Paradigm positions itself as a research-driven technology investment company, focusing on the cryptocurrency industry and other cutting-edge related technologies. Paradigm's investment style often involves early-stage intervention in projects, with investment amounts ranging from millions to billions of dollars, and continues to provide support to invested companies after investment, including various aspects such as technology (mechanism design, security, engineering) and operations (recruitment, listing, legal and regulatory strategies).

After several years of development, according to public data, Paradigm's staff has expanded to nearly a hundred, which is quite a significant scale for a native cryptocurrency fund.

How did Paradigm grow into one of the top cryptocurrency funds?

Even in web3, whether a project is funded or not is an important indicator of its potential, especially if it receives early investment from top funds like Paradigm, which can create strong positive feedback in the market (such as the previous Friend.tech). This is due to the trust people have in top cryptocurrency funds. So how did Paradigm grow and become one of the most well-known cryptocurrency funds?

Paradigm was founded in 2018 and received an initial financing of $400 million from the Yale University endowment fund in the same year.

It can be said that Paradigm made its fortune with BTC. During the bear market in 2018, it chose to mainly invest in BTC and ETH. Whether based on a strong market judgment or luck, Paradigm's first investment perfectly bottomed out. Upon hearing the news, the endowment funds of Harvard University and Yale University added approximately $350 million in investment to Paradigm.

After successfully weathering the bear market, what truly made Paradigm famous was its investment and incubation of Uniswap in 2019, which garnered tremendous success. People gradually began to pay attention to this cryptocurrency native fund that adheres to a research-first and deeply involved investment philosophy. The successive successful investments enabled Paradigm to complete another round of fundraising of $25 billion in November 2021.

If Uniswap was just a stroke of luck for Paradigm, it wouldn't be enough to explain anything. But several other early-stage projects it invested in (such as Lido, Optimism, dYdX, Blur) also achieved success one after another, making Paradigm truly deserving of being mentioned alongside top cryptocurrency funds like a16z and Coinbase Venture.

However, in May of this year, Paradigm was also embroiled in a public opinion storm. This was sparked by Paradigm quietly removing the content related to crypto when updating its company profile on the official website, and it was accused of wanting to abandon the cryptocurrency industry in favor of the more popular AI industry.

Many people criticized Paradigm for being "unfaithful" and that cryptocurrency native funds should not invest in other fields. Under public pressure, Paradigm had to add a sentence at the beginning of the new official website, "We focus on crypto and related technologies at the frontier," to appease the public anger.

But in fact, among the projects that Paradigm has disclosed investments in, only one is related to AI (ArenaX Labs), and ArenaX Labs is working on Web3+AI games and has not completely departed from the cryptocurrency industry.

But even taking a step back, faced with the uneven cryptocurrency market, it is not unreasonable for Paradigm to choose to expand its investment scope. After all, for a fund that has passed the startup stage and has a large scale, expanding the investment scope and diversifying risks is a more common and sustainable strategy.

How does Paradigm integrate technical research into its organizational structure?

Paradigm was co-founded by Matt Huang and Fred Ehrsam. Matt Huang was previously a partner at Sequoia Capital, focusing on early-stage venture capital, and was an angel investor in companies such as ByteDance and Instacart, a US delivery company.

Fred Ehrsam was previously a co-founder of Coinbase and served as president of Coinbase from 2012 to 2017. Before founding Coinbase, he also worked at Goldman Sachs for a period of time. Since buying his first bitcoin in 2011, Fred Ehrsam has been paying attention to the cryptocurrency field and has become an angel investor in some high-growth cryptocurrency companies, with extensive investment experience.

It is worth noting that in Paradigm's team, in addition to employees with financial investment backgrounds and functional roles, a large proportion of researchers dominated by cryptocurrency technology also hold high positions.

For example, Paradigm's third employee, Charlie Noyes, is a research-oriented cryptocurrency researcher, and he and his team have published papers on areas such as Uniswap, MEV, and Cosmos. There are also General Partner and Research Director Dan Robinson, who focuses on researching blockchain protocols and smart contracts. In the investment and incubation of Uniswap, Dan Robinson and his team helped solve many liquidity and smart contract issues for Uniswap.

There are other researchers in key positions, such as Research Partner and Chief Technology Officer Georgios Konstantopoulos and Research Partner and Security Director samczsun. Paradigm's investment philosophy driven by technical research is fully reflected in its organizational structure.

In an interview a few years ago, Matt Huang explained that as investors, Paradigm not only writes Twitter threads for projects but also hopes to write contracts together with the projects.

What are the characteristics of Paradigm's external investments?

According to Rootdata, Paradigm has publicly participated in a total of 95 rounds, led 54 times, and has invested in a total of 79 historical projects. Here is a comparison with several other top cryptocurrency institutions:

• Compared to several other top cryptocurrency institutions, Paradigm's lead investment rate is 56.8%, second only to a16z's 62.3%, and far higher than Coinbase Venture and Binance Labs.
• In terms of the scale of participation, native cryptocurrency funds Paradigm and a16z both show an inverted trapezoidal shape, with a higher proportion of participation in projects with over $20 million. On the other hand, as corporate strategic investment departments, Coinbase Venture and Binance Labs show a positive trapezoidal distribution, demonstrating a "sharing the wealth" approach and an attitude of "investing a little in everything."
• However, in terms of the total number of investments, Paradigm is relatively restrained, with only 6 investments made this year. Overall, Paradigm's investments also exhibit the characteristics of "taking a small portion from a large river" and "daring to make heavy bets."

Below is a list of Paradigm's investment projects compiled by the author, excluding projects that have already issued coins and rug projects, for readers to make decisions (sorted by cumulative financing amount).

Of course, no investment institution in the world is always right. Even though Paradigm maintains a relatively restrained investment style, its investment portfolio also includes 10 to 15 projects that are currently inactive, and the collapse of FTX has caused Paradigm to lose approximately $215 million.

Conclusion and Reflection

After understanding Paradigm's development and investment situation, the author believes that Paradigm's situation and investment style are very similar to a well-known investment institution in China - Hillhouse Capital.

• In terms of their origins, it is quite coincidental that Hillhouse's first capital also came from the Yale University endowment fund.
• In terms of their track records, Paradigm gained fame through deep incubation of Uniswap, while Hillhouse became well-known for its early heavy investment in Tencent.
• In terms of investment philosophy, Paradigm's philosophy of deeply participating in project development coincides with Hillhouse's previously proposed concept of "walking with entrepreneurs," and both have the characteristic of daring to make heavy bets.

Hillhouse and its founder Zhang Lei were once known as the father of value investment in China, focusing on investing in projects with long-term value and social benefits. In the cryptocurrency industry, which is filled with impetuous emotions, Paradigm, with its emphasis on technical research, seems to be setting the benchmark for value investment in the cryptocurrency industry.

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