The Role of Venture Capital in Crypto

Venture capital remains a powerful mechanism for financing innovation, injecting substantial capital into founders' hands to develop groundbreaking products and technologies. Many fundraising rounds have led to tangible changes in the world. However, high valuations often limit community involvement, which is crucial for the long-term success of decentralized networks.

VC involvement is necessary for early-stage projects on the cutting edge. Nonetheless, the focus on returns over longevity risks undermining the communities essential for the success of these projects. Community members and smaller retail investors, rather than private funds, are critical to the future of any network. Decentralization relies on the active participation of both community and builders.

The Evolution of Crypto Funding Mechanisms

In 2017, ICOs emerged as a revolutionary funding method, capturing significant investor interest. Initial Coin Offerings (ICOs) represent a pivotal shift in how new ventures access capital, paralleling Initial Public Offerings (IPOs) but within the cryptocurrency domain. An ICO facilitates direct fundraising by selling tokens that often confer various rights within the project's ecosystem, ranging from ownership to profit-sharing and voting privileges. Unlike IPOs that issue new shares, ICOs allocate existing tokens, providing a streamlined mechanism unburdened by regulatory lag, thus presenting an attractive, albeit risky, investment frontier.

The 2018 bear market, however, saw many projects and their tokens collapse, leading to heightened scrutiny from the public, institutions, and regulators. This downturn diminished public retail funding for decentralized technologies, paving the way for the resurgence of traditional VC structures.

Democratized Funding

Crypto bootstrapping can exist beyond traditional funding routes, with low barriers to entry enabling rapid innovation. A powerful idea, supported by smart contracts, can disrupt legacy systems. Crypto projects leverage open-source knowledge, allowing for high leverageike