Crypto Startups See Rapid Growth With ‘Liquid Speculations’ And Decentralized Cap Tables – Bloomberg
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Cryptocurrency startups are increasingly adopting an open-ended or revolving funding model.
This approach allows startups to continuously raise capital and quickly scale their valuations, which is different from the traditional venture capital model of funding spread over several years.
According to a report from Bloomberg, an increase in open funding rounds in the crypto industry indicates the sector's recovery from the 2022 bear market and the willingness of venture funds to deploy previously stagnant cash.
In this crowdfunding model, early investors benefit from the rapid growth of a startup's valuation with the commitment of later backers.
Although some investors and industry experts see these “liquid assumptions” as confusing and lack of fundamental drivers, the report says that the traditional approach to the formation of venture capital may not be suitable for digital asset companies.
“Capital formation in crypto is always evolving – governance, liquidity and other important concepts we've learned about in traditional startups are often a little different,” said Matt Luongo, CEO of Thesis.
Thesis is a venture studio that helped develop and launch Mezon, the Bitcoin L2 protocol designed as an economic layer.
Ed Roman, managing partner at Hack VC, noted that crypto startups generally prefer “decentralized capital desks” to help with governance.
Michael Heinrich, co-founder of 0G Labs, which focuses on decentralized and modular artificial intelligence, noted that this type of architecture is becoming more common.
“Investors are still willing to pay high prices, because it is seen as a sign of market success despite the rapid succession.”
0G Labs itself raised $35 million in a fundraising round in March, with the offering paying 20 times more than expected. The company's value ranges from less than $40 million to $100 million, depending on the investor.
According to data from The Block Research cited by Bloomberg, the average Series A round in the first quarter of 2024 reached $26 million, the highest since early 2022. Total venture investment in the sector rose to $2.5 billion in the same quarter.
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