Bittime - The old tradition of startup funding through banking or conventional investors is now being seriously challenged by the presence of crypto fundraising. This method offers a new funding scheme that is more agile and democratic.
This article will explore the ins and outs of crypto fundraising, its types, and the basic differences with traditional fundraising.
Crypto-style Funding Round Scheme
Crypto fundraising has stages similar to startup funding models in general. Starting from the pre-seed stage, where family and close friends are usually the source of initial funding.
Next, the project will enter the seed round stage, which is a more serious initial funding round. The next stages are series A, B, and C. For example, Draper Labs, a leading blockchain company, managed to raise a total of $300 million through series A, B, and C funding.
Well-known investors such as VY Capital, Lightspeed Venture Partners, and DST Global participated in the funding round (data from Blockchain.com).
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Four Types of Crypto Fundraising
Let's discuss the four main paths you can take to hold crypto fundraising for your project:
Venture Capital (VC)
The crypto market is becoming a favorite for Venture Capital (VC) because of its promising profit potential. Funding can come from established VC companies or well-known crypto companies.
Coinbase, one of the largest crypto exchanges, even has its own VC arm called Coinbase Ventures. It should be noted, VCs generally require a finished minimum viable product (MVP) before pouring in funds.
Also read: Why is USDT Staking a Popular Choice in the Crypto World?
Angel Investors
Unlike VCs who represent companies, Angel Investors are individual investors. They are often actively involved in project management and offer expertise, networks and exposure in exchange for ownership of startup shares.
Initial Coin Offering (ICO)
This is a fundamental fundraising method in the crypto universe. Entrepreneurs offer tokens to investors, which essentially have a certain utility in the project.
ICOs were the driving force for the rapid growth of the crypto market in 2017. However, it should be remembered that many ICO projects failed or ended in fraud. As a result, the ICO method is now starting to be abandoned and replaced by other, more transparent and safe schemes such as IEO and IDO.
Also Read How to Buy Crypto:
Initial Exchange Offering (IEO)
IEO is similar to ICO, but with two crucial differences. First, only selected projects can hold IEOs on certain exchanges. The reputation of the exchange is an additional guarantee for investors.
Second, investors have the assurance that the tokens they buy will be listed on the exchange, making it easier for them to sell them again. Apart from that, the KYC and AML processes that investors and startup teams must undergo also reduce the risk of fraud.
Initial DEX Offering (IDO)
This is the latest trend in crypto fundraising. Similar to IEO, IDO is only open to projects that have passed curation. However, instead of being selected by a panel of experts, it is the decentralized exchange (DEX) user community that will determine whether a project is worthy of holding an IDO on their platform.
Transparency is further enhanced because all fund transfers are regulated by smart contracts, without involving third parties. However, it should be noted that regulations related to IDOs may change as policies develop in various countries. Also read: History and Evolution of Initial DEX Offerings (IDO) in the DeFi Ecosystem
Differences between Crypto Fundraising and Traditional Funding
There are several basic differences between crypto fundraising and traditional funding:
Regulations
Crypto fundraising is still relatively new and dynamic so the rules of the game are not as strict as traditional funding. Some countries are even known to be crypto-friendly, such as El Salvador and Dubai.
Investor Protection
Investors in traditional funds generally have voting rights and rights to company profits. This does not necessarily apply to crypto fundraising. Only Decentralized Autonomous Organization (DAO) based projects offer voting rights to crypto investors via special tokens.
Potential Profits
Crypto investors have the opportunity to profit from increases in token prices and the utility of these tokens in the project ecosystem. Meanwhile, traditional investors generally rely on increasing the value of share ownership and dividends.
Who are the Investors in Crypto Fundraising?
There are various parties interested in participating in crypto fundraising, ranging from individual investors, VCs, hedge funds, to financial institutions. Some investors are attracted to the high profit potential of ICOs, while others want to support the development of innovative blockchain technology.
According to a report by Outlook, there are currently more than 300 crypto funds actively distributing capital. Here are some examples of the largest crypto VC funds:
Block Media Labs
VC firm that provides capital and business consulting to crypto companies. In addition to funding, Block Media Labs helps crypto startups craft business strategies and select the right board members.
Pantera Capital
An American hedge fund that focuses on crypto and is the largest crypto hedge fund in the world based on AUM. Founded by Dan Morehead in 2003, Pantera Capital has invested in blockchain and digital asset companies since 2013.
Sequoias
Sequoia focuses on early and growth stage investments in private technology companies, including those in the clean technology, consumer internet, crypto, financial services, healthcare, mobile and robotics sectors.
Binance Labs
Binance Labs seeks and supports successful entrepreneurs, startups and blockchain communities. They also invest and fund business projects that support the expansion of the broader blockchain ecosystem.
Dragonfly Capital
Investment banking firm Dragonfly Capital has offices in Charleston, South Carolina and Charlotte, North Carolina. Dragonfly Capital focuses on the unique needs of management and owners of small and medium-sized companies.
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Conclusion
Crypto fundraising has revolutionized the way startups raise capital. With the emergence of Initial Coin Offerings (ICOs) and Initial DEX Offerings (IDOs), startups can now bypass traditional funding channels and connect with a global pool of investors.
While there are challenges and risks associated with the crypto market, the benefits of fundraising this way are significant, including higher accessibility, lower barriers to entry, and a more efficient fundraising process.
With the continued growth and maturity of the crypto market, it is likely that more and more startups will consider crypto fundraising as a viable option for their funding needs.
How to Buy Crypto on Bittime
You can buy and sell crypto assets in an easy and safe way via Bittime. Bittime is one of the best crypto applications in Indonesia which is officially registered with Bappebti.
To be able to buy crypto assets on Bittime, make sure you have registered and completed identity verification. Apart from that, also make sure that you have sufficient balance by depositing some funds into your wallet. For your information, the minimum purchase of assets on Bittime is IDR 10,000. After that, you can purchase crypto assets in the application.
Learn Complete Guide How to Buy Crypto on Bittime.
Monitor price chart movements of Bitcoin (BTC), Ethereum (ETH), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.
Also read:
What is DEX Screener? These are 7 DEX Screener Tools You Must Know!
6 Best Cold Wallets to Keep Your Crypto Assets Safe
Why is a Cold Wallet Important for Storing Crypto Assets?
What Is Crypto Cold Storage? This is the Place to Secure Your Crypto Assets!
DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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