May 25, 2022

long-awaited update There is an asterisk the size of the Internet in the estimates and fundraising expectations of private tech startups.

While many funds are returning under more conservative attention focusing on profitability and business fundamentals, the crypto industry remains in the spotlight, attracting multi-billion dollar funds and investment terms that will prolong us into 2022. Reminds me of more than 2021. .

So, is it the hype, the promise of cryptocurrency innovation, or a little bit of both? VCs and founders at the fundraising stage talk about current investment strategies when it comes to investing in this group of startups. Contrasting Strategies The capitalization table has technical differences, the culture of the communities that many of the businesses in the space are built on, and of course, the fear of merging into the non-crypto world.

The future of tokens and future shares

Web3 limitations generally fall into four categories, said Chris Matta, president of 3iQ Digital Assets, gaming-updates. The first is the traditional capitalization table, which is similar to traditional tech companies and follows a classic business model that is “more accessible and understandable to investors” but will not include a tokenized model.

The second is a hybrid capitalization table, consisting of a main list of traditional shareholders, as well as several investors who have a token conversion agreement that will provide them with a distribution of tokens after the launch of company-related tokens. “These business models focus on tokenization but use shares as a transition structure,” Matta said.

Third, the token-based structure, with a “minimum cap table” made up of startup founders, is a clean placeholder for a fully tokenized structure that is the main vehicle for raising capital, Matta said. “These designs were popular in 2017-2018” [Initial Coin Offering] The days are getting shorter today. ,

Finally, the decentralized autonomous organizations (DAOs) that have emerged in the past 12 months typically do not have a centralized structure, but they do have certain powers and governance structures that a traditional non-Web3 company would have.

There is also a simple settlement for the future token (SAFT), in which investors do not own shares in the company, but see the value of the token and end up with the company’s own coin, said Yeda Gao, general partner at Shima Capital. Alternatively, there are simple future share agreements (SAFEs), where a company grants an investor the right to future shares without specifying a price per share at the time of the initial investment.

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“The days are long, but the years in crypto are short,” Stan Miroshnik, partner and co-founder of 10T Holdings, told gaming-updates. “When we started the fund (over three years ago), the assumption was that there was no one in the blockchain space who could write a check for $50 million.”

Over the past 12 months, the combination of traditional growth-focused investors and crypto-focused investors has moved deeper into the space. In addition, there are strong existing venture capital managers with more specialized crypto strategies such as Andreessen Horowitz (a16z), Lightspeed Venture Partners, Bain Capital and Sequoia Capital, just to name a few.

However, things are accelerating in cryptocurrency. According to data compiled by Pitchbook, around $32 billion of capital was pooled in the crypto world last year, while $11.35 billion was invested this year.

Gao told gaming-updates that there is a clear difference between traditional stock investing and capital use in terms of ownership in Web3 and crypto companies. “In traditional equity investing, you want a Series A or seed investor to own 20% to 30% of the company,” he said. “But owning a token or a network of 20 to 30% is very bad and is opposed by the community. And Web3 is a community.”

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