How to conduct seed round financing for blockchain start-up projects

Editor's Note: This article comes fromChain News ChainNewsEditor's Note: This article comes from

Chain News ChainNews

(ID: chainnewscom), Author: Regan Bozman, Compiler: Perry Wang, published with authorization.

The financing news of the crypto asset industry is gaining widespread attention, among which the eye-catching large-scale financing has already taken everyone's attention, and few people discuss the financing experience of the founders of start-up companies in this field.

As the headlines may have told you, securing investment in this hot industry can be challenging. Yes, for a start-up blockchain company, there are many uncertainties in the way of financing. So, which fund is actively investing in this field and has a high reputation? Which one might be a better fit for your company? How to do due diligence on them?

I asked in a Telegram group a few weeks ago, does anyone have any good insights into the investor graph since the last wave of divestments?

My question was not answered, and I realized that if the smartest and most well-connected people in this industry do not have a clear understanding of the investment institutional map, I think most entrepreneurs will also be confused.

Venture capital has now entered a relatively transparent financing market and process. People like AngleList co-founders Babak Nivi and Naval Ravikant, as well as institutions such as Y-Combinator, have been doing their best to help entrepreneurs raise funds more conveniently. However, the transparency of the cryptocurrency market is much lower than that of venture capital, and it is also more complicated and difficult to understand: the potential investor group is much larger, including not only venture capital, but also various consulting institutions, consortiums of related companies, and crypto hedge funds. There are also more financing mechanisms, including token financing and equity financing.

Financing itself has nothing to do with driving the industry forward. The sooner a company can complete rounds of financing and devote itself to construction, the industry itself will progress. The purpose of my writing this article is to let entrepreneurs know some data points, hoping to help them in their financing process.

Remember, taking money from outside investors is one of the most complex decisions with consequences for early stage founders, and you need to make an informed decision.

secondary title

Seed round venture capital

• Before I joined CoinList, I worked in the investment team of AngelList. At that time, I was lucky to participate in the early financing of more than 100 projects, and I was fully exposed to various venture capital models.

• VCs are far from perfect, and if you're starting a SaaS business in San Francisco, you need to:Well-known startup accelerators such as Y-Combinator, Techstars, etc.;：

• List of famous angel investors,For example, "Forbes" magazine once provided a list

With the support of well-known big-name venture capital institutions and partners,

CB Insight provides a nice list of the top 100 venture capitalists in the worldCompared with financing in traditional industries, I am not saying that cryptocurrency financing is necessarily a risky experience. However, there are indeed many, many problems. In contrast, the financing process conducted by traditional venture capital institutions is more transparent, and the ability of the founders is also fully proved."Entrepreneurs want to take money from investors in the Chinese currency circle, please be careful!"

. He gave advice to blockchain entrepreneurs: When contacting or cooperating with Chinese cryptocurrency funds, they need to think carefully, do due diligence, and understand the advantages and disadvantages of taking money from investors in the Chinese currency circle. Also well worth a read. "

secondary title

• Early Funding in the Crypto World

• Compared with traditional venture capital, the encryption world has low transparency, rapid changes, and extremely complicated situations. Mainly for several reasons:

• Crypto investing is still new. The world's first cryptocurrency fund, Pantera Capital, was established in 2013, and most new funds are less than two years old.

• Most venture capital funds have institutions as passive investors who provide funds for fund managers as limited partners, so their operating methods are relatively conservative. Considering that many new cryptocurrency funds are funded by the founders themselves or their friends, the approach is aggressive and even reckless.

Almost all venture capital firms follow the same strategy—buy and hold. Cryptocurrency funds have a variety of strategies – including long/short hedge funds, arbitrage funds, mining pools and equity investment funds.

secondary title

The specific process of financing

Entrepreneurs will encounter several key problems in the process of financing blockchain companies that are difficult to prove their strength:

Q: Of all these funds, who should you talk to?

In my experience, most entrepreneurs start out with a list of all the big-name investors who are actively investing in the space. This is the starting point from which I start my research, a prerequisite for everything else in the fundraising process.

Q: Which of these people should you talk to?

Q: What should you ask them?

There are many unanswered questions in this field, which may have extremely complex impacts and consequences on entrepreneurs. For example, if you want to sell equity to a cryptocurrency hedge fund whose investors can withdraw their money on a quarterly basis, what will they do with your company's illiquid equity if faced with a flood of investors withdrawing from the fund? Entrepreneurs should know the right questions to ask.

secondary title

Cryptocurrency Fund Family Tree

If I were doing early-stage funding, I'd start with a list of 100 funds active in the space.

I'm not saying this is the top 100 crypto space funds, or that you shouldn't raise money from funds that aren't on the list. More precisely, this is the 100 funds that are actively investing in blockchain companies around the world. I will try my best to keep it updated, and I also plan to add some information such as average investment amount and fund obligations, such as only investing in equity.

Precautions:

• secondary title

• Precautions:

• This is informational information, not an endorsement of any fund. This has been compiled based on information available from publicly available sources and there is a good chance of misinformation.

• The above is a personal opinion. CoinList, which I work for, has nothing to do with the above list.

• This is a list of American perspectives, with a considerable number of American and European investors.

Bonus

The above list is for entrepreneurs looking for early-stage funding, so I've excluded funds that don't make early-stage investments such as quant funds or growth equity funds.

In addition to CoinList’s Regan Bozman recently writing the article above, pointing out the way for blockchain entrepreneurs to raise funds in the cold winter, Yang Yonghuan, the founder of Global Coin Research, also recently wrote an article introducing blockchain startups in North America. How to get financing from Chinese investors.

Although the article itself is aimed at those North American blockchain projects that hope to obtain financing in China, a large number of Silicon Valley Chinese technical elites have devoted themselves to blockchain entrepreneurship, and the suggestions provided in this article are also applicable to them; in addition, for Chinese regional For blockchain entrepreneurs, this article also provides useful information for better understanding of Chinese investment institutions.

first level title

How do startups get financing from Chinese blockchain investment institutions?

Liu Xi, co-founder and CEO of Eximchain, and Ryan Fang, co-founder and COO of Ankr.Network, are two Chinese-born entrepreneurs in the United States who are proficient in Chinese regulation, financing and recruitment. Talking to them on Global Coin, a podcast I produce, I realized how little is known about Asian funds in English-speaking countries.

I've taken some of what we've covered in our discussions to provide some guidance for entrepreneurs looking to seek investment from China and Asia.

secondary title

Think twice

Not only can overseas investors provide a very different point of view, they can also give you access to markets in another hemisphere of the world, without which it would be very difficult to go it alone.

Ryan Fang, co-founder of Ankr.Network, suggested that when companies bring in investors, they should maintain a balance between East and West. Liu Xi, co-founder and CEO of Eximchain, emphasized that before deciding which investors to raise funds from, you should deeply consider your target consumers and users. This is all good advice.

secondary title

Which investors are you financing from?

There are two types of funds that I think you should be looking for to get into the East.

Another alternative, and one that is becoming increasingly popular, is to seek out Chinese and Asian investors or institutions with significant investments in the United States.

The following are the top funds in these two fields I have compiled:

secondary title

How to sell projects to Chinese or Asian investment funds?

In the current financing environment, English-speaking investors pay more attention to what kind of results your technology can bring, and what kind of advanced technology, token economy or consensus model you adopt.

In the Chinese investor circle, investors may or may not know much about technology, depending on whether there are people with technical background in their team, but they are very concerned about your market strategy and your product. They are very concerned about how you get merchants to accept your products and pay for your products.

Ryan Fang said that compared with their American counterparts, many Chinese investors are more concerned about the price, such as how much the token can be sold in the secondary market, and how much it can increase compared to the pre-sale price of the token.

Frankly speaking, I personally think that every investor should pay attention to price and risk in this ups and downs market. To me, Chinese investors are more open and honest than their American counterparts when it comes to talking about prices, exit mechanisms, and token gains. For every entrepreneur and founder, this may be a good opportunity to sort out the long-term value trend of their own tokens and the idea of ​​​​eliminating the risk of token price volatility.

secondary title

What value can Chinese or Asian investors bring that American investors can't get?