In the world of Web3 and crypto investments, venture capital (VC) firms like Defiance play a crucial role in shaping the ecosystem. Defiance Partner Arthur addresses misconceptions about VC strategies and clarifies their approach to token unlocks and exits in response to recent criticisms.
How Crypto VCs Operate: Defiance’s Investment Philosophy
At Defiance, our investment principles combine fundamental analysis with active participation. Here’s how we approach our portfolio:
- Commitment to Portfolio Growth:
We collaborate with teams to achieve product-market fit and scalability. Our success hinges on the success of our investments. - Market Awareness:
We continuously refine our insights to allocate capital and time effectively.
Holding vs. Selling: When Do We Exit?
Our default stance is to hold tokens post-liquidity events if the original thesis remains valid. Examples of long-term holdings include:
- $AAVE
- $JOE
- $LDO
- $BNT
- $MC
We actively engage with these projects through governance and partnerships.
👉 Learn how top VCs manage token unlocks
Why We Exit Investments: Key Reasons
We exit investments only after rigorous evaluation. Common reasons include:
Valuation Reaching Fair Value
- Target prices achieved.
Portfolio Rebalancing
- Liquidity management or reducing overexposed positions.
Hard decisions arise when:
Thesis Invalidation
- Market/vertical viability disproven.
Deteriorating Fundamentals
- Poor product-market fit or team mismanagement.
We prioritize fundamentals (team, tech, valuation, TAM) over early entry or quick exits.
Addressing Misconceptions About VC "Paper Hands"
Critics often label VCs as "paper hands" based on isolated actions. This ignores nuances like:
- Long-term holdings despite 90% drawdowns.
- Advocating fair valuations for retail investors.
As Arthur states:
"Reducing an entire firm’s strategy to a single action reflects ignorance. Our exits are deliberate, not impulsive."
FAQ: VC Token Management Explained
Q: Do VCs always dump tokens after unlocks?
A: No. Defiance holds if the thesis holds, even in downturns.
Q: How do you decide to sell?
A: Based on fundamentals, not market timing.
Q: Why reduce valuations for public sales?
A: To align with private rounds and reward early retail backers.
👉 Explore crypto investment strategies
Final Thoughts
Defiance remains bullish on Web3’s future. While market conditions may force tough exits, our goal is long-term value creation.
"Bear markets demand prudence—but don’t mistake exits for abandonment."