When evaluating crypto projects, VCs rely on a distinct set of criteria that reflect their investment philosophy and the project’s potential. These criteria can be segmented into three primary areas: business and strategy, product and technology, and marketing and community.
In this article, we gathered insights from leading venture capitalists (VCs) across the crypto space to shed light on what they look for when assessing crypto projects. Contributions come from experts at Axia8 Ventures, Bing Ventures, Outlier Ventures, and Capitable Group, who shared their perspectives on the key criteria that determine whether a project is worth the investment.
Business and Strategy
VCs look at several things from a business and strategy perspective. Let’s take a closer look at them:
1. Founding Team and Leadership
For most venture capitalists (VCs), evaluating the team behind a startup is the critical first step in their investment decision. A strong, experienced, and cohesive team can significantly influence a startup’s potential for success.
VCs typically assess the founders’ track record, leadership skills, industry expertise, and ability to execute their vision. They also look for team dynamics, such as how well the members collaborate, handle challenges, and adapt to changing market conditions.
Wayne Lin from Axia8 Ventures emphasizes, “We invest in people first. The founder’s vision, adaptability, and resilience are key to our decision-making. If a founder can pivot and iterate multiple times, even after setbacks, we know they have what it takes to succeed”.
This people-first approach is critical in early-stage projects where the product is still being developed.
Echoing this sentiment, Bruce Lan from Bing Ventures adds, “The ability to execute and adapt is what sets great teams apart. VCs need to see not only technical expertise but also the soft skills needed to lead and inspire teams through uncertain market conditions”.
Strong leadership, combined with clear communication, often makes or breaks a project in its early days.
2. Vision and Long-Term Strategy
For venture capitalists (VCs), a project’s long-term vision is very important when making investment decisions. They aren’t just interested in quick profits; they want to see a clear plan for how the project will grow over time. The project needs to show how its goals fit with bigger trends in the industry so that it can keep up as the market changes.
VCs look for projects that can adapt and stay strong in the future, not just ones that do well right now. A solid long-term vision helps investors feel confident that the project will succeed in the long run.
As Pietro Negri from Outlier Ventures explains, “We look for teams that understand their industry’s trajectory and are positioned to evolve as trends shift. Projects that capitalize on emerging sectors and adapt to the market’s needs stand out.”
Innovation alone isn’t enough.
Bruce Lan from Bing Ventures emphasizes that “VCs want to see that a project is not only innovative but also relevant to where the market is headed. Having a clear vision of how the project fits into future industry developments shows foresight and adaptability.”
This adaptability is key to ensuring a project’s long-term success in a rapidly changing environment.
3. Regulatory Compliance
With more regulations coming in, compliance isn’t optional anymore—it’s a must. Projects that focus on legal issues show investors they’re less risky. VCs prefer projects that are ready for future regulatory changes. Following these legal rules not only reduces risk but also helps ensure the project’s long-term success as the crypto industry faces stricter rules.
Product and Technology
VCs don’t stop at the business and strategy level. In order for a VC to consider funding for crypto projects, it also looks at the product and its technology.
4. Product-Market Fit
Product market fit is a crucial indicator for VCs because it shows that there is a real demand for the solution a project offers. VCs want to invest in projects that have already identified their niche and attracted users or customers. This traction helps reassure investors that the project is more than just an idea — it has practical value in the market.
A strong product-market fit goes beyond simply having a product available; it proves that the team understands its audience, knows its pain points, and has developed a solution that effectively addresses those needs. This kind of fit drives user adoption and signals future growth potential. For VCs, it’s not just about whether a product exists but whether it has a market that genuinely needs and wants it.
Additionally, product-market fit shows that the project is more likely to adapt to changes in market demands. When a product resonates with its audience, it has a higher chance of retaining users and expanding its customer base over time.
5. Minimum Viable Product (MVP)
For many VCs, an MVP is a sign of real progress.
Matthew Tang from Capitable Group explains, “A working MVP is crucial to eliminate doubts about a project’s feasibility. It’s a sign that the team can deliver on their promises and that the project is progressing in a tangible way”. Investors look for MVPs to validate the team’s technical abilities and the project’s potential in the market.
6. Scalability and Technical Infrastructure
Projects must demonstrate that they can grow without sacrificing their technology. Scalability is especially important in the blockchain space, where network congestion or high gas fees can limit growth. Venture capitalists want to see that the project’s technical infrastructure can handle an increase in users without a drop in performance. If a blockchain project can’t scale effectively, it risks slowing down or becoming too costly for users, which can halt its growth.
Addressing scalability challenges early on is crucial to attracting serious investment. VCs look for projects that not only have a solid user base but are also prepared for expansion. Whether it’s through upgrading technology, optimizing network efficiency, or preparing for new market demands, the ability to scale is a key factor in making a project appealing to investors.
Marketing and Community
Last but not least, is marketing and community, often considered as the most important aspects of Web3 projects. But what aspects do VCs look at?
7. Partnerships and Strategic Alliances
Strong partnerships can greatly enhance a project’s credibility and visibility in the market.
“Whether it’s a partnership with a VC, a hackathon collaboration, or an AMA session with a media outlet, what really counts is building a digital footprint. When people search for your brand, they should find those collaborations mentioned. These partnerships act as proof of your network and reputation,” BeInCrypto Chief Strategic Partnerships Officer Alevtina Labyuk explains.
These alliances not only validate a project’s standing in the industry but also help establish trust with investors and users. Strong partnerships signal that the project is recognized by reputable entities, which can lead to increased confidence and further opportunities for growth.
For venture capitalists, seeing these connections reinforces that the project is well-integrated within the broader ecosystem and has the backing to succeed.
8. Community and Network Effects
In the crypto space, a strong community has always been crucial to the success of tier-1 projects. Many top projects by market capitalization have grown by actively involving their community in collaboration and co-creation. This successful model has inspired newer projects to adopt a similar approach.
An engaged community drives adoption through network effects, where each new user increases the value for others. A dedicated community can also help projects weather market fluctuations, providing stability and support during challenging times while continuing to fuel growth.
Conclusion
VCs prioritize several key factors when evaluating crypto projects, with strong leadership and team dynamics often taking precedence. Beyond the team, product-market fit, MVP development, scalability, and community engagement are critical components that investors weigh before making decisions.
Ultimately, adaptability and the ability to navigate regulatory landscapes will define a project’s long-term success. By aligning with these core criteria, crypto startups can increase their chances of securing funding and building sustainable ventures.
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