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What Stages Should Crypto Startups Approach VCs for Fundraising?

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1 day ago

November 4, 2024

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For any cryptocurrency startup, deciding when to approach venture capitalists (VCs) is a crucial problem. The best time to look for outside funding varies greatly, depending on the particular requirements of the project and the interests of the venture capitalists (VCs) involved.

The investment thresholds of various VCs vary. While some investors are satisfied with the founding team’s strength and the idea alone, others look for concrete results like a Minimum Viable Product (MVP) or obvious market traction. All agree that raising money should never be seen as the final goal. Instead, it’s a strategic tool that must align with a startup’s growth trajectory.

“Founders shouldn’t feel pressured to chase VC funding unless it aligns with their growth strategy. The goal should be building sustainable businesses with healthy revenue streams, not just fundraising for the sake of it,” Leonarda Rajeckyte from The VC Whisperer states.

With this principle in mind, we’ve gathered insights from experts at Axia8 Ventures, Bing Ventures, Capitable Group, Outlier Ventures, and The VC Whisperer to shed light on the right stages for crypto startups to approach VCs.

Pre-Seed Stage: Building a Vision and Team

For some VCs, investing begins even before an MVP exists. Axia8 Ventures, led by Wayne Lin, focuses on the very early stages of a startup’s journey. For them, the most important criterion is not necessarily the technical advancement of the project but the strength of the founder’s vision and adaptability.

“We invest at the truly early stage, often before a deck or product is even developed. The critical factor for us is the founder’s vision, passion, and capability to pivot through multiple iterations. We’ve worked with founders who failed twice but succeeded on their third try,” As Wayne Lin explains.

This approach highlights the importance of having a strong, committed team with the ability to persevere and pivot through failures.

Seed Stage: Concept Validation with Whitepaper and Deck

As a project progresses from ideation to conceptualization, having a well-crafted whitepaper and a solid deck becomes crucial. According to Bruce Lan from Bing Ventures, the whitepaper plays a pivotal role in bridging the gap between an idea and its execution.

“In the early stages, a well-crafted whitepaper or deck can bridge the gap between an idea and execution. It’s essential for teams to communicate a clear vision and path forward. VCs are more likely to engage when they see that the project is grounded in a solid, thoughtful concept, even if it’s still in its infancy.”

This is particularly important for startups looking to raise funds at the seed stage, where they may not yet have a fully functional MVP but can present a compelling argument for the viability of their idea.

A whitepaper can serve as an essential document that articulates the project’s vision, technology, and potential market impact. It gives VCs a clear roadmap of where the project is headed and how it plans to get there.

MVP Stage: Gaining Credibility and Minimizing Risk

As a project advances past the ideation stage, having a Minimum Viable Product (MVP) becomes a critical factor in demonstrating both credibility and progress to VCs. Matthew Tang from Capitable Group emphasizes the importance of an MVP in instilling confidence in investors.

“A working MVP demonstrates progress and eliminates any suspicion of vaporware or scams. At this stage, VCs are more confident in the team’s ability to build and deliver,” says Tang.

For many VCs, especially those who enter the later stages of seed funding, having an MVP is a concrete indicator that the project has moved beyond the theoretical phase and into practical application. The presence of a functioning MVP also provides investors with an opportunity to evaluate the product’s technical feasibility and potential market fit.

Scaling Stage: Approaching VCs for Growth Capital

A cryptocurrency project should look for venture funding to support its next stage of growth once it has begun to attract users and has demonstrated its product-market fit. When a startup is prepared to grow into new markets, accelerate product development, or scale operations, Pietro Negri of Outlier Ventures suggests that they approach venture capitalists.

“When a crypto project needs funding to take its ventures to the next level, it should approach venture capitalists. VCs look for indications of strong product-market fit and growth potential at this stage, whether it’s expanding the product or entering a new market,” says Negri.

Venture capitalists are currently searching for projects that have already demonstrated their concept and now need funding to grow. They will evaluate important measures of product-market fit, like revenue generation, user adoption, and the project’s capacity to draw in partnerships.

Key Criteria VCs Look for in Crypto Startups

Several universal factors help VCs evaluate the potential of crypto startups, regardless of the stage. These criteria include:

Founding team
Technological innovation
Market potential and capacity for problem-solving
Strategic partnerships

For a deeper look into each of these criteria and insights from experts like Wayne Lin (Axia8 Ventures), Bruce Lan (Bing Ventures), and Pietro Negri (Outlier Ventures), refer to our article on Key Criteria VCs Prioritize When Assessing a Crypto Project.

Common Pitfalls to Avoid When Seeking VC Funding

Even though raising money can be exciting, a lot of cryptocurrency startups risk failing because they make simple mistakes that could have a negative impact on their chances of success. Red flags are easily spotted by VCs, and a startup’s attractiveness can be greatly increased by avoiding these pitfalls.

Unclear vision and goals: Uncertain vision and goals: One of the most frequent errors is to propose an extremely ambitious or vague vision without providing a clear plan for how to get there. Startups need to be able to clearly explain both their long-term objectives and the precise actions they plan to take to get there. “Investors need to see a well-defined plan that demonstrates how the project intends to grow and scale,” says Leonarda Rajeckyte of The VC Whisperer.
Incomplete tokenomics: Many crypto projects fail to adequately design a sustainable and transparent tokenomics model. VCs are particularly cautious of projects where the token’s utility and value growth are unclear or poorly thought out. A solid tokenomics model should outline how the token functions within the ecosystem and its long-term value potential.
Lack of compliance: Legal and regulatory issues are often overlooked in the rush to launch, which can be disastrous in the long run. Failing to consider compliance can turn VCs away and also lead to legal complications down the line. Bruce Lan from Bing Ventures stresses, “Compliance is crucial. Crypto projects need to be mindful of regulations, especially if they plan to expand internationally.”

Final Thoughts: Aligning Funding with Growth Strategy

Raising venture capital is a critical step for many crypto startups, but it must align with the startup’s growth trajectory. As emphasized by experts from Axia8 Ventures, Bing Ventures, Capitable Group, Outlier Ventures, and The VC Whisperer, there is no one-size-fits-all approach to securing VC funding.

The decision to approach VCs should be driven by the project’s readiness, market fit, and clear long-term strategy. Startups should not view fundraising as an achievement in itself but as a means to support sustainable growth. Leonarda Rajeckyte from The VC Whisperer wisely advises that startups should pursue funding only when it enhances their business strategy.

Timing is essential. VCs are more likely to invest when there is demonstrable progress—whether it’s a strong team, an MVP, or early market traction. Ultimately, the goal should be to use funding as a tool to scale, without losing focus on the project’s core mission and vision. Clear objectives and a solid growth strategy will always attract the right investors at the right time.

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All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

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What Past US Elections Reveal About Crypto Market Trends

Published

44 mins ago

November 6, 2024

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The US Presidential election is anticipated to have a substantial impact on global markets, with the cryptocurrency sector standing as no exception. Traders, analysts, and crypto enthusiasts worldwide closely monitor the US, where shifting attitudes toward digital assets make a difference.

In a recent report, on-chain analytics platform Santiment explored the connection between the most important US political event and crypto market movements. With results expected in days, here’s a look back at the crypto market reactions during the last two US presidential election cycles.

How Did US Elections Impact Crypto During Past Cycles

Analysts expect a close race in the 2024 US presidential election and predict a prolonged counting period. Given the tight competition, multiple days may pass after Election Day on Nov. 5 before the final results are confirmed and the next president is publicly announced.

In past elections, markets have reacted swiftly to presidential outcomes. Officials announced Joe Biden’s victory in 2020 four days after Election Day, triggering positive trends despite ongoing global economic turbulence from COVID-19.

While the election influenced market movements, some argue that a bull run was already on the horizon as the international community focused on economic recovery and pandemic response.

Crypto Market Dynamics in November 2016. Source: Santiment

After Donald Trump’s 2016 victory, the crypto market saw a minor five-day retrace, with Bitcoin and altcoins dipping before quickly rebounding from the initial volatility. Cryptocurrency markets are famously volatile, and election cycles tend to amplify this effect.

In 2020, Joe Biden’s win fueled optimism for stimulus-driven policies and potentially more lenient monetary practices, leading to a surge in crypto prices. The brief dip and swift recovery in 2016, contrasted with the post-election rally in 2020, highlight how political shifts can significantly impact market trends.

As a result, the announcement of Joe Biden’s victory in the 2020 election was far more positive for crypto, and markets reacted almost instantly after the news broke.

Crypto Market Dynamics in November 2020. Source: Santiment

The 2024 election is expected to bring significant price fluctuations in crypto markets, driven by the incoming administration’s stance on regulation and policy. Both major presidential candidates have outlined their views on cryptocurrency, offering a glimpse into the potential direction of US digital asset policy in the years ahead.

Candidate Positions on Cryptocurrency: Trump vs. Harris

Donald Trump

Cryptocurrency enthusiasts widely view Trump’s proposals as more favorable due to his emphasis on industry-friendly policies and his family’s active involvement in digital assets. The crypto community has largely responded positively to his proposals, which many view as encouraging to market growth:

National Bitcoin Reserve: Trump proposed creating a national bitcoin stockpile at the Bitcoin 2024 conference in July, aimed at establishing the US as a cryptocurrency frontrunner.
Crypto-Friendly Regulatory Policies: Trump has pledged to create a presidential advisory council on cryptocurrency, aiming to develop clear, favorable regulations.
SEC Leadership Overhaul: Trump has stated he would replace SEC Chair Gary Gensler, aiming for a regulatory shift he describes as more favorable to digital assets.
Family Ventures in Crypto: Trump’s sons, Donald Trump Jr. and Eric Trump, recently launched World Liberty Financial, a cryptocurrency exchange, underscoring the family’s involvement in the industry.

Kamala Harris

Harris, though supportive, emphasizes consumer protection, which some in the crypto space interpret as less conducive to industry expansion:

Support for Innovation in Digital Assets: Harris has voiced support for digital assets and AI, emphasizing the need to foster innovation while protecting consumers.
Framework for Regulatory Clarity: Harris proposed a regulatory framework for digital assets in October 2024, focusing on investor protections and transparent guidelines.
Blockchain’s Potential: Harris has acknowledged blockchain technology’s potential, calling for balanced regulations that support innovation without compromising consumer safety.
Engagement with Industry Leaders: Harris has engaged in dialogue with cryptocurrency leaders throughout 2024, signaling her openness to digital innovations while maintaining regulatory standards.

These differing approaches have resulted in a significantly higher volume of mentions around Trump’s crypto discussions and policies compared to Harris’s, reflecting the community’s heightened interest in his approach.

Mention Rate Trump vs. Harris, 2024. Source: Santiment

On Polymarket, prediction rates show higher support for Trump over Harris among the crypto community, though Harris has recently closed the gap, making it a closer race.

Regardless of who wins the 2024 election, the cryptocurrency sector anticipates continued growth and evolving regulatory frameworks as the new administration steps in. The crypto community will closely observe how the incoming administration navigates the rise of digital assets, balancing the drive for innovation with regulatory safeguards.

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VanEck Expands DeFi Offerings with PYTH ETN on Euronext

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2 hours ago

November 6, 2024

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Asset manager VanEck has launched a new ETN based on PYTH, specifically for European buyers. The Pyth network, a decentralized oracle protocol, has earned praise from VanEck for its potential to transform the DeFi landscape.

This launch follows several similar crypto-focused ventures by VanEck in recent months.

VanEck Launches PYTH ETN

According to a recent press release, asset manager VanEck is listing a new exchange-traded note (ETN) based on PYTH today. The Pyth network is a decentralized oracle protocol that uses PYTH as a network token. PYTH’s value has risen slightly since this announcement, bucking a decline this month, but there has not been a substantial price jump.

This new ETN is one of several recent crypto project investments by VanEck. Earlier in October, the firm launched a $30 million venture fund aimed at crypto startups and, just last week, partnered with Kiln to offer Solana staking.

PYTH Valuation on November 5. Source: BeInCrypto

VanEck publicly stated that Pyth’s technical potential inspired its latest ETN offering. Listed on Euronext Paris and Euronext Amsterdam, the ETN is now available to investors. Although distinct from an ETF, it shares some similarities: its value is tied to PYTH, and VanEck secures the ETN’s underlying assets in cold storage.

“Smart contracts… are gaining increasing significance in the financial world… and oracle networks play a crucial role in enabling [their] real-world use. With our Pyth ETN, investors have the opportunity to participate in the development of… Pyth Network, which has the potential to become a crucial part of DeFi application infrastructure,” VanEck Europe CEO Martijn Rozemuller said.

However, it remains unclear whether “underlying assets” specifically refers to PYTH tokens. The ETN’s value is derived from the MarketVector Pyth Network VWAP Close Index, which in turn tracks PYTH’s value indirectly. This layered approach to value calculation may help explain why PYTH’s price has remained relatively stable since the announcement.

The press release also notes that the ETN is available across 15 European countries under the ticker VYPT, with a total expense ratio of 1.5%. VanEck cautions twice in its statement about the “risk of extreme volatility” associated with the product.

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Swift, UBS, Chainlink Pilot Simplifies Tokenized Fund Transactions

Published

3 hours ago

November 6, 2024

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In partnership with UBS Asset Management and Chainlink, Swift has completed a pilot program designed to streamline tokenized fund transactions through its established financial network.

Conducted as part of the Monetary Authority of Singapore’s (MAS) Project Guardian, this pilot demonstrates how financial institutions can leverage Swift’s existing infrastructure to manage off-chain cash settlements for tokenized assets.

Swift, Chanlink and UBS Aim to Streamline Fund Operations and Boost Efficiency

Swift, UBS Asset Management, and Chainlink have completed a pilot for settling tokenized fund subscriptions through the Swift network. The initiative addresses inefficiencies in the $63 trillion global mutual fund market by connecting 11,500 institutions to streamline manual processes and cut costly settlement delays that hinder liquidity.

“Chainlink is enabling institutions to reuse Swift’s infrastructure to facilitate payments for digital asset transactions. I am very excited by the upcoming adoption of these off-chain payment capabilities and how they will increase the flow of capital and expand the possible user base of digital assets,” Chainlink co-founder Sergey Nazarov said.

Chainlink and Swift’s pilot bears real potential in demonstrating how financial institutions can streamline these processes in the future. It automates payment processing for tokenized investment funds without requiring a fully blockchain-based system. This approach makes transactions faster and more efficient.

The pilot builds on earlier work between UBS Asset Management and SBI Digital Markets. Their previous collaboration focused on developing a Digital Subscription and Redemption system for tokenized funds.

Using Swift’s established infrastructure, the pilot demonstrated how fund transactions could be settled efficiently by connecting traditional systems with blockchain. Upon meeting specific conditions, UBS’s tokenized investment funds automatically issued or canceled fund tokens for investors.

UBS rolled out a tokenized fund on the Ethereum blockchain on November 1. The “UBS USD Money Market Investment Fund Token,” known as “uMINT,” aims to meet growing demand for tokenized assets. Meanwhile, MAS highlighted its dedication to asset tokenization, drawing insights from 40 institutions and 15 pilot trials.

“Our collaboration with UBS Asset Management and Chainlink under MAS’ Project Guardian uses the Swift network to bridge digital assets with existing systems. This approach supports our goal of helping financial institutions securely transact across various digital asset classes and currencies,” Swift Head of Strategy Jonathan Ehrenfeld commented.

The pilot highlights the growing momentum toward integrating digital assets with mainstream financial systems, illustrating how established infrastructures like Swift’s can support the fast-evolving digital economy.

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