Funding Strategies for Blockchain Startups
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Blockchain startups raise funding from a vibrant ecosystem
Wellfound, formerly AngelList Talent, recently released another tally of rapidly-scaling blockchain startups. Some names you may recognise, whilst others are just breaking into the space: Gemini, Injective Labs, Fold, RabbitHole, Futureswap, 0x, CoinAlpha. These startups are part of a growing ecosystem of entrepreneurial and intrapreneurial projects, each using blockchain technology to address a slightly different challenge.
A broader community helps founders launch these types of projects. Although the path to building a profitable venture seems pricey, founders rarely fund their ideas alone: they receive support from corporations, venture capitalists, blockchain protocols, and governments. Mastercard invites crypto and blockchain startups into its global accelerator programme. Cryptocurrency exchange Binance runs programmes to expand its blockchain ecosystem. Venture capital firms CoinFund, Orange DAO, and Shima Capital each invest millions of dollars in crypto and web3 startups.Join Oxford’s Blockchain Strategy Programme today
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Venture capital funding for blockchain startups
One of the top ways blockchain entrepreneurs fund their projects is through venture capital (VC) funding. Although initial coin offerings (ICOs) once represented a primary funding source for blockchain projects, intense regulatory scrutiny of ICOs has shifted the balance of power. As shown in the chart below, venture capital plays a significant role in entrepreneurial and intrapreneurial blockchain projects, even during periods of depressed valuation.
Evaluating options besides venture capital
But venture capital isn’t the only source of blockchain startup funding. Since the blockchain space is highly decentralised 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 their network’s reach. As a result, blockchain startups can access multiple VC alternatives, such as accelerators, incubators, and network-supported grants.
Alternative sources of blockchain startup funding
- Accelerators offer funding coupled with strategic support. Although not the most common method of fundraising in the blockchain industry, popular accelerators like DeFi Alliance, GBV Capital, Binance Labs, Tribe Accelerator, and Impossible Finance provide blockchain startups with valuable recognition and opportunities for mentorship.
- Incubators provide the ability to build, network, and collaborate with industry experts. Unlike accelerators, incubators don’t often fund startups, but they do offer strategic guidance and high-profile networks. Many of these incubators are linked to governments, universities, and corporations. For example, Singapore’s government supports LongHash Ventures, enterprise technology provider R3 provides a Venture Development Programme, and Telangana, an Indian state, recently announced that it would partner with the Indian School of Business and 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 bootstrap new projects whilst expanding the network’s community. If you’re already intending to use a specific blockchain protocol, research the community to see if it offers a similar grant programme.
Selecting a funding source
Between venture capital, ICOs, accelerators, incubators, and network-supported funds, no one right solution exists. As with any startup, funding sources vary depending on your startup’s stage, and more nuanced funding strategies often combine several funding channels to balance risk, reward, and growth.
To select an initial funding source or sources, review your startup’s short- and long-term goals. Ask yourself whether you need connections, resources, control over the project, or a mix of all three. Then map your core funding needs.
Funding your blockchain startup
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