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Venture capital is a form of financing offered by organized investors as a service to consumers. These investors may include banks or wealthy individuals who band together into VC firms to help businesses and startups in their early expansion stage. When it comes to crypto capital ventures, the only difference is that the business receiving the financial injections are cryptocurrency companies. Despite the economic disruption caused by Covid-19, the cryptocurrency space has continued to grow in value. Here is a beginner’s guide to crypto capital venture.

  1. Venture Capital and the Crypto Space. Crypto or blockchain-related businesses are looking for a new realm, given that the industry began only a few years ago. The risk for venture capitalists is high, especially if you consider the prevalence of failures and scams in the crypto space. Nevertheless, crypto-related businesses are attractive because they promise significant advances in the future. As such, many venture capital firms want to invest in crypto and blockchain startups. One aspect of the crypto venture capital is that some investors get exposure to crypto assets through Simple Agreement for Future Tokens.
  2. In 2019, the Initial Exchange Offering (IEO) model came into effect, igniting investors’ interests in early-stage crypto networks. IEOs are coordinated by crypto-asset exchange, which sells the project’s tokens directly to users. The primary advantages of IEOs to the user are the near-instant liquidity through a guaranteed listing on the host exchange and more significant due diligence undertaken by the host exchange.
  3. Capital Venture and Equity Investment. Several capital ventures are looking for ways to make traditional equity investments into cryptocurrency businesses. This move will entitle capital ventures to greater protections and regulatory assurance. Typically, any crypto-related project that raises equity finance is building an application layer of products with no direct link to a specific crypto network. Such projects operate a traditional business model while offering access to a decentralized ecosystem. Since crypto networks are not companies, the value accrual is opaque and requires a thorough inspection. As a result, investors and their capital ventures are looking for ways to get more exposure to value-accruing and crypto protocols without investing in crypto assets.
  4. Financing Rounds. Crypto startups might go through four primary venture capital financing rounds. Each round represents the stage of a company’s development. However, some companies can survive until later rounds.
  • Seed Round. In this financing round, the primary source of capital is the founders’ funds, family, friends, and well-wishers. Those who invest later are venture capitalists.
  • Series A. this stage represents a startup’s first institutional funding. However, the business must have a minimum viable product. Venture capital firms that lead at this stage buy a 50% ownership stake in the startup. The startup uses the raised funds for the development of its services and to hire new talent.
  • Series B. At this stage, businesses seek funding to continue their growth and address their technological risks.
  • Series C. companies may look for financing at this stage if they want to improve their balance sheet, finance an acquisition or go public by listing its shares. Currently, this is not common among crypto firms.

If you want to grow your business, this crypto capital venture can help you.

 

 

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