When a project has just been launched, and the team needs more financial support to unfold it to the full extent, or when a team of developers have a great promising idea but have no money to develop it, venture capital firms can be a viable solution.
How Crypto VC Funding Works
Venture Capital firms provide funds, invest in a project for equity in it. It means that a venture capital firm will have a part in the project. But in return, the crypto startup gets not only money. The guys get valuable consultants in the face of venture capitalists. Those are normally people who have been in the business for ages and created a fortune themselves.
In other words, by applying for funding from a venture capital firm, a project gets money and support.
Is it difficult to get funding from a venture capital firm? Well, yes. Such companies invest in disruptive projects. If a project is something average, most likely, it cannot count on funding. Reasons? VC firms expect to get high returns in the future.
That’s why before investing in a project, investors evaluate it very carefully. They estimate the project’s potential and the possible return on investment (ROI).
A standard funding process with a VC looks as follows:
- Pre-seed: the project founders raise capital from friends and relatives. The idea is there but at this stage, it may be unclear yet.
- Seed: the project has been tested for viability. The funders have a clear roadmap, they have analyzed competitors and determined the project’s niche in the market.
- Series A: the community behind the project is solid, and the project is expanding.
- Series B: the customer base is already large and is growing. The focus shifts to project branding, marketing, business growth, and customer support.
- Series C: the product is feasible commercially. The project expands to foreign markets.
Somewhere at the Seed A stage, the project becomes interesting to investors.
In the crypto world though, there are some differences from a standard plan. The thing is that cryptocurrency is still a very young technology. That’s why there are not many projects that reach the Series A stage. Strategic planning is also complicated because still, the industry is lacking specific cases in a number that is sufficient for statistics.
Most crypto ventures raise funds via the sale of tokens. While owning tokens means owning a share but it differs from owning a share in a physical product. That’s why investors that participate in token sales take additional risks.
The Biggest Crypto VC Firms
The following VC firms are among the best ones.
Andreessen Horowitz
This is a California-based crypto venture capital fund known for investing in many promising projects in all fields. Cryptocurrency is not an exception. Among the most known projects that received VC funding from Andreessen Horowitz are Coinbase, Celo, MakerDAO, among others.
Alameda Research
Alameda Research is known for focusing on the cryptocurrency industry. This crypto investment fund has shares in the majority of blockchain platforms. For example, it owns shares in Bitcoin, Uniswap, Solana, Binance, and Ethereum, among others.
Coinbase Ventures
Coinbase ventures is a cryptocurrency investment company founded by Brian Armstrong. It is a part of a famous DeX. It is known for investing in the Compound protocol, Starkware, BlockFi, and a good number of other promising projects.
Binance Labs
Binance Labs is another cryptocurrency investment company. It is a subsidiary of another famous cryptocurrency exchange - Binance. It had shares in Terra. Now, it owns a part of Moonbeam and Coin 98, among others.
Jump Crypto
It is an investing department of a known company Jump Trading. Along with being a cryptocurrency venture capital firm, this company is actively investing in trading companies. Among the projects that it supports, there was Terra. Now, the company has a share in Solana, Wormhole, Phantom, and others.
Paradigm
This is one of the top crypto VC funds that is known for backing companies with stakes between $1 and $100 mln. Argent and OpenSea are among the most successful investment ventures of the company.
Multicoin Capital
Multicoin Capital is a crypto investment fund focused on crypto projects, tokens, and blockchain-based companies. They also participate in liquidations, staking, and other finance-related activities. Near Protocol, and Audius are among the most promising investment projects of Multicoin.
Pantera
Pantera is the first US-based company with a focus on blockchain exclusively. The crypto venture fund is known for investing in blockchain-based companies, exchanges, and other crypto infrastructures.
Coinbase, FTX, Polkadot, and a couple of other successful projects are in the portfolio of this VC fund.
Conclusion
As we can see, many venture capital firms are interested in cryptocurrency and blockchain. Indeed, the technology is extremely promising. It bears immense growth and profit potential.
FAQ
What is VC in crypto?
Venture capital firms in crypto work almost in the same way as they do in any other field. They provide funds to finance promising projects. It is done in return for the project’s share.
Is there a crypto investment fund?
There are some famous crypto investment funds such as Pantera, Paradigm, and Multicoin Capital, among others.
What investment firms deal with cryptocurrency?
There are traditional investment firms such as Andreessen Horowitz. They are known for being in the investment field for ages and are behind many successful projects. There are investment funds by known exchanges such as Binance or Coindesk. And finally, there are investment funds that focus specifically on blockchain and cryptocurrency such as Pantera, Paradigm, and Multicoin Capital.
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