EV3 Ventures — Investor Letter (Q1’24)

Crypto ended the quarter with $2.8T of market cap, up +50% YTD led by $12B of net inflows into spot Bitcoin ETFs. DePIN ended the quarter with $18B of market cap, up +100% YTD led by compute tokens becoming the consensus expression of the ‘AI picks & shovels’ thesis onchain. DePIN dominance — i.e., DePIN as a percentage of crypto market cap ex-BTC/ETH/stablecoins — rose from 1.6% to 2.2%. We expect to see this figure at 5%+ by year-end as roughly one‑quarter of the 1000+ currently-active DePINs plans to launch a token in 2024.

A trio of factors — capital, technology and regulation — is driving the explosive growth in early‑stage DePIN activity. There are now 15+ DePINs valued at $1B+ FDV that serve as favorable comps for venture investment committees. There is high‑performance blockspace available across dozens of >100‑TPS chains. Wyoming’s new law enables US‑based entrepreneurs to compliantly launch decentralized organizations starting July 1st. The barriers to launching a DePIN have never been lower.

These factors are driving technologists from every corner of the globe towards experimenting with DePIN ideas. At the application layer, we’re seeing an acceleration of deal‑flow in emergent categories like healthcare (smart rings & wristbands), energy (smart plugs & EV chargers) and logistics (sidewalk delivery robots & drone detection stations). At the infrastructure layer, we’re seeing experienced crypto builders adapt DeFi/L1 primitives like liquidity aggregation, off‑chain data verification and shared security for DePIN. Since crypto VC returns have historically been concentrated in the latter category, top infrastructure‑for‑DePIN projects are often able to raise capital at 2–5× higher valuations and skip the pre‑seed stage entirely. Fund I is invested primarily into the former category, where the business models are not yet well‑understood by the current cohort of crypto investors. We will also make a handful of high‑conviction bets in the latter category, where EV3 can catalyze growth via inter‑portfolio partnerships.

Outside crypto, the cracks in centralized infrastructure continue to accelerate on a global scale. Take the wireless industry as an example: in February, AT&T’s nationwide outage left millions of Americans without internet for hours and even took down public safety (911) networks. In March, AT&T reset account passcodes for the 70m+ Americans whose data they leaked four years earlier. Outside the US, telcos in Taiwan, Malaysia, Paraguay, Australia, Israel, and Uganda disclosed major hacks in Q1’24 with many more likely going unreported. Without open-source, credibly‑neutral infrastructure, events like these will continue to become more frequent and more damaging. DePIN is an inevitable global movement.

Sources: CoinGecko, ETF flows, DePIN Analytics, DePIN Projects, Chainspect, Wyoming law, WaPo, TechCrunch.

Private Markets

Q1’24 was our most active quarter ever in the private markets, both by number of deals and capital deployed. Our conviction reflects the quality of DePIN founders at the pre‑seed/seed stage, which is higher than ever. In addition to investing all of our available (called) cash, we took profits on certain liquid token positions — selling >$500m blended average FDV — to re‑deploy capital into our highest‑conviction private bets — buying <$25m blended average FDV.

As sector‑focused early‑stage VCs, there are three — really four — maneuvers to insulate expected returns as markets heat up: 1) invest in tier‑1 founders that are overlooked by other investors, 2) invest in tier‑1 founders before other investors get comfortable with a thesis/market, 3) invest in tier‑1 founders at the same time as everyone else but concentrate aggressively into only the very best companies, or 4) stop venture investing and/or deploy into adjacent asset classes.

New Pre‑Seed Investments

1. Daisy — decentralized influence‑sharing protocol enabling low‑trust collaboration between influencers at scale; leverages Opacity to serve ads based on social graphs; private beta is fastest‑growing pre‑seed by revenues. Site.
2. Código — blockchain developer platform to launch full‑service dapps on Solana in minutes using a code‑generation SDK; templates for skeleton DePIN projects. Site · Docs.
3. Unofficial — web3‑native social products for health communities; founder led engineering at Spotify/Peloton; builds at intersection of demographics, hardware and data interoperability.
4. Free Market (FM) — crypto‑native developer automation tools (web3 Zapier) focused on agent‑based security audits and low/no‑code integrations; seven‑figure net ARR. Site.
5. Qiro — Asia‑based institutional private credit protocol connecting onchain capital with EM borrowers; exceptional team and regional expertise. Site.

Doubling‑Down

1. Daylight — decentralized energy network for distributed energy resources; integrates with smart devices, launches consumer app and contractor platform, and designs an energy monitor. Monitor · App.
2. 3DOS — decentralized manufacturing via a global network of 3D printers; leverages 3DPrinterOS’ 45k+ printers; early demand from crypto merch and web2 e‑commerce integrations. 3DPrinterOS.
3. MintStars — creator content platform using crypto rails for disenfranchised adult creators; 10× revenue growth and 1.5k+ creators organically; lower platform fees than incumbents.

Seed Extensions & Ecosystem Notes

• Zeppelin — decentralized edge compute & data intelligence with high‑value locations (e.g., billboards); among largest miners of several DePINs.
• Natix — decentralized mapping via smartphones/edge sensors; 85k+ active drivers across 170+ countries; token launch planned within 60 days.
• Repl.Fi — DePIN re‑pledging protocol connecting tokenholders and miners in stake‑based networks; $pFIL to $40m TVL shortly after launch. Site.

Liquid Markets

Top quarterly performers included compute networks catalyzed by new product launches like Arweave (+300%), ATOR (+330%), and Nosana (+520%). Laggards had concentrated insider ownership/unlocks such as Hivemapper (+25%), Helium (‑10%) and WiFi Map (‑25%).

Our biggest liquid winner in Q1 was the fair‑launched token $ATOR, a decentralized private computing network that adds crypto‑incentives to onion‑routing technology developed by Tor. After Tor banned ATOR nodes in November, the team moved rapidly to fork and launch a new privacy‑centric compute network; we doubled‑down and $ATOR is up >300% since.

We also made early‑stage public token investments in Glow (decentralized micro‑grid solar) and OTACON (AI agent‑powered smart contract audits & bug bounties), favoring liquid exposure where private‑round terms were less attractive.

Large‑cap positions built during the quarter: $HONEY (Hivemapper), $FIL (Filecoin), and DePIN‑adjacent $JITO, $NEAR, $IMX.

Closing

As always, we are grateful for your support. In Q2’24 we will be traveling to Asia and Latin America to meet DePIN entrepreneurs and will host our first AGM on May 16 in New York City. Please reach out for details.

— Your partners,
Sal & Mahesh