EV3 Ventures — Investor Letter (Q4’23)

We are excited about our first full calendar year in business, in which the market has already begun to validate our thesis on decentralized physical infrastructure networks (DePIN). Annual results are not a reflection on efforts in any given year, but on the accumulated insights, relationships, and technology that compound over decades. We made significant progress in creating flywheels across our three pillars in 2023, setting us up to accelerate even faster in coming years.

In our research business we spent Q4 refining data-driven insights from the front lines of DePIN, culminating in our annual State of DePIN report, a comprehensive 50-page document outlining our latest thinking on DePIN and the sub-sectors we are most excited to invest behind in 2024. We will be publishing the report in Messari shortly.

In our media business we developed a two-pronged approach of partnering with publications both inside & outside the crypto industry and building our own direct distribution (LightReading, Bankless, Benzinga; podcast, newsletter, research, and conference).

In our technology business we focused on community-centric software that drives proprietary onchain insights and puts EV3 on founders’ radars before anyone else. We are now tracking 650+ projects on depin.ninja (with onchain revenue stats for a subset) and recently added functionality for community members to self-add/edit projects. We plan to lean into this heavily in 2024, shipping features that enable deeper engagement and champion our most active contributors.

Liquid Markets

Investor confidence in liquid crypto markets is officially back. After a volatile 2023 marked by three separate >15% corrections, crypto ended the year as the top-performing global asset class with market cap recovering from ~$850B to ~$1.8T. With macro tailwinds and improving sentiment, we expect flows to continue benefiting category leaders in emerging sectors (DePIN) and established leaders that re-invented themselves in the bear market (Alt L1s).

DePIN produced an outsized number of winners versus smart contract L1s in 2023. We built core and non-core positions across the top performers and sized positions opportunistically as evidence mounted (e.g., Helium Mobile traction, Bittensor subnets, Braintrust Base migration).

• Helium / $HNT: Subscriber growth, WiFi offload traction, national rollout roadmap.
• Bittensor / $TAO: Rising miner training spend, subnet launch, growing developer ecosystem.
• Braintrust / $BTRST: Efficient growth, competitive dynamics versus web2 peers, Base migration enabling more onchain activity.

Private Markets

Crypto’s reflexivity is increasingly evident in our private portfolio: as token markets recover, treasuries fund more grants, miners reinvest earnings to scale supply, and partners move faster to integrate. Portfolio highlights include Petastic and MintStars extending runway and growth, and WiFi Map’s $WIFI token driving validation quality and onchain revenues via eSIMs and subscriptions.

New Investments

• Sovrn — Portable identity primitive using ZK & MPC to enable developers to tap into web2 user data securely, powering “reputation bootstrapping” for DePIN applications.
• Zonal — Decentralized mesh positioning network using UWB/BLE and ultra-low-cost, batteryless stickers; initial focus on dense use cases and Petastic integration.
• Lumino — Decentralized GPU marketplace founded by Filecoin veterans, bringing real supply on day one and negotiating demand across DePIN ecosystems.

2023 Lessons

Our most painful misses were largely errors of omission or sizing (e.g., Solana, Render, Hivemapper, Autonolas). We continue to refine our process for aligning token economics, DAO–company relationships, and onchain evidence with position sizing and timing.

2024 Predictions

1. Layer-1 Wars: General-purpose L1/L2s (e.g., Solana, Base) attract the majority of new DePIN projects.
2. Wireless: DeWi resurgence led by Helium Mobile’s flywheel; fast-followers emerge; fixed wireless tokenization reaches $1B+ FDV.
3. Compute-over-Data: Convergence of storage and compute for verifiable computation over local user data; compute remains the biggest DePIN category.
4. Mapping: Gamified networks (Hivemapper, WiFi Map) become the largest top-of-funnel for non-crypto users (>1M new users).
5. Security: Physical and virtual verification networks break out; SecFi emerges alongside oracles & RPCs.

Outro

We will host our first annual investor meeting in May 2024 in New York City and continue with our established reporting cadence: marks 30 days after quarter-end; quarterly letters & balances the fortnight following; annual reporting & balances the first week of April.

As always, thank you for your continued support.

— Your partners,
Sal & Mahesh