Dec 2022#Opinion#Fundraising

Crypto consulting for fundraising

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Authors

Roman Aliev

Roman Aliev

Director, Strategy

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7 min

Introduction

Crypto is one of the most dynamic markets. Blockchain projects emerge and develop several times faster than in other industries, and this creates an extra responsibility for founders when plotting the strategy. A single correct or wrong decision can make you a world-famous unicorn startup in a few days — or turn you into yet another failure. 

To increase the chances of success, you need advice from blockchain consultants who have experience making decisions under similar conditions or who have been where your project is going. In this article, we’ll discuss one of the thorniest issues — attracting investments — and the role of crypto consulting services in this process. 

Fundraising and its challenges

'How to attract funds?' must be one of the most common questions asked by crypto founders. 

For one of BDC’s internal projects, we conducted a survey of blockchain founders looking for investments. They fell into 2 categories:

  • projects with fundraising experience (20%);
  • no fundraising experience (80%).

The first group hardly needs blockchain consulting services, as they have done this before and know all the hidden obstacles. The second group, though, desperately needs guidance. 

Let’s look at the main issues faced by the projects from the second category. 

1. Project evaluation and tokenomics

Many of the crypto founders are developers rather than entrepreneurs, and they don’t know how to design a business model. They believe in the idea, and this faith prevents them from looking at the numbers and facts objectively. For this reason, they usually evaluate their startups by comparing them to similar ones. 

It may seem logical, and indeed, there is a business evaluation approach called the comparison method. However, projects tend to pick the easiest solution and compare tokenomics instead of business models. The result is an army of copycat tokenomics without any real business model to underpin them. 

When working with such projects as cryptocurrency consultants, we tend to take a step back. We analyze the business model and monetization streams; analyze the market; and create a financial model for the future business. This model takes into account all development costs, human and other resources, and three growth scenarios: pessimistic, neutral, and optimistic.  

This financial model serves as the foundation for tokenomics. Such a tokenomic document elicits investor trust and increases the chances of closing a deal. You won’t be caught off guard by investors’ questions like 'Why are you raising this specific amount?', 'What's the TAM?', 'How are you better than the competitors' — and you will have calculations and research to back your answers. 

2. Presentation materials

Teams without fundraising experience often start with a White Paper and a pitch deck — and then wonder why they don’t get any feedback after sending out these documents to investors. 

It’s easy to understand why this happens once you put yourself in investors’ shoes. They receive dozens — if not hundreds — of pitch decks every day, and they physically don’t have time to go through all of them. Imagine that you have 30 seconds to get an investor’s attention and motivate them to dedicate a few more minutes to your project. How can you do that?

The answer is to describe the project in a few short sentences. This is your key initial touchpoint. After reading that short description, the investor will have two options: forget the project or get interested and turn to the next document. But that won’t be the pitch deck, not yet.

We are talking about the One-Pager. It should contain the basic information about the project — on a single page. It should make clear why you are unique, why the market needs your product, and why the investor will profit from giving you  money. You need to take out all the aces out of your sleeve, because the next step (the pitch deck or a phone call) requires the investor to spend even more of their time. 

Next you need a good pitch deck. Creating one that will capture the investor’s attention is an art in itself. Most pitch decks prepared by blockchain teams themselves don’t reflect even half of their projects’ value: you could replace the name with another and hardly anything would change. 

Look at these real-world examples and try switching X and Y:

'Project X isn't just a project: it’s a way to transform the world. It will make people’s lives better. We’ll speed up global decentralization, making blockchains faster and more secure. Millions of people across the world will use our products.'

'Project Y is an ecosystem designed to revolutionize how people interact by implementing the advantages of blockchain technology in the easiest and most efficient way. Y was created as a promising, effective, and innovative project: it's the key connecting link between the end of centralization (with all its flaws) and the beginning of a new technological era.'

Blockchain consulting helps package projects the right way. Experts know which criteria investors use to evaluate projects — and understand the circumstances of each niche at a specific time. Note that project selection criteria can change several times a year: something that was trendy in spring in a bull market can become irrelevant by the arrival of the bear market in fall. 

The blockchain consulting company will hold the founder’s hand through each stage of working on the presentation package; save the team’s time, so that they don’t waste it on creating documents that aren’t needed; and dramatically increase the number of investor responses.

Just as importantly, cryptocurrency consulting firms have a personal network of investment fund contacts — and can introduce you to them. These are all warm leads, so that you’ll at least get a chance to pitch the project and get some feedback — and perhaps even sign a funding deal.

3. Trust criteria

An idea is worth nothing without implementation. That’s why investors first look at the team, trying to understand if it can bring the idea to life and create a project that will thrive financially. 

The probability of success is estimated based on the team’s prior experience — as well as the steps they have already made. How correct were those steps, and did they yield results?

The matter of the team is more or less clear: investors look for relevant experience that can be used in the current projects. As for the steps, the story is more complicated: what is a project expected to have done before contacting investors, and which results do they expect to see?

Crypto consultants can help with that, too. As we work with a large number of investors and funds, we know what determines their trust in a project. 

For example, one of the key criteria for funds is traction. They expect a project to show proof that the market is showing interest in their product. For some types of projects, it can be enough to conduct a CustDev survey of future users; for others it’s more important to sign up a strategic partner; and for others, an incentivized testnet is the best solution. Ideally, a project should have commercial traction: real users who have paid for the product, proving that it can be monetized. 

Unfortunately, most projects neglect the issue of traction, instead wasting time on documentation or useless cold pitching. 

Quality cryptocurrency consulting will put everything in its right place. It will show the project team what the most urgent task at hand is; which selection criteria has to be matched first; and how to achieve traction.

In conclusion

Fundraising is a complex process with a vast number of pitfalls, which the team won’t notice in time unless they have prior experience. 

With crypto consulting, you can complete this process faster, cheaper, and with a much higher probability of closing an investment deal with a fund. A single crypto consultation can save you several months of campaigning and dozens of thousands of dollars. 

However, you need to remember that even the best crypto advisor can’t build a quality product for you: they will only show you the right way.

Want to save time and maximize your chances when attracting investments? Then work with experts blockchain consulting companies.


 

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