What is Crypto Fundraising and Why It Matters? Any company eventually reaches a point where raising money is essential for growth and expansion. And the cryptocurrency sector is proving to be the go-to model for fundraising since it provides more chances and this sector is less regulated as compared to the traditional finance and equity sectors. Now, even construction firms can raise money using cryptocurrencies; for instance, BitRent tried to tokenize investments in construction projects and BASIS raised money for the creation of new building materials. Crypto Fundraising Types and Rounds The crypto fundraiser is similar to equity fundraising in terms of the rounds of funding. It begins with like a pre-seed round, where family and friends deploy capital into the project. After pre-seed, the project moves on to the seed round, which is the initial investment and is then followed by series A, B, and C rounds. In the case of Draper Labs, they have raised a total of $300 Mn from series A, B, and C rounds as per the data by Blockchain.com. Notable investors like VY Capital, Lightspeed venture partners, and DST Global led these rounds. The primary methods for you to raise cryptocurrency for your project are listed below: Venture Capital Since it offers the greatest potential return to investors, the cryptocurrency sector is the most popular one for venture capital funds. Venture capital firms and well-known crypto businesses can both provide funding for cryptocurrency entrepreneurs. For instance, Coinbase, one of the largest crypto exchanges has its own venture capital fund; Coinbase Ventures. It is very impossible to sell simply the idea to venture investors, thus to raise money through this method, you must at least have the MVP ready. Most of these investors ask for a minimum MVP built and traction on the product. Angel investors While there are established angel investor clubs, they differ from venture capital firms as they represent private investors rather than businesses. Since it is customary for angel investors to receive a portion of the startup in exchange for their investments, they frequently participate in project management and bring with them valuable advice, guidance, networking opportunities, and visibility. ICOs The most fundamental type of crowdfunding in the cryptocurrency sector is known as an initial coin offering, in which entrepreneurs offer investors tokens that, in principle, have some utility within the project. ICOs played a significant role in the cryptocurrency market's spectacular expansion in 2017. However, 80% of firms that acquired money using ICOs either ended up being total frauds or failing. Investors essentially earned nothing because many of the tokens released during ICOs haven't even made it to cryptocurrency exchanges. ICOs are often used with caution nowadays due to the abundance of fraudulent projects and lack of investor interest protection; instead, alternative kinds of financing, like IEO or IDO, have taken their place.
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