Fundraising

Fundraise as you build

Caution: this is not legal or financial advice!

Fundraising is one of the most crucial aspects of building a successful blockchain startup. It should be emphasized that you will be conducting fundraising while simultaneously building your product as well as handling the day-to-day business activities. That's why it's essential to treat fundraising as an ongoing, integrated effort rather than a standalone task.

Fundraising is a separate section because many builders are especially interested in this topic. It is a core component of any startup's success and can often be the deciding factor between scaling quickly or stagnating.

In this section, we’ll cover different types of fundraising—bootstrapping, grants, private rounds, and token sales. Each of these has its place in a startup's journey, and understanding when and how to leverage each type is key to maintaining momentum and bringing your vision to life.

Fundraising can be daunting, but in this section we'll provide a practical framework to help you navigate the fundraising process confidently. While this book provides a framework for getting launched it cannot provide specific advice for your project. It is necessary to find a lawyer who can help guide you through certain legal challenges of getting launch.

While ICOs were the dominant fundaing mechanism in 2017, ICOs declined sharply amid the bear market of 2018 and increasing regulatory scrutiny. However, the process of fundraising has not changed much since 2018.

3 Stages of Fundraising

While blockchain fundraising shares many similarities with traditional tech startups, one key difference is the ability to leverage token sales as a fundraising method. Despite this unique aspect, the process remains a well-trodden path with recognizable stages. I've even detailed this journey in a YouTube video series, breaking down each step.

1. Grants: Ecosystem-specific funding that doesn’t require giving up equity, great for early development.

2. Private Rounds: Bringing in angel investors, venture capital, or strategic partners who can help support product development.

3. Token Sales: Public sales, airdrops, or other mechanisms that can help raise funds while also distributing tokens to early adopters.

The goal here is to help you understand each stage of fundraising, so you can confidently approach investors, apply for grants, and leverage community support. The information on this page will provide an overview, while sub-pages will dive into the specifics of each fundraising method in detail.

Fundraising is challenging but rewarding, and with a solid strategy in place, you’ll be better equipped to navigate the complexities and ultimately secure the resources you need to make your startup thrive.

Not every startup needs to follow all three phases—each situation is unique. Some founders may have enough personal funds to develop a public product entirely. However, this is rare, even after notable gains in the crypto market. During the earliest stages, you may need to bootstrap your journey. This is a critical time to demonstrate commitment and resourcefulness, even if the funds are limited. Focus on reducing costs, using open-source tools, and leveraging personal skills and networks to move forward until you can secure additional funding.

Fundraising timeline

3-stage blockchain fundraising process:

• Early Stage: Bootstrapping & Grants

  1. Bootstrapping through personal finances (plus potentially from family & friends)

  2. Grants
  3. Networking with other founders

  4. Start developing a whitepaper and pitchdeck
  5. Consider releasing an alpha version of the product

• Private Rounds

  1. Build something that works before approaching investors

     1. Having a simple working product is better than nothing.

     2. Investor will desire to see a completed pitch deck as a minimum. There can be some leniency with the whitepaper not being complete.

     3. Consider a potential valuation for your token.
     4. Compile a list of investors to approach. Don't meet with your most preferred investor first. Get a little experience with pitching.
  2. Incorporate a token-issuing entity before receiving investment

     1. Can be done with input from investors (e.g. suggestion of jurisdictions).

     2. Will definitely need a lawyer's help to do this.

  3. Raise over multiple private rounds leading up to TGE.

     1. Gradually raise funds across multiple rounds to build momentum.

     2. Valuations tend to rise with each new round. Be forthwarned that this is somewhat contentious.

  4. Release a beta version of the product

     1. Get feedback, iterate on the feedback.

• Public Rounds

  1. Public distribution / Token Generation Event (TGE)

     1. Potentially conduct a public sale or TGE to distribute tokens widely. (note there is considerable risk here).

  2. Airdrops, bounties, deploy own grants

     1. Deploy initiatives like airdrops to engage the community and reward early adopters.

        1. Note that it isn't a guarantee to success.

     2. Consider developing your own grants and bounties programs to encourage buliders to flock to your ecosystem.