Finding Investors

Securing investment can take considerable time and effort, but for most blockchain projects, it's a necessity. While building a product without investors can be ideal—allowing you to maintain full control—this path is not feasible for the majority. We'd estimate that 99.9% of teams will seek investment, as they do not have sufficient funds of their own.

Investors are primarily driven by returns. Crypto-native investors who have been in the space for many years may also want to see great products get built, but when they are providing money, it is not out of charity. Investors may wish to insert their opinions, and this may or may not align with the best interests of your product. It is crucial to weigh the value that investors bring beyond just financial support.

It is worth having a look at the different types of investors, so you have a better understanding of who to target.

Types of investors

Let’s explore the different types of investors, along with their pros and cons, and then discuss strategies for finding them. In the early rounds you are most likely to raise money from angels and VCs. Retail is possible, but requires extra care. Private Equity is not common at all in this industry and arguably something to avoid.

1. Angels

• Pros: Angel investors are often more flexible and can make quicker decisions compared to venture capital firms. They may also have valuable industry experience and connections.

• Cons: Their available capital is usually more limited, and they may not be able to support large funding needs or multiple funding rounds. Given their lack of maturity (compared to VCs) they may try to sell faster than more sophisticated investors.

• Examples:

  • Echo - this is like a syndicate of angels and VCs. There is no way to promote yourself here, but rather another investor can put you forward.

2. Venture Capital (VC)

• Pros: VCs can provide substantial amounts of funding and have a deep network of resources. Some can bring operational support, industry expertise, and credibility. VCs can often leave you to work on your product in peace.

• Cons: They may demand significant equity or control, and their goals may not always align with the long-term vision of your project. VCs like rapid growth and prefer to have mid-term exit strategies, which can lead to pressure on founders. It is not necessarily the case that they will sell as fast as possible, but do take care with lockups.

• Examples:

  • Lighthouse Beacon - a list of VCs within blockchain.

3. Private Equity (PE)

• Pros: Private equity investors are well-capitalized and can bring large amounts of funding, especially at later stages. They may also bring expertise in scaling and improving operations. Not all PE firms have the same capabilities, of course.

• Cons: Private equity investors are more risk-averse compared to VCs and typically become involved at a later stage. They may require significant control and are usually looking for clear exit strategies. It is not typical for PE to be interested in the early private rounds of blockchain products. One key point here is that PE deals often involve debt.

4. Retail Investors

• Pros: They are often interested in being part of the project and can become loyal advocates.

• Cons: Managing many retail investors can be challenging. They may have less understanding of the project’s long-term strategy, and sentiment can shift quickly based on token price fluctuations. Marketing tokens to retail investors is typically forbidden too, which means that any sort of communication around a sale is trickier. It is recommended to seek professional legal advice here.

• Note:

  • Retail investors can be reached through public token sales and provide broad community support. It is technically possible for a small number of unsophisticated investors to buy tokens in a private sale, but this is not really a viable funding mechanism for your project.

5. Investment DAOs

• Pros: Investment DAOs are a collective of angels and potentially VCs, resulting in a higher overall maturity compared to individual angel investors. They can provide diverse perspectives, and their decentralized nature often means that they include crypto natives and current builders who understand the space deeply. DAOs are somewhat like syndicates, although there should be some sort of on-chain "entity" with members. Governance is supposed to be decentralized too.

• Cons: The maturity of Investment DAOs can vary significantly. Some are more mature than others, and their decision-making processes may be slower due to the collective nature. Additionally, aligning the interests of a decentralized group can be challenging, but there is also a change that designated dealmakers will push deals through in a timely manner.

• Examples:

  • Alchemy DAO list - a list of investment DAOs.

How to Find Investors

• Networking Events: Attend industry conferences, hackathons, and networking events to meet potential investors in person. Building relationships early is key. Other founds are often key to meeting investors.

• Accelerators and Incubators: Joining an accelerator program can introduce you to a network of investors and mentors who may be interested in your project. We add caution here as there are typically strings attached, hence the existence of Open Accelerator!

• Online Communities: Blockchain-focused forums, Discord groups, and Telegram channels are places where investors and founders interact. Engage in discussions and showcase your progress to attract attention.

• Direct Outreach: Identify investors who have funded similar projects and reach out to them directly. Be prepared to provide a pitch deck and a concise explanation of why your project is a good fit for their portfolio.

Resources

• Lighthouse Beacon - a list of VCs within blockchain.
• Echo - a syndicate of angels and VCs.
• Alchemy DAO list - a list of investment DAOs.
• What are investment DAOs, and how do they work? - CoinTelegraph article.