The wider cryptocurrency market has been a central talking point for investors for the past 5 years. Cryptocurrency has evolved from a relatively unknown form of investment into one that typically accounts for around 5% of the average portfolio. Even major traditional investment firms now include cryptocurrency as an investment suggestion for their clients.
With how widely successful cryptocurrency investments have been, it’s unsurprising that the venture capital industry has equally begun to shift to accept this as a pathway of potential investment. Crypto venture funding, where venture capital firms fund new or exciting cryptocurrency projects to streamline their growth, is becoming a common practice in the field.
In this article, we’ll explore the world of crypto venture funding, touching on what it is, how it benefits cryptocurrencies, and why crypto projects should look to secure external funding.
What is Crypto Venture Funding?
Crypto venture funding is a form of venture capitalist investment that directly funnels capital into blockchain projects. The investment of capital into this field has been steadily rising over the past few years, reaching upwards of $2.5bn in the first quarter of 2023.
One of the primary reasons that this sector repeatedly receives funding is that blockchain projects can overlap with several other profitable fields. Everything from blockchain gaming and NFTs to Metaverse projects and functional cryptocurrencies all fall under this umbrella, giving investment firms the ability to diversify their investments while remaining within the spectrum of blockchain projects.
For a crypto project, the ability to receive venture capital funding offers a number of benefits, ranging from a boost in liquidity to spare capital that they can reinvest in their foundational architecture. All of these offerings help to streamline the development of a cryptocurrency project and allow the company to keep up with the fast-paced nature of this sector.
What Are the Benefits of Gaining Crypto Venture Funding?
Before cryptocurrency projects were widely accepted by venture capital firms, the main route that they had to raise money was through crowdfunding. Crowdfunding certainly had some benefits, like providing a higher degree of control to a brand and full ownership of its creative direction. Equally, crowdfunding helped foster a sense of community around a project, helping to lead to its early success.
Yet, crowdfunding is also incredibly limiting, only really being available to projects that have an established audience and can call upon their social media followers to rally attention.
Crypto venture funding offers a viable alternative to businesses in the blockchain space. Alongside its wide availability for brands with a strong vision, crypto venture funding offers a number of benefits.
Comprehensive Resource Support
When cryptocurrency projects seek out funding, their primary goal is always to secure capital to help improve their business and streamline growth. When focusing on capital support, many overlook the several other major benefits of partnering with a crypto venture capital firm, like the additional resources that they can offer.
For example, a venture capital group could support the crypto project with:
- Technical Support: Investment groups that specialize in a certain industry will typically have a range of experts in their organization. By discussing with these experts and drawing upon their expertise, crypto projects can streamline their technical infrastructure and create more effective products.
- Marketing Support: Venture capital brands have years of experience in the market and have seen what works and what doesn’t. They can share insight on how similar crypto projects have marketed themselves, what has worked, and what hasn’t.
- Strategic Advice: Another powerful additional resource that venture capital crypto investors can offer is strategic advice on how to enhance a project. Whether it’s an insight into the current market and what branding endeavors would succeed or simply sharing roadmap suggestions, these external perspectives can go a long way.
Provides Industry Connections
Crypto venture capital brands have a corpus of connections, not only to other players in the space but also to the many brands they’ve partnered with. VCs don’t invest in a vacuum; they can put brands in touch with one another, identify potential partnerships, and share contacts that could help your brand down the line.
The blockchain field as a whole is notorious for lacking trust. One effective method to overcome this is to leverage connections to other or more established companies. When working with a crypto VC investor, they can put you in contact with other projects they have invested in, allowing you to lean on one another to mutually grow.
Leveraging the connections that investors can offer a crypto project is a highly beneficial advantage of external investment.
Advisory and Regulatory Guidance
The cryptocurrency regulatory space is constantly shifting, with regulations emerging in territories across the globe that impact how businesses must operate. Much like the AI space, the relative novelty of the blockchain industry makes it highly exposed to new regulatory obligations and compliance initiatives.
By working with a cryptocurrency venture capital funding source, you gain a direct connection to seasoned veterans in the field who will have access to world-leading lawyers who specialize in blockchain. With insight from these external parties, you can shape a future-proof crypto project that aligns with current and emerging regulations.
Especially how compliance can make or break a crypto project, it’s vital to understand how new regulations impact your company and how you should respond to them. Working with a VC investor can help you with regulatory guidance, creating a problem-free path to growth.
Final Thoughts
Crypto venture funding is an excellent resource for blockchain projects that are looking to accelerate their development and gain the support of industry partners. Especially when working with specialized crypto venture firms, this relationship can offer much more than a simple capital investment.
Crypto venture funding is a large part of the future of the blockchain industry, with the development and widespread accessibility to sources of funding helping to fund lesser-known projects and bring new voices to the community.
