Crypto Venture Capital - How to Invest in Blockchain Startups
As the crypto industry matures, we are beginning to see a flood of traditional accredited investors looking for crypto venture capital deals in blockchain startups.
VC financing is becoming an essential part of the crypto industry. It is where new ideas are turned into successful ventures. Let's take a look at where Crypto VCs are investing.
First, What is Crypto Venture Capital?
Crypto venture capital funds are composed of a pool of investors wishing to make a considerable return on capital more quickly than average, and this also tends to have a bit more risk.
In traditional funds, fund managers send out a prospectus to potential investors inviting them to participate. A prospectus is essentially a document that sells an investor on the idea of investing in a company.
And for further understanding on the background, VC managers invest significant amounts of time reviewing the business plans, financial statements, and performance of potential investments.
Venture capital firms like to spread their investments across multiple projects. This way, they don't risk putting all their money in one single project that could fail.
There’s a lot of competition in the traditional venture capital funding game. You may not be able to find firms that want to work with you.
As a result of the former, blockchain startups have been avoiding seeking out traditional VCs for financing and have been focused on firms who understand the crypto space better.
Times are changing though as VCs begin to take a serious look at how they can invest in cryptocurrencies and new blockchain opportunities. What are those opportunities?
Let's take a look at the current state of the crypto investment world and how it is subject to evolve.
What Crypto VCs Have Been Focused On
The NFT market and DeFi space are among the most popular areas in the cryptocurrency industry attracting venture funds. Neither of these areas are exclusive, but they have seen some large crypto venture capital investments as of late.
The NFT Market
The NFT market is an emerging area of the Internet of Things. NFTs are an emerging application of blockchain technology and the visual use of digital assets, which are based on smart contracts.
Digital assets are an innovative type of asset that can be used as a means of payment for goods and services. NFT stands for non-fungible token and they can represent a single piece of digital information, such as a specific person, place or thing. An NFT can represent a musician, a real estate property, or a piece of art for example.
The DeFi Space
Decentralized Finance, or DeFi for short, is another area where venture capital has flocked to over the past year. For example, one of the latest funds to enter the space is a $100 million crypto-focused investment fund from US-based hedge fund Tiger Global Management.
The fund they offer, called Crypto Fund, will focus on investments in stablecoins, tokenized assets, decentralized finance and digital asset lending platforms.
Tiger Global is one of the largest investors in blockchain startups globally, having previously invested in Coinbase, Ripple, Blockstream, and Circle Internet Financial Limited. According to the report, Tiger Global is also planning to launch its own stablecoin.
However, large-scale adoption of DeFi products that could be considered as a real alternative to traditional financial institutions has yet to evolve.
In the meantime, many investors are still focused on cryptocurrencies as a place for parking venture capital as other investments have become lackluster in macro-economic conditions.
How to Invest in Blockchain Startups Like a Crypto VC
As hinted on previously, VC funding in the crypto space is not entirely different from typical venture capital funding. In the cryptocurrency market, the startups that benefit from financing operate in the blockchain sector instead of the traditional market, and that's the key difference.
Institutional investors are beginning to view the cryptocurrency market as a less risky investment than stocks, bonds, and other traditional investments as institutional players enter the space. Much like VC funding in general, the advantages and disadvantages of cryptocurrencies are similar already.
One of the most crucial parts in becoming a Venture Capitalist in crypto is to research reputable partners to find private crypto investment opportunities at.
WealthUnion is a great place to begin your journey, by signing up for our free newsletter and getting to know us better, or jumping right into the application for private crypto investing to see if you are a good fit for WealthUnion opportunities.
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