approach — which involves an investor making a bunch of bets on the hope that one will deliver a massive upside — appears to be becoming less of a darling strategy in today’s market.

Says Lau: “People are being more careful with their capital.”

On this episode of The Scoop, Lau and Frank Chaparro discuss: 

• Lau’s approach to venture investing and his decision-making process for making a venture bet
• How he uses bots to automate his investment process and scour Discord channels to find hot deals
• How he got involved with Solana early on and what he thinks the future holds for the project
• How DAOs have evolved over the years and why they’ve become a red-hot buzz word

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.