token pre-sales could be the best alternative for founders

Deals with venture capital firms are failing to come through this year as reflected by recent statistics compiled by Crunchbase with roughly $120 billion being funneled to early-stage companies compared to over $160 billion in the same period last year and the quarter before.

A challenging macroeconomic backdrop, the implosion of several crypto projects, and an overall risk-off attitude in the marketplace are contributing to slowing down the pace at which venture capitalists are pouring money into startups.

That said, even though external factors are playing a key role in reducing the amount of capital that is flowing to new companies, there are also certain typical complications that may make the journey of raising funding more difficult for new businesses and decentralization could be the solution to get rid of those hurdles.

Top Obstacles that Could Lead to a Failed VC Deal

The VC industry relies on the law of probabilities to turn a profit. Out of hundreds of projects and investment opportunities they typically analyze during a certain period, only a handful of candidates make it to a funding round.

Meanwhile, even those companies that meet all the strict criteria imposed by these firms to access funding are not necessarily going to live up to their prospects.

However, the ones that do succeed typically offer large enough returns on investment to hopefully offset and exceed the losses that the worst-performing candidates end up producing.

What kind of criteria do VCs typically use to screen startup pitches? According to top executives in the industry, everything that happens after a first meeting with the startup’s founders is considered due diligence.

This typically includes researching who the founders are and what they have done to see if they have a positive or negative track record as entrepreneurs. In addition, the size of the company’s total addressable market is also a relevant variable. In this regard, the larger the market, the easier it would be for the company to grow rapidly as grabbing even a tiny share of the market could result in sizable revenues.

Moreover, it is important for the project to set forth a realistic and attainable roadmap that includes deadlines, key milestones, and the specific steps that need to be completed to get to the next stage.

Establishing proof of concept is a must for most venture capitalists. This means that the product or service has been tested at a small scale and it has been embraced by the target audience.

This lowers the odds of a failed takeoff and the absence of objective evidence that the problem that the product or service aims to solve is being solved by the company’s value proposition may lead to the VC firm passing on the proposal.

Finally, the product or service’s go-to-market strategy is also important as VCs will evaluate if the marketing strategies that the founding team will be using will result in a significant short-term cash burn or if they are considered effective enough for what they are attempting to commercialize.

Using Crypto Pre-Sales y to Bypass the Obstacles of Raising VC Funding

Blockchain technology proposes the decentralization of many aspects of our day-to-day lives. The so-called decentralized finance (DeFi) space is one of the best examples of how the way certain services work can be reshaped for the benefit of both consumers and businesses.

In the specific case of raising capital for a project, token pre-sales have proven to be an excellent choice for founders who opt to offer early-stage investors a stake in their projects in the form of a cryptocurrency to obtain the capital they need to build it.

For this kind of initiative to work, the project has to provide enough evidence that it can develop what it promises and the developing team has to be credible enough to assure the investment community that they are capable to execute the proposed roadmap.

The use of smart contracts facilitates the task of assuring investors that their ownership will not be diluted as projects can opt to establish a fixed maximum supply for the tokens they sell and other similar restrictions.

Some prominent and successful examples of pre-sales include Battle Infinity. On 8 August, the developing team managed to raise 16500 BNB tokens from investors 66 days before the pre-sale due date.

Those nearly $5 million in fresh funding will help the project in building their proposed metaverse consisting of a fantasy sports play-to-earn (P2E) game, a decentralized exchange, and a marketplace for non-fungible tokens (NFTs) – among other initiatives.

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