Chain Venturer: Fiona Ma of DWF Labs

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GM folks,

We’re currently in the middle of setting up our new podcast. While we need a bit more time, I recently got the opportunity to interview two good friends and fellow investors.

So enjoy these two final episodes of Chain Venturer v1 — the v2 will drop once we get everything up and running. Here’s a sneak peek :)

Happy Weekend 🙋🏻‍♂️

-Marco

In case you don’t know…

I’m an investor at Primitive Ventures. We back founders who believe that crypto represents the new socioeconomic primitive that will redefine individual sovereignty and financial paradigms.

If you’re building an interesting project → DM me here.

If your project is too early in the lifecycle, I also run a syndicate, you can check it out here.

Anyway, enjoy this week’s conversation.

happy red candles day

Fiona Ma of DWF Labs

Fiona Ma is a senior associate at DWF Ventures, the venture arm of DWF Labs. DWF Labs is a new-generation Web3 investor and crypto market maker. It is one of the world's largest high-frequency cryptocurrency trading entities, trading spot and derivatives markets on over 60 top exchanges. 

Fiona has built a distinguished career in Web3 and traditional finance. Since early 2023, Fiona has been with DWF Ventures, where she oversees the firm's VC investments. Her responsibilities include performing research, sourcing promising founders, and conducting due diligence for investment decisions. 

Prior to Web3, Fiona's career began in traditional finance, where she built experience in private equity and Goldman Sachs investment banking. Her expertise centered around growth investing and M&A buyouts. She primarily covered sectors in TMT, Consumer & Retail, and FIG.

Fiona pursued her BBA degree at the University of Michigan's Stephen M. Ross School of Business. Before college, she represented the Hong Kong Swimming Team for 8 years.

Here’s my conversation with Fiona Ma. 

Quick takeaways:

• DWF Labs is a powerhouse in crypto trading, market-making, and investing, with over 700 portfolio companies.

• Finding the right balance and designing a stable, measured token-unlocking schedule is critical to address the current high FDV low float situation.

• While the token-driven VC model has dominated the space so far, Fiona anticipates that we may see a growing number of PE transactions as the crypto industry evolves to be more mature. 

• The relationship between infrastructure and DApps can be likened to a chicken and egg scenario. A good blockchain cannot be built without quality DApps on top, just as quality DApps cannot be built without a good underlying blockchain.

• As farming becomes more complex and requires a higher level of expertise, Fiona anticipates that the number of retail participants in these farming activities could decline.

What was the defining moment that drew you into the world of crypto?

Fiona's journey into crypto began during the DeFi Summer 2020 when she first started exploring crypto like Bitcoin and Ethereum. This exploration led her to experiment with various DeFi protocols, and she found the entire landscape intriguing. 

The defining moment: In 2021, Fiona worked at a private equity family office with $7bn AUM. In addition to traditional Web2 Investments, she began exploring crypto opportunities for the firm. Inspired by her crypto OG boss who accumulated significant wealth by investing very early in Bitcoin, Fiona decided to dive even deeper into the crypto space. Leveraging her private equity and VC experience, Fiona has joined the crypto VC space since 2022. She is now part of DWF Ventures, continuing to explore the industry's vast possibilities.

What is DWF Labs? 

DWF Labs is a prominent market-making and multi-stage Web3 investment firm, recognized as one of the largest high-frequency trading firms in the world. Currently, DWF Labs trades spot and derivatives on over 60 leading exchanges. With over 700 portfolio companies, DWF Labs is experiencing rapid growth and expansion within the crypto ecosystem.

DWF is primarily known for its market-making services, but it also offers an RFQ platform, facilitating OTC trading in the liquid markets. Additionally, the firm has a ventures and incubation arm, which focuses on early-stage investments, specifically in pre-seed and seed stages, with a selective approach to later-stage investments. While DWF Ventures is sector agnostic, it tends to favor investments in consumer and DeFi.

What are your thoughts on the low float and high FDV discussion? Do you think a different financing model, like private equity, is needed for consumer-focused crypto products that aren't suited for traditional venture capital?

Fiona believes there is no absolute right or wrong, as issues often have multiple perspectives. On one hand, the community has raised concerns about the high FDV and low float scenario seen in many crypto projects, especially since Q4 2024. This is understandable, as such characteristics may make a project more vulnerable to price manipulation and dumping pressure. At the same time, the alt market has not yet fully recovered, and some highly anticipated token launches from major infrastructure projects have fallen short of people's expectations. As a result, retail traders are becoming wary of these high FDV and low float projects. More traders seem to be gravitating towards more liquid projects that are fully or mostly vested, as theoretically this is seen as more resistant to manipulation. Going forward, more VCs may also lower their appetite for high FDV and low float projects and instead seek investment opportunities in earlier stages with lower valuations.

On the other hand, Fiona also believes that large token unlocks during a project's early stages can be problematic, especially for long-term initiatives that require ongoing team commitment and community contributions. If a project frontloads the majority of its token incentives in the early stage, later users will typically receive significantly smaller rewards. This can make it challenging to attract new participants in subsequent phases. Additionally, if a project's team is able to unlock their own token allocations too early, their motivation to remain committed and continue contributing to the project may diminish. Therefore, finding the right balance and designing a stable, measured token unlocking schedule would be beneficial for a project's long-term sustainability. 

In contrast to the token-centric crypto VC model, Fiona believes the private equity approach may be better suited for crypto business models that are more equity-centric. The acquisition of Rio by EigenLayer is a typical example of leveraging the PE buyout model. While the token-driven VC model has dominated the space so far, Fiona anticipates that we may see a growing number of PE transactions as the crypto industry evolves to be more mature. 

Do you have a thesis for investing in consumer-focused crypto projects, given the challenges in this area?

Going forward, DWF Ventures is targeting more consumer-driven opportunities. Fiona mentioned that most infrastructures are currently getting commoditized, leading to smaller investment upsides. Despite the proliferation of Layer 1 and Layer 2 chains, most lack widely-used applications built on top of them. This makes it challenging for such chains to scale and achieve wider adoption. Therefore, the crypto industry needs more good consumer applications that can attract organic users and liquidity.

Fiona addressed that the relationship between infrastructure and DApps can be likened to a chicken and egg scenario. A good blockchain cannot be built without quality DApps on top, just as quality DApps cannot be built without a good underlying blockchain. For example, the leading position of Arbitrum as an L2 solution has been heavily driven by the adoption of GMX. 

DWF Venture believes that consumer-oriented applications are poised to be the biggest winner in this cycle. When the next wave of retail users enters the crypto industry, the applications they are interacting with daily will capture most of the traffic and mindshare. 

For instance, Telegram is one of the biggest social and messaging platforms for both inside and outside of the crypto industry. This presents an opportunity for consumer projects building on top of the TON ecosystem to acquire users simply by staying in the telegram user interface. Ton’s powerful distribution channel via Telegram, similar to WeChat mini-apps in China, can help consumer projects achieve mass adoption. This can be proven by Notcoin and Catizen's rapid growth to millions of users. Therefore, DWF Ventures sees a huge potential in this type of consumer DApps. 

What are your thoughts on airdrops and their impact, particularly in light of recent criticisms? Are you more bullish or bearish on them, and do you think we will see more projects adopting aggressive anti-Sybil measures?

Fiona observes that airdrops play a significant role in the crypto ecosystem, particularly as a GTM strategy for attracting users to protocols. However, many retail farmers may become more disenchanted, especially after realizing that some protocols they have engaged with do not offer as many airdrops or full transparency as they had hoped. As farming becomes more complex and requires a higher level of expertise, Fiona anticipates that the number of retail participants in these farming activities could decline.

Regarding the LayerZero anti-sybil mechanism, Fiona views it as a valuable social experiment. While there are varied opinions about their methods, she recognizes their efforts to innovate in this area. She emphasizes that the true measure of a project's success lies in its ability to create a valuable product that users find genuinely useful, rather than relying solely on airdrops and promotional tactics. Ultimately, sustainable growth in the crypto space will depend on building real utility, not just attracting attention.

What do you think about the Bitcoin ETF in Hong Kong?

Fiona positively views the broader Hong Kong crypto scene rather than focusing solely on the Hong Kong Bitcoin ETF. She notes that crypto adoption in Hong Kong is becoming increasingly popular, with crypto-related advertisements and posts commonly seen around the city. The government's supportive stance is evident through approvals for Bitcoin ETFs and by providing grants to Web3 companies.

She also mentions that DWF Labs has sponsored the Hong Kong Web3 Festival in 2023 and 2024, observing a significant increase in participation this year. In particular, industry leaders such as Vitalik Buterin and many Western ecosystem founders traveled to HK and presented at the event. Major ecosystem projects at the main conference and side events indicate a growing investment of resources, time, and effort in the region.

Therefore, Fiona sees these developments as positive signs for Hong Kong's crypto landscape, though she acknowledges that regulations may change over time. She remains cautiously optimistic and looks forward to observing how the situation evolves.

As a Pudgy holder, do you have any tips for other NFT founders who have been struggling?

A well-developed IP with a unique backstory, characters, or themes gives the NFTs more perceived value and collectibility, much like how Disney IP has driven value in Web2. With the Pudgy team's efforts, the Pudgy Toys line is now available across major mainstream retail channels like Walmart, Toys"R"Us, and Amazon - a landmark push towards the mainstream adoption of Web3-based IP.

The community always comes first - and this is easier said than done. Pudgy Penguins spend a lot of time and resources in hosting various real-life events regularly in different cities across Hong Kong, Malaysia, Singapore, etc. Additionally, Luca Netz, the CEO of Pudgy Penguins, constantly interacts with community members on X and other platforms. That level of engagement is remarkable. When Fiona spoke with him, he was very friendly and made her feel like an honorable holder rather than just one of many.

The founder's personality and charm are also crucial. For instance, despite past controversies, Azuki's founder, Zagabond, still has a strong following because of his charisma and the community's conviction. As a founder, one needs to be the spokesperson and know how to go to market effectively - and this logic can apply to all projects in crypto. For example, Sreeram from EigenLayer is a great speaker and consistently appears at conference talks, showcasing the importance of founder presence.

Additionally, offering perks to the community can boost engagement and satisfaction. Pudgy Penguins, for example, have got several airdrops from infrastructure projects like LayerZero and ZKSync, which everyone appreciates. 

Rapid Fire Questions

1. What's one piece of content every aspiring investment professional should read/watch?

   • Zero to One: Notes on Startups, or How to Build the Future by Blake Masters and Peter Thiel

2. What’s your biggest investment mistake?

   • Investing into a wrong meme coin. Fiona’s liquid portfolio is fundamentally BTC, ETH, as well as altcoins / memecoins that she has high conviction

3. What’s the most underrated use case of crypto?

   • One of the most common yet underrated use cases in crypto is decentralized payments. While this may not be the most exciting narrative, it has been life-changing to many people through decentralized and borderless money transfers, especially in some developing countries

4. What’s your most contrarian view in crypto right now?

   • Arguably it is not contrarian anymore. Back when not many people were paying attention to TON, Fiona started DCA-ing and supporting TON tokens in the early days 

5. What’s the biggest risk that the crypto space is facing?

   • Regulatory uncertainty in DeFi

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