How did I miss out on the 100x opportunity of Virtuals Protocol?

Author: Marco Manoppo Translation: Shenzhen TechFlow

In a bull market, our social media is always flooded with success stories that have achieved 100x gains (like Hyperliquid's hype, please stop spamming). However, we seldom discuss those missed opportunities.

In today's article, I want to review the story of Virtuals Protocol, share how I got in touch with the founding team in the early days, and how as a venture capitalist, I missed my first 100x opportunity.

Note: Strictly speaking, the first 1000x opportunity I missed was in 2019 when I participated in the seed round investment of Solana through an angel friend, but I was not a real investor at that time.

Disclaimer: I am an investor of @primitivecrypto (PV). Although PV is not a traditional venture capital firm, we also engage in similar investment operations. The views expressed in this article are solely my own.

Virtuals is one of the biggest investment opportunities I have missed in this cycle. The founding team contacted me as early as July (during ETHCC), when their fully diluted valuation (FDV) was only $50 million. Before that, I actually heard about this project in the first quarter through mutual friends, and their valuation was even lower at that time. Six months later, this AI intelligent agent tokenization platform has become one of the focuses of the current cryptocurrency cycle.

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The co-founders of Virtuals, Jansen and Wee Kee, have indeed shown extraordinary perseverance.

I remember clearly that they tirelessly introduced Virtuals to investors and industry insiders. Since they mostly worked in Southeast Asia (SEA), I heard from friends in the crypto field about their brand reshaping from the PathDAO era and their theories about tokenizing AI agents. It is admirable that they persisted in advancing the project despite the bear market and the lack of major centralized exchanges (CEX) listings. Many other founders might have chosen to return the funds or give up on the project, but the Virtuals team persevered and returned to the market with a stronger posture.

Why do I make mistaken decisions?

Earlier this year, we saw a number of projects combining crypto and AI attempting to enable decentralized computing or inference. Frankly, a lot of these projects are just talk. Most projects don't have an effective way to really engage the average user. Sure, you might get some airdrops by joining the network and running some calculations, but these are nowhere near as much as GameFi or DeFi's pool2 model that attracts large-scale regular investors.

At first, I thought these projects would be some sort of gamification to collect unique data and combine it with consumer-centric apps to make the experience more unique — and maybe add some "Ponzi" elements. After all, data is still at the heart of any AI model; And using "free internet money" to incentivize people to share unique data seems like the best way to do it.

Do you still remember the third season of Westworld?

However, the fact is that the cryptocurrency market is polarizing. We skipped the content I just mentioned and entered the asset issuance stage, which is still the most important product market fit (PMF) in the cryptocurrency field.

The Virtuals team, with all their previous efforts, was perfectly suited to seize this opportunity.

The Emergence of GOAT

It is often said that luck is what happens when you are ready to meet an opportunity.

Here, I don't need to elaborate on what GOAT is; if you are not familiar with this phenomenon, you can refer to this explanatory article. In short, GOAT has sparked a craze for AI agent tokens, as it makes the market start to imagine what possibilities it will bring when AI agents can interact with a certain currency. Although GOAT has some limitations, such as the need for some degree of human intervention, the key point is that it makes people believe that when AI agents encounter cryptocurrencies, it will open up a whole new field of experimentation.

Upon realizing this opportunity, the Virtuals team acted quickly and demonstrated their technical prowess.

Their tokenized AI intelligent agent LUNA was launched on October 16th, just a week after GOAT. If you are familiar with the cryptocurrency industry, you will know that being just the 'main character's beta' is far from enough. At a breakfast meeting in Bangkok, Jansen told me that the Virtuals team is making every effort to make LUNA the first AI intelligent agent capable of conducting on-chain transactions independently.

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Reflection: How to Seize Winning Opportunities in the Cryptocurrency Market?

Reflection is often subjective, but here are some of my takeaways:

• Resilience: The Virtuals team has demonstrated extraordinary perseverance through continuous iteration of products. Although the founders have different backgrounds and motivations, it is crucial to invest in teams that are not easily discouraged, maintain a high level of ambition, and keep up with market trends.
• Geographical advantage and rapid experimentation: Generally, projects that attempt rapid experimentation (such as platform or starter board mode) are difficult to succeed in Western markets due to higher costs. However, the Virtuals team, being located in Southeast Asia, is able to iterate rapidly at lower costs, while benefiting from a user base and capital market priced in US dollars.
• Resilience & Pragmatism: Southeast Asian founders' strength lies in their resilience and pragmatism. The region's business culture has always focused on "pragmatism first", whether it's traditional business, Web2 or crypto, it's all about localizing the successful experience of the Western or Chinese market. This pragmatic and business-oriented mindset is reflected in the Virtuals team.

What are the future trends?

The AI ​​boom has only lasted for about two months, but I feel like I have gone through two years of baptism. Although the market has shown some fatigue, I believe that by 2025, we will see more AI booms combined with cryptocurrencies. Innovation in the encryption industry often starts from the most enthusiastic areas and gradually develops into more mature practical application scenarios.

One fact that cannot be ignored is this: without cryptocurrency, experimentation with AI would be extremely limited.

This is especially true in experiments with AI agents. Just imagine that you can't expose a random AI agent to real capital in the traditional financial system (TradFi) unless you have a whole bunch of documents and lawyer support on hand. Not to mention handing cash directly to an AI agent. Cryptocurrency, as a purely digital form of money, provides the most suitable vehicle for these experiments.

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Therefore, the experiment of AI agents will gradually evolve from simple functions (such as a GPT wrapper that can tweet, with a valuation of $100 million) to more interesting application scenarios. Here are some directions I personally look forward to:

• More AI agent tokenization frameworks and platforms: While the Virtuals team has been launching new products at a rapid pace, there's still a lot of room for competition in the market. For example, platforms like @ai16zdao, @MoemateAI, @Spectral_Labs, and @griffaindotcom have begun to emerge and gain market share.
• Niche AI Intelligent Agent Experiment: Some projects (such as @freysa_ai, @aiwdaddyissues, and @Big_Pharmai) showcase more niche experiments and application scenarios. The key to these projects is how to develop from an interesting experiment into a real protocol with long-term commercial value.
• Crypto x AI applications for consumers: How do you turn AI agents into real-world applications that engage consumers while maintaining their uniqueness and innovation? This can even be combined with other AI products, such as data collection, model training, or inference services. The key is to make the experience of using AI agents both novel and useful.
• AI agents combined with "side hustles": I can't predict too much here, but it is foreseeable that in the future, more AI agents will generate significant cash flow by participating in certain "side hustles" (e.g., gambling, adult industries, etc.), rather than relying solely on token offerings or crypto market transactions.
• The combination of AI agents and payment systems: With the improvement of the interaction capabilities between AI agents, we can explore how to use AI agents to achieve a more seamless on-chain and off-chain payment experience, thereby optimizing the payment process.

When confronted with community-driven innovation, the traditional venture capital mindset can sometimes seem restrictive. The core of learning is to remain open to new experiments, not bound by conventional ideas, and to be able to adapt quickly, rather than blindly pursuing idealization. Primitive is always on the lookout for brave founders. If you are researching any of the above directions, welcome to contact us!