Nowadays, crypto funds come as a popular way to pay for e-purchases, transfer money, and gain profit for trading activities. Thus, blockchain technology is firmly rooted in our lives. The number of cryptocurrencies is constantly growing, with new crypto startups regularly appearing. This is why the industry features a constant need for crypto fundraising.
Before a new altcoin enters the crypto market, a team of developers attracts funds to launch a startup and give birth to a new currency. Thus, each project needs to undergo particular startup fundraising rounds. Note that since the industry does not stand still, the fundraising landscape observes constant evolution due to changing mechanisms in the domain.
Basic Concept of Fundraising Rounds: What Stages Does a Crypto Startup Go Through?
Crypto fundraising is a multi-stage process, where project developers set particular tasks to achieve certain indicators on each level. The process is aimed at attracting as many investors as possible, getting the required sum of investments for project existence and development. The modern crypto industry distinguishes the next recent fundraising rounds:
- Pre-seed. It’s an initial stage of project development, on which a basic concept of a future product is born. At this stage, a team of enthusiasts creates a prototype and deploys capital into a startup by attracting investments from close or like-minded people (those who have a high level of trust and loyalty to project members, like relatives or friends).
- Seed. This step is characterized by the flow of the first investments from third-party investors, i.e. it’s the stage of firm project settlement. Here, a funding round example is introduced to a wide audience to appeal to more investors.
- Series A, B, C. These stages imply the active attraction of more investment for stable project growth and development. As it grows, more and more funds are required, which leads to the need to seek new investors. Based on the scale of the attracted investments, funding rounds A B C are distinguished.
Passing through these crypto fundraising stages is inevitable and vital for each product to guarantee its smooth and long-term existence in the crypto arena. A subsequent transition from one stage to another allows for getting more investors in a team, which prevents crypto startup failure.
Benefits and Challenges of Crypto Fundraising
Crypto fundraising may come as an effective and stable source of passive income. The industry features a high circulation of funds, due to which investors can benefit from their investments by getting high return percentages. The main advantages of investing funds into the crypto sector and its startups include the next points.
Diversification
When investing funds into the crypto sphere, they are widely diversified, due to which investors’ investment is allocated between several assets. Thus, they get more chances to profit from several projects rather than those who concentrate all funds on one asset.
Investment Minimums
The crypto market features lower entrance points for investing funds, which sets investors in an advantageous position if compared to traditional venture capital funding. A lowered entrance threshold welcomes a wide audience of investors with smaller investment portfolios.
Professional Management
The domain offers wide trading opportunities with minimum engagement. Skilled managers allocate and use your funds themselves. A wide list of strategies, starting from active up to long-term holding, is available to generate a big profit. Passive management is an excellent solution for unskilled traders or busy investors who want to provide funds and get regular revenues.
Liquidity
The crypto market is characterized by high liquidity in comparison with other investment solutions.However, like any other activity, the funding round business has its drawbacks. Investors may face the following challenges:
Regulatory Uncertainty
Unclear regulation of the crypto environment is the main challenge. Jurisdictions of different countries vary their attitude, which sets an obstacle to smooth interactions between managers and investors.
Market Volatility
This feature comes as a double-edged sword. While it provides investors with higher chances to gain a profit, it increases the level of risk.
Due Diligence
The crypto landscape is characterized by complexity and relative novelty, which is why investors need more time to get acquainted with funding round details and running mechanisms, slowing down profiting processes.
Besides, managers engaged in crypto fundraising frequently encounter investor skepticism toward this type of investment. Although the domain is quickly developing and secure, many investors believe that frauds and risks are concentrated here. These challenges impede stable fundraising in the trading sector.
Where to Seek Investors?
When developing a project, managers face the need to search for investors. So, a reasonable question arises: “Where to seek them?” There are special platforms, like B and B Funding, that help clients find the needed partners. They work on both sides and assist both crypto managers and investors, that is, serving as an intermediary in connecting investors and project holders.
Tips on How to Raise Capital for a Startup in the Crypto Space
When seeking investors for projects, it’s important to realize what stage of fundraising it passes. Depending on the ICO funding round, investors of different sizes are needed, and places for their attraction are different. Anyway, to cope with crypto fundraising successfully, project holders need to introduce it correctly, highlighting the project’s strengths and advantages. To succeed in the task, it’s important to make a correct revision and a high-quality presentation to appeal to investors with your product. Thus, the proper explanation of the project concept, presentation, website, etc. are obligatory aspects for finding investors.
Tips on How to Find Prosperous Startups to Participate in Crypto Projects
As for investors, if they want to invest their capital into crypto projects, they have to visit specialized web platforms with listings of startups. By studying listed projects, they can pick a suitable option. This is why it’s vital to enter such listings after the funding round announcement.
Specialized platforms for funding rounds of crypto projects display at what stage a particular startup is, due to which investors can judge the required investment size and select appropriate products according to their capital.
Crypto fundraising requires time and effort to find a partner. However, this activity can be prosperous in the long run and become a worthy source of passive income.
