It’s no secret venture capitalists react to prevailing market conditions when making decisions, and amid global economic uncertainty, entrepreneurs from across industries are finding that VC funds are more difficult to come by these days. This is especially true for crypto and blockchain companies, which have to overcome not only a knowledge barrier but also the lingering fear aroused by recent bad behavior from certain high-profile crypto founders and firms.
Crypto pioneers who became accustomed to a free-flowing tap of VC cash during the industry’s early heyday may need to adjust their mindset and approach to be successful when seeking funds in the current market. Here, 12 members of Cryptox Innovation Circle share tips to help crypto and blockchain companies move forward as VC funds become less generous with their investments.
Ensure the first encounter with the front end feels familiar
We’ve thought through the user flow carefully for our applications and demos, with a testnet behind our first application. Our goal is for users to understand that blockchain-based decentralized applications are simply the next generation of apps, with special properties on the back end — so their first encounter with the front end must feel familiar. Only then will we go into the block explorer and the code, if they wish. – Stephanie So, Geeq
Stop focusing on the tokens
The first thing a crypto or blockchain company needs to do is to stop focusing on the tokens. The main focus, regardless of cycles, should always be on building a high-quality product and the effort to create traction and prove product-market fit. – Sami Rusani, Rusani Ventures
Focus on delivering customer value
Remember: You’re building a business, not a hype machine. Businesses have revenue, profits, customer acquisition and retention costs, and so on. Understand what real problems you solve, who your customers are, how you’re going to find them and the value you create for them, especially relative to your competition and alternatives (like Web2, fiat and so on). Focus on delivering customer value, and the rest will follow. – Xinglu Lin, Fog Works, Inc.
Be able to demonstrate the versatility of your solution
As a fund manager, I have found that those who are successful in securing funding do the following: They demonstrate that their solution is versatile enough to pivot into the niche the industry needs the most. For example, my last two investments have been in infrastructure projects focused on improving the Know Your Customer features of gaming and decentralized finance protocols in light of the upcoming regulatory pressure. – Carlos Gomez, Belobaba Crypto Fund
Prepare your deck and demos, and ask for a reasonable valuation
Have your ducks in a row. So many crypto founders who were around in the bull market are lazy when it comes to approaching VCs. They don’t have a proper deck. They don’t have product demos. Above all else, don’t ask for a crazy valuation with a long vesting schedule. Crazy and unjustified valuations and long vesting schedules don’t sit well with investors in bear markets. – Brian D. Evans, BDE Ventures
Show off your passion for your project
The best tip I can give a crypto founder who is looking to raise funds at the moment is to show VCs how purpose-driven your project is. I think all of us — especially investors — are now looking for honest, inspirational and value-driven projects. Show them your passion and why they should get excited. It’s time to wash away the bad players and focus on those in the ecosystem who are bringing value. – Ayelet Noff, SlicedBrand
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Ensure there are no surprises
Minimize risk and maximize value. Investors need to know that their money is safer with you than with someone else of apparently “equal” value; the only way to assure them of that is to ensure there are no surprises, no secrets and no tucked-away embarrassments or vulnerabilities. Keep them informed, actually build what you say you will build and update them early and often if circumstances change. – Budd White, Tacen
Develop application-specific solutions
While it can be challenging to raise capital while the economy struggles, companies can insulate themselves from general market trends by developing application-specific solutions that play an integral role in customers’ businesses, rather than producing general-purpose products that are often the first budget line items on the chopping block. – Yaoqi Jia, AltLayer
Demonstrate strong fundamentals and highlight Web3’s advantages
Crypto companies can be more successful in raising funds by demonstrating strong fundamentals such as traction and efficiency. Additionally, crypto companies can differentiate themselves by highlighting the unique features and potential of the Web3 ecosystem, such as its decentralized nature, transparency and, most importantly, lower customer acquisition cost. – Erki Koldits, OÜ PopSpot
Be clear about potential risks and rewards and have a plan for using the funds
To attract investors in a tough market, focus on building a strong business plan and track record, network and build relationships, and stay up to date on industry trends. It’s also important to be transparent and clear about the risks and potential rewards of investing in the company and to have a clear plan for how the funds will be used to grow the business. – Wolfgang Rückerl, ENT Technologies AG
Don’t give in to fear
The worst thing to do is to subscribe to the fear. Mindset is everything, and if your deep-set belief is that you will not be able to raise funds or that your company may not survive, whether you realize it or not, you’ll be making decisions — often critical decisions — with fear as your primary foundation and motivator, which is not good. Instead, keep your head down and focus on what’s important. – Zain Jaffer, Zain Ventures
Continue building
Potential investors are interested in projects that they believe in, so it’s critical for companies to continue to build great products and better services. The market will eventually turn the tide, and the companies that stayed patient and continued to work on building impactful products are the companies that will survive in the long run. – Anthony Georgiades, Pastel Network
This article was published through Cryptox Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cryptox.
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