Introduction: Recently, HashKey Capital announced the completion of the first closing of its fourth fund, HashKey Fintech Multi-Strategy Fund IV, with a scale of $250 million. This also marks the highest single fundraising amount in the crypto VC industry since June 2024.

With outstanding investment performance, HashKey Capital has been listed in the RootData's Top 50 Crypto VCs for three consecutive years, becoming one of the most notable and highly regarded Asian VCs in the current crypto market.

Why was HashKey Capital's fundraising so smooth this time? What areas will future investment strategies prefer? How will the primary market evolve in the future? ChainCatcher recently had an in-depth conversation with HashKey Capital partner Xiao Xiao to attempt to reveal the answers to these questions. Below is the full dialogue:

ChainCatcher: In the winter of the primary market, HashKey Capital completed a $250 million fundraise, which sends a very positive signal to strengthen market confidence. Can you share the specific process of this fundraising?

Xiao Xiao: This round of fundraising started in mid to late September last year and took about three months to complete the $250 million. The background of the investors includes institutional investors, family offices, and high-net-worth individuals from both traditional and crypto circles.

The fundraising indeed progressed quickly, but it wasn't that we completed it without preparation. Many investors had previously invested in our earlier funds or other products from HashKey Capital and were satisfied with the performance and team management, so they came back for reinvestment. This is a relationship built over the long term.

Our total fundraising target for this fund is $500 million, so we will continue to push forward with fundraising. During the process, we also received quite a few customized requests, especially from institutional funds. Therefore, the remaining $250 million may not all go into this fund itself; some may be converted into customized products.

ChainCatcher: Reports indicate that HashKey Capital's current fund will combine public market investment strategies and liquidity-creating cross-investment opportunities while selectively investing in the private market. Does this mean the focus of the new fund is on secondary market investments?

Xiao Xiao: It cannot be simply understood as a secondary fund. Our entire investment structure will be different from previous funds. Previously, it was common for primary funds to invest in primary and secondary funds to invest in secondary, but this fund is a multi-strategy fund that may invest in some liquid assets in a primary manner, such as participating in PIPEs or CBs of listed companies, and also purchasing assets of already issued projects through OTC.

Why adopt this strategy? On one hand, our early VC funds are still in the investment period, so the new fund will take a differentiated strategy. On the other hand, LPs at this stage have very high demands for liquidity and exits, so we will make the investment strategy more flexible from this perspective, ensuring better overall liquidity while guaranteeing returns.

ChainCatcher: You just mentioned that the LPs of this fund have very high demands for exits. How is this specifically reflected?

Xiao Xiao: On one hand, the investment strategy will have higher liquidity requirements for the targets to ensure timely exits at the fund level; on the other hand, the overall structure of the fund will also differ from ordinary funds. Typical funds are completely closed, and they may only naturally expire after 8 years. Our fund will have an early redemption window in the mid-term, allowing investors who want to take profits to choose early redemption during this window. If investors are more optimistic about the next few years, they can choose to stay in the fund.

ChainCatcher: HashKey Capital's current fund focuses on global infrastructure, scalability, and large-scale application scenarios. What specifically does large-scale application scenarios refer to? What is the core criterion for judging whether a project has 'large-scale application' potential?

Xiao Xiao: We believe that large-scale application is not just about having a large number of users; it requires real usage motivation and a sustainable business model. Additionally, we need to see if the frequency of user usage can create a network effect, meaning users continuously use it over a long period, and whether multiple users can generate a 1+1>2 effect.

ChainCatcher: While many other VCs have significantly reduced their investment frequency, HashKey remains one of the most active Asian crypto VCs. Why do you still have confidence in the market?

Xiao Xiao: We actually understand the behavior of other VCs significantly reducing their investment frequency. Although we are still relatively active, the number of recent investments has also decreased compared to previous years, mainly because the number of excellent targets in the market is decreasing, and capital is concentrating on top-tier targets. Many projects see this situation and directly choose not to raise funds.

Why are we still willing to invest? This is actually part of our long-term strategy: when the capital heat dissipates and noise disappears in each cycle, we can find some projects that truly have long-term value, so we are willing to spend more effort to find such projects at this stage.

ChainCatcher: From publicly available information, you rarely invest in prediction market projects. What are the considerations behind this?

Xiao Xiao: In fact, we have projects in our portfolio that are in the prediction market, such as Myriad, but they transitioned to the prediction market midway. We were paying attention to Polymarket very early on, but there were some restrictions in the previous fund terms that prevented investment in platforms with gambling characteristics. At that time, they were not compliant platforms and were in a gray area, so our fund did not invest.

Currently, projects like Polymarket have become compliant, but their valuations have also significantly increased, which no longer aligns with the investment strategy of our early funds. However, it may align more with the investment strategy of our new fund, so we do not rule out participating in pre-IPO or IPO rounds.

ChainCatcher: Data shows that nearly 60% of new tokens will be listed below their initial offering price in 2025, coupled with the fact that VC firms' token unlock periods require at least a year. Many opinions suggest that VCs are already in a weak position in the industry. How does this situation affect your discussions with project parties regarding valuation and unlock periods?

Xiao Xiao: We have always been cautious about valuations. If a project has an exceptionally high valuation, we will not participate, regardless of how popular it is. This is one of our risk control measures.

Currently, many projects' listing valuations are indeed too high; their intrinsic value does not justify such a price, or they are over-drawing future market value. Why do these tokens drop below their offering price? Because they do not have a long-term business model to support them. Stock traders know that many US stocks are actually over-drawing the narrative for the next two or three years, but after two or three years, they have new stories or new businesses that can continue to elevate their value. This kind of sustainability is rarely seen in the crypto space; many projects lose heat after issuing tokens. On the other hand, the teams lack the perseverance to continue after issuing tokens.

So how do we avoid these issues? It mainly depends on whether the project has its own self-sustaining ability and whether it has a real business model, rather than just using tokens as ecological rewards, which only create selling pressure without practical utility to support them.

Regarding unlock periods, we believe that token lock-ups are reasonable because, for both early investors and teams, if there is a genuine long-term plan, a slow release of tokens is completely acceptable. However, this pace must correspond to the pace of product development.

ChainCatcher: During the project due diligence phase, what dimensions of information do you pay the most attention to?

Xiao Xiao: We place the highest importance on the quality of the team itself, including their entrepreneurial motivation, vision, and execution ability. We have encountered many situations where the project itself and financial data are quite good, and the project has hit the right trend, but if the team appears arrogant or not grounded, we will pass on such projects.

For example, in terms of team management, we will pay attention to whether fund management is standardized, such as whether the company wallet and the founder's personal wallet are independent, and whether the employee incentive mechanism is sound. We have encountered situations during financial due diligence where the project party could not clearly provide this information, which usually indicates issues with fund management, and we will directly pass on such projects.

ChainCatcher: The situation of Chinese entrepreneurial projects has become a highly focused topic in the market. How do you view the changes in the status and role of Chinese entrepreneurs in the industry?

Xiao Xiao: I do not believe that the status of Chinese entrepreneurs is lower than that of European and American entrepreneurs; rather, their status is reflected in different fields. If it is a project that is more application-oriented or execution-oriented, I am more inclined to trust Chinese teams because they often excel in internet operations and execution compared to European and American teams.

The advantages of European and American teams may lie more in researching trends or creating trends. The excellent projects we see now are often mixed teams; even if it is a Chinese entrepreneurial project, if they need to expand the market in Europe and America, they actually need to hire excellent European and American individuals. Conversely, when European and American markets expand into Asian markets, they also need Chinese individuals because Chinese individuals are more adept in the Asian market.

ChainCatcher: The transparency of various information such as project teams, token unlocks, and product progress is generally low, which is considered one of the important issues affecting industry development. How do you view the role of transparency in the future of the crypto industry?

Xiao Xiao: We actually pay attention to this issue when investing, requiring them to inform us of product progress. At the same time, we also encourage the projects we invest in to improve transparency to the community, such as token unlock plans and publishing monthly project progress reports in the community. If a project cannot accomplish these processes, they may quickly be eliminated.

ChainCatcher: Do you think the crypto industry will evolve to have information disclosure mechanisms similar to traditional securities markets in the future?

Xiao Xiao: I believe there will be two extreme situations. One is completely anonymous or decentralized projects, where the mechanisms are very simple, and the community decides the evolution through on-chain voting. This model does not require the team to disclose information because the governance process itself is transparent. However, as long as a project wishes to trade on centralized exchanges, it must bear certain information disclosure obligations. From the perspective of protecting users on exchanges and the development of the industry, a set of compliance and disclosure standards is necessary.

ChainCatcher: After multiple market cycles, how do you view the trends and changes in the primary market of the crypto industry going forward?

Xiao Xiao: In the past few years, I believe a clear trend is that token financing and equity financing are increasingly merging. Previously, many projects either went for SAFT financing or equity financing, but now more are adopting the Equity + Token model, which is flexible enough for exits from both the crypto market and traditional capital markets.

For crypto projects, whether through IPOs or backdoor listings, the listing channels have become smoother. I believe the capacity of the primary market will continue to grow, and many companies with sustainable self-sustaining capabilities will gradually align more with traditional primary markets, with a large amount of capital concentrating on truly top-tier entrepreneurs. This is already very evident in the payment industry, where a lot of capital is continuously pouring into leading payment companies, regardless of how high the valuations are.

Moreover, the boundaries between primary and secondary investments in the crypto industry will not be so clear. This has already appeared in the last wave of DAT frenzy, where many DAT projects raised funds in the primary market, but essentially they are secondary targets. This situation will become more common in the future, with many projects listing first and then refinancing after achieving sufficient liquidity in the secondary market.

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