Cryptocurrency Venture Capital 101

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Note that this is a shortened version of our recent blog post which you can find here.

In 2020, despite all of the volatility, Covid-19 and the side-effects of a pandemic, breakdowns in the supply chain and fractured workforces, there are still assets that continue to grow in value. In 2019, Bitcoin was the best-performing major asset for the entire year; more than gold, oil and more. The best performing investment fund in the world last year yielded 296% in appreciation, which is absolutely enormous compared to the S&P 500 (18.7%) and the Global Dow (12.9%).

Of course, this article is here to explore the space in the cryptocurrency world where venture capitalists are looking to make big bucks through solid investments. First of all…

What is venture capital funding in the cryptocurrency space?

To begin with, Venture Capital is a type of financing or investing that is offered by professional and organised investors as a service or activity. These groups of investors may also contain banks and very wealthy individuals and they band together into VC firms to help entrepreneurs and startups, typically in the early expansion stages of their business, to secure funding that will accelerate their growth and bring extraordinary profits. Along with profits, they often provide some expertise and gain some voting rights or a position on the board of directors.

When it comes to VC funding in the crypto space the only real difference is that the businesses and projects receiving the financial injections are cryptocurrency companies.

Who are the top cryptocurrency venture capital firms?

Below you will see the top 10 cryptocurrency VC firms and the number of deals that each one has made in the crypto-world.

  1. Digital Currency Group — 127
  2. Blockchain Capital — 57
  3. Pantera Capital — 56
  4. Digital Horizon Capital — 38
  5. Fenbushi Capital — 36
  6. Plug and Play Tech Center — 32
  7. 500 Startups — 31
  8. Andreessen Horowitz — 30
  9. NEO Global Capital — 27
  10. Boost VC — 25

What are the biggest VC deals ever?

Back in July 2018, a mining giant in the crypto-world called Bitmain closed an exceptional Series B funding round that saw them valued at an extraordinary $12bn. As a result of this valuation, they raised a lot in equity finance, and whilst the exact figure has not been announced, it is confirmed to be approaching $400m.

Second on this list is Robinhood, a trading app that offers zero-fee exchange activities, and raised a stunning $363m in May 2018 with a valuation of $5.6bn. The platform already boasts more than 4 million brokerage accounts and has processed hundreds of billions of dollars in crypto-trades.

What’s the difference between an ICO/IEO and venture capital?

  • ICO — An Initial Coin Offering is a crypto crowdfunding method whereby a new cryptocurrency sells its tokens at an introductory price to attract investors and raise money for the project
  • IEO — An Initial Exchange Offering is very similar to an ICO, except rather than selling tokens to grow a cryptocurrency project, they sell issued digital tokens to help launch or grow their cryptocurrency exchange
  • Venture Capital — Crypto-related venture capital firms are institutionally recognised or accredited investors who bring high levels of expertise, quality demands, and particular connections to a project.

Anyone can release an ICO, all you need is a short white paper, half an idea, and a bunch of friends who know how to use a computer, and to be frank, you can also just pay a service to do all that for you. Launching an ICO doesn’t mean your project is real or ever will be, which is why thousands of people have been scammed over the last few years, as opportunists launch bogus ICOs and then disappear with whatever they can quickly raise through token sales. The VC space doesn’t have the same problem, as so much vetting and investigation takes place to ensure that the company has a bold vision, an experienced team, and a viable technology.

Can any crypto project seek Venture Capital financing?

Technically yes, but realistically, no. Any crypto project, business, or startup that wants venture capitalists to put their money into their mission must be able to demonstrate at least a working minimum viable product, or deliver an exceptionally well-prepared pitch. The people who comprise the crypto-team should be experienced, qualified, or bring knowledge that few others can offer, as the team will be vetted to a high degree by any potential investors.

The brightness of the future…

It would appear that venture capital firms are in a really great place now with the cryptocurrency market.2020 has seen crypto play an exciting role in the global pandemic, as people around the world were able to use cryptocurrencies when their financial situations took a dire turn. The advancements in Blockchain technology also helped around the world when it came to creating track and trace systems, as well as advanced databases for patients and testing.

The future is truly bright for cryptocurrency venture capital firms…