For any cryptocurrency startup, deciding when to approach venture capitalists (VCs) is a crucial problem. The best time to look for outside funding varies greatly, depending on the particular requirements of the project and the interests of the venture capitalists (VCs) involved.
The investment thresholds of various VCs vary. While some investors are satisfied with the founding team’s strength and the idea alone, others look for concrete results like a Minimum Viable Product (MVP) or obvious market traction. All agree that raising money should never be seen as the final goal. Instead, it’s a strategic tool that must align with a startup’s growth trajectory.
“Founders shouldn’t feel pressured to chase VC funding unless it aligns with their growth strategy. The goal should be building sustainable businesses with healthy revenue streams, not just fundraising for the sake of it,” Leonarda Rajeckyte from The VC Whisperer states.
With this principle in mind, we’ve gathered insights from experts at Axia8 Ventures, Bing Ventures, Capitable Group, Outlier Ventures, and The VC Whisperer to shed light on the right stages for crypto startups to approach VCs.
Pre-Seed Stage: Building a Vision and Team
For some VCs, investing begins even before an MVP exists. Axia8 Ventures, led by Wayne Lin, focuses on the very early stages of a startup’s journey. For them, the most important criterion is not necessarily the technical advancement of the project but the strength of the founder’s vision and adaptability.
“We invest at the truly early stage, often before a deck or product is even developed. The critical factor for us is the founder’s vision, passion, and capability to pivot through multiple iterations. We’ve worked with founders who failed twice but succeeded on their third try,” As Wayne Lin explains.
This approach highlights the importance of having a strong, committed team with the ability to persevere and pivot through failures.
Seed Stage: Concept Validation with Whitepaper and Deck
As a project progresses from ideation to conceptualization, having a well-crafted whitepaper and a solid deck becomes crucial. According to Bruce Lan from Bing Ventures, the whitepaper plays a pivotal role in bridging the gap between an idea and its execution.
“In the early stages, a well-crafted whitepaper or deck can bridge the gap between an idea and execution. It’s essential for teams to communicate a clear vision and path forward. VCs are more likely to engage when they see that the project is grounded in a solid, thoughtful concept, even if it’s still in its infancy.”
This is particularly important for startups looking to raise funds at the seed stage, where they may not yet have a fully functional MVP but can present a compelling argument for the viability of their idea.
A whitepaper can serve as an essential document that articulates the project’s vision, technology, and potential market impact. It gives VCs a clear roadmap of where the project is headed and how it plans to get there.
MVP Stage: Gaining Credibility and Minimizing Risk
As a project advances past the ideation stage, having a Minimum Viable Product (MVP) becomes a critical factor in demonstrating both credibility and progress to VCs. Matthew Tang from Capitable Group emphasizes the importance of an MVP in instilling confidence in investors.
“A working MVP demonstrates progress and eliminates any suspicion of vaporware or scams. At this stage, VCs are more confident in the team’s ability to build and deliver,” says Tang.
For many VCs, especially those who enter the later stages of seed funding, having an MVP is a concrete indicator that the project has moved beyond the theoretical phase and into practical application. The presence of a functioning MVP also provides investors with an opportunity to evaluate the product’s technical feasibility and potential market fit.
Scaling Stage: Approaching VCs for Growth Capital
A cryptocurrency project should look for venture funding to support its next stage of growth once it has begun to attract users and has demonstrated its product-market fit. When a startup is prepared to grow into new markets, accelerate product development, or scale operations, Pietro Negri of Outlier Ventures suggests that they approach venture capitalists.
“When a crypto project needs funding to take its ventures to the next level, it should approach venture capitalists. VCs look for indications of strong product-market fit and growth potential at this stage, whether it’s expanding the product or entering a new market,” says Negri.
Venture capitalists are currently searching for projects that have already demonstrated their concept and now need funding to grow. They will evaluate important measures of product-market fit, like revenue generation, user adoption, and the project’s capacity to draw in partnerships.
Key Criteria VCs Look for in Crypto Startups
Several universal factors help VCs evaluate the potential of crypto startups, regardless of the stage. These criteria include:
- Founding team
- Technological innovation
- Market potential and capacity for problem-solving
- Strategic partnerships
For a deeper look into each of these criteria and insights from experts like Wayne Lin (Axia8 Ventures), Bruce Lan (Bing Ventures), and Pietro Negri (Outlier Ventures), refer to our article on Key Criteria VCs Prioritize When Assessing a Crypto Project.
Common Pitfalls to Avoid When Seeking VC Funding
Even though raising money can be exciting, a lot of cryptocurrency startups risk failing because they make simple mistakes that could have a negative impact on their chances of success. Red flags are easily spotted by VCs, and a startup’s attractiveness can be greatly increased by avoiding these pitfalls.
- Unclear vision and goals: Uncertain vision and goals: One of the most frequent errors is to propose an extremely ambitious or vague vision without providing a clear plan for how to get there. Startups need to be able to clearly explain both their long-term objectives and the precise actions they plan to take to get there. “Investors need to see a well-defined plan that demonstrates how the project intends to grow and scale,” says Leonarda Rajeckyte of The VC Whisperer.
- Incomplete tokenomics: Many crypto projects fail to adequately design a sustainable and transparent tokenomics model. VCs are particularly cautious of projects where the token’s utility and value growth are unclear or poorly thought out. A solid tokenomics model should outline how the token functions within the ecosystem and its long-term value potential.
- Lack of compliance: Legal and regulatory issues are often overlooked in the rush to launch, which can be disastrous in the long run. Failing to consider compliance can turn VCs away and also lead to legal complications down the line. Bruce Lan from Bing Ventures stresses, “Compliance is crucial. Crypto projects need to be mindful of regulations, especially if they plan to expand internationally.”
Final Thoughts: Aligning Funding with Growth Strategy
Raising venture capital is a critical step for many crypto startups, but it must align with the startup’s growth trajectory. As emphasized by experts from Axia8 Ventures, Bing Ventures, Capitable Group, Outlier Ventures, and The VC Whisperer, there is no one-size-fits-all approach to securing VC funding.
The decision to approach VCs should be driven by the project’s readiness, market fit, and clear long-term strategy. Startups should not view fundraising as an achievement in itself but as a means to support sustainable growth. Leonarda Rajeckyte from The VC Whisperer wisely advises that startups should pursue funding only when it enhances their business strategy.
Timing is essential. VCs are more likely to invest when there is demonstrable progress—whether it’s a strong team, an MVP, or early market traction. Ultimately, the goal should be to use funding as a tool to scale, without losing focus on the project’s core mission and vision. Clear objectives and a solid growth strategy will always attract the right investors at the right time.
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