Funding Strategies for Blockchain Startups
Blockchain startups raise funds from a vibrant ecosystem
Wellfound, formerly AngelList Talent, recently released another fast moving count block chain startups. Some names you might recognize, while others are just getting into space: Gemini, Injective Labs, Fold, RabbitHole, Futureswap, 0x, CoinAlpha. These startups are part of a growing ecosystem of entrepreneurial and intrapreneurial ventures, each using blockchain technology to tackle a slightly different challenge.
A larger community helps founders launch these types of projects. Although the path to building a profitable business seems expensive, founders rarely fund their ideas alone: they receive support from corporations, venture capitalists, blockchain protocols and governments. Mastercard invites crypto and blockchain startups to its global accelerator program. Cryptocurrency exchange Binance is running programs to expand its blockchain ecosystem. Venture capital firms CoinFund, Orange DAO, and Shima Capital each invest millions of dollars in crypto and web3 startups.
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Venture capital funding for blockchain startups
One of the primary ways blockchain entrepreneurs fund their projects is through venture capital (VC) funding. Although initial coin offerings (ICOs) were once a primary source of funding for blockchain projects, intense regulatory scrutiny of ICOs has shifted the balance of power. As the chart below shows, venture capital plays an important role in entrepreneurial and intrapreneurial blockchain projects, even during periods of depressed valuations.
Evaluate options other than venture capital
But venture capital is not the only source of blockchain startup funding. Since the blockchain space is highly decentralized and community driven, blockchain entrepreneurs have a few more options than those in other fields. Many blockchain networks, for example, will fund or support projects to expand the reach of their network. As a result, blockchain startups can access multiple VC alternatives, such as network-supported accelerators, incubators, and grants.
Alternative sources of blockchain seed funding
- Accelerators offer funding coupled with strategic support. Although not the most common fundraising method in the blockchain industry, popular accelerators such as DeFi Alliance, GBV Capital, Binance Labs, Tribe Accelerator, and Impossible Finance offer blockchain startups valuable recognition and mentorship opportunities.
- Incubators provide the opportunity to create, network and collaborate with industry experts. Unlike accelerators, incubators don’t often fund startups, but they do offer top-notch strategic advice and networks. Many of these incubators are linked to governments, universities and companies. For example, the Singapore government supports LongHash Ventures, enterprise technology provider R3 offers an enterprise development program, and Indian state Telangana recently announced that it will partner with the Indian School of Business and at IIIT-Hyderabad to launch a new incubator for blockchain startups. .
- Network-supported funds (grants) support projects that focus on a specific blockchain network. Borderless Capital funds projects that drive users to adopt the Algorand blockchain, Dash Investment Foundation funds traditional businesses through the Dash DAO, and Gitcoin funds projects in Ethereum. These grant programs help start new projects while expanding the network’s community. If you already intend to use a specific blockchain protocol, research the community to see if they offer a similar grant program.
Selecting a funding source
Between venture capital, ICOs, accelerators, incubators, and network-backed funds, there is no one-size-fits-all solution. As with any startup, sources of funding vary depending on the stage of your startup, and more nuanced funding strategies often combine multiple funding channels to balance risk, reward, and growth.
To select one or more initial funding sources, review your startup’s short-term and long-term goals. Consider whether you need connections, resources, project control, or a mix of all three. Then map your main financing needs.
Funding your blockchain startup
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