CHENNAI: Blockchain is on the VC radar. Even after Bitcoin has fallen nearly 70% from its late 2021 high and as VCs pull back on investments in other sectors, venture activity in crypto and blockchain start-ups is as busy as ever. As of last week, VC investments in the space have reached $18.3 billion so far in 2022. That’s nearly triple the amount invested in 2020 and also on pace to exceed 2021’s record haul of $32.4 billion. So let’s see the how, where and what of getting funds. But mind you, you really need to have great ideas, innovative products and the belief in the technology as you sail out in the quest to look for investors to bite.
You can find the standard concepts for start-up funding in the case of funding for blockchain projects, such as crowd-funding, venture capital funding, and angel investments. All of these serve as valid options for helping startup founders raise the capital required. Interestingly, some of the traditional funding methods for blockchain projects have successfully adapted to the blockchain domain. At the same time, it is also important to notice the blockchain-centric funding methods such as DAOs or Decentralised Autonomous Organisations.
Focus on community engagement is critical as well as you look for the perfect investor match for if you look at it closely, crowd-funding is a community effort, and how effectively you can communicate your vision to the community is vital. Communities are an integral aspect of the domain of decentralised blockchain technology as they fuel engagement and hype across different stages of a project.
As a start-up it is vital to also recognize the investors as this could be the key to finding the ideal source of funding for blockchain projects. You can evaluate an investment fund by taking a look at its existing portfolio. One glimpse at the portfolio of an investment fund could help you figure out whether they would be interested in our project or start-up.
You also need to identify the development stage of your project to find suitable investors with a relevant track record in funding through different rounds. Make a strong case for convincing the fund to invest in your project. Investment funds rely on references for identifying valuable business opportunities. Therefore, any individual you know can introduce you to an investment fund, thereby improving your credibility. Also remember that investment funds feature a corporate structure where start-up founders have to go through multiple approvals before receiving the funds so keep you pitch brief but consistent.
Make sure you learn about term sheets as they are critical documents to obtain start-up funding from investment funds for they document all the critical details of a deal. The term sheet would feature the investment amount, ownership structure of your blockchain startup or project, and project valuation.
The different methods for blockchain project funding outlined here show that conventional start-up funding mechanisms can work for blockchain startups. However, the traditional funding methods such as crowd-funding, investment funds, angel investors, and accelerators or incubators feature unique modifications tailored for blockchain projects. At the same time, the evolution of new and proven funding methods such as crowd-funding through DAOs serves as a formidable advantage for blockchain start-ups.
Be well prepared. You should have the necessary plan of what you want to deliver and how it can draw profits (the magic words!). Your investor is just around the corner - the right strategy will get you there!