How to get your Web3 project 'investment ready'

Epic Web3 Weekly Newsletter

Oct 24, 2022

GM, Web3 builders 🌝

This is Epic Web3 Newsletter — your weekly dose of growth insights from the top Web3 experts.
Enjoy it every Monday at 12 PM (CEST) to start your day right, get inspired and take your products TO THE MOON 🚀

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☝️ This time we’re talking about money in Web3. Cuz dealing with it is part art, part science.

Do you invest in Web3 startups? Or wanna start to?

Last week we invited Mansoor Madhavji, Partner at Blockchain Founders Fund, and Miloš Rakčević, Head of Business Development & Partnerships at Renfter, to talk about behind-the-scenes of a Web3 VC Fund. Main questions were asked:

Q: At what product stage is it better to invest in?

— At Blockchain Founders Fund we usually invest early, initially on the equity first. And once a project has launched a token, we’ll allocate a smaller portion of capital to it as well.

So, the sweetest spot for us is a pre-seed stage: a company has already tested the market, validated the idea, and started building on the product. It’s usually 3-4 months before going to seed round.

Q: What are the red flags that VCs have to think about while deciding to invest in the project?

— First of all, we have our own rules for investing. We initially come in between 5-20 million valuation — of course, sometimes this number can be higher or lower, but our initial check size doesn’t exceed 200K. So in terms of red flags, from a valuation perspective, if someone’s coming pre-product, pre-revenue and is trying to pitch something like a 7 million valuation, we’ll probably push back.

What’s more, we always run weekly calls and chat with founders to see how they progress, and then we’ll follow on a subsequent round (we can follow up to 5 million).

Q: What are some new Web3 use cases? Which ones will see the most VC engagement?

— To my mind, the most eye-catching, especially now in the bear market, are those that deal with enterprise and institutional finance.

Recently, we invested in a company called Krayon that is doing amazing things on the organizational side of crypto — they’ve built some sort of an MPC (Multi-Party Computation) technology that offers tracking and security capabilities to crypto assets and can structure out organizational roles, budgets, addresses, etc. I think it will be extremely used as the industry grows and companies get larger.

Another company we invested in is Magna, it manages tokens distributed to different investors, ensuring that they’re sent to the right addresses at the right time, etc. I believe such products will also come out more, as they’re useful for managing token investments.

What we also discussed with Mansoor:

— How to find the potential deals;

— The best way to reach out to an investor;

— Minimal capital for onboarding investors;

— How to measure the return on investment.

If you’re eager to get even more useful insights, watch the full AMA-session with the Epic Web3 subscription.

Try it now

🧑‍💻 Are you ready to pitch investors ? Community Insights on doing it right.

You’ve built a product that users love and you feel that the time to raise funds has come. But do you know what matters when pitching investors?

Here’s what Sam Simmons, a Web3 advisor & investor, recommends you to know:

1️⃣ Use token warrants

In an early stage, when you’re trying to figure out what your product is gonna look like and how you wanna structure the ecosystem, think of implementing token warrants. Your investors want to have a guarantee that if for some reason tokens will not be issued in the future, then they’ll at least receive shares of the company.

And token warrants will guarantee investors their right to receive tokens in proportion to their investment, but without detailing significant conditions (such as the price, the amount of the issue, etc.).

2️⃣ VC’s portfolio is important

When searching for investors, you need to look at their portfolios (they’re usually available on Crunchbase or in different PR announcements) and research their background and industry expertise.

Make sure that your product aligns with industries and target companies VCs invest in, so you can position yourself in the context of that.

Editor’s note: You can review crypto Venture Capital, private equity & M&A deals via Messari Fundraising Data.

3️⃣ Strategic value >>> money

Not all money is created equal. Anybody could launch a project with a whitepaper on the website and raise a few million $ but if you do it with low-quality investors, you’ll have to pay a price later.

So find investors that can bring strategic value to your business — whether it’s a network they come from, the experience they have, or something else.

Remember: the best investment you can get isn’t the one when you’re pitching but the one when you get pitched.

These are just some of the highlights that Sam and Josh covered. And if you wanna get more, grab your chance and watch the full video to know:

— VC raise and crowdfunding for a Web3 startup: pros and cons;

— The % of equities or tokens you need to sell to an investor when doing a round;

— NDA and your investors: how to protect your ideas from stealing.

Watch now

Epic Web3