Written by: Ratko

How to Fund Your Next Crypto or Blockchain Project?

You have a great idea and you have a lot of experience in blockchain. When you combine the two, you can make a huge positive impact on the world. Even though this scenario is ideal, there’s one small obstacle that can get in the way.

Perhaps you’ve heard of it — it’s called a lack of money. If you don’t know how to fund your blockchain or cryptocurrency project, there’s a good chance you’re going to give up.

That’s where this article comes in and saves the day. Read on!

Funding Startups Is a Well-Established System

Those who have had an opportunity to learn about funding start-ups are likely to understand concepts such as VC funding or bootstrap funding.

However, some actions such as blockchain crowdfunding, blockchain grants, and blockchain seed funding do tend to be slightly different. Although the goal stays the same, the road to reaching investors might come with a couple of forks in it.

One thing is certain — obtaining money for your newly formed business is a pretty well-established process. Seeking funding and seizing investment opportunities comes down to a couple of essential steps. Your goal is to find the best possible funding options for your business and make them work to your advantage

Let’s take a look at some concrete examples and various blockchain trends and opportunities for funding your project. Read on!

Before we start — If you’re not at all familiar with how funding works, make sure to open this Crunchbase’s glossary of funding types. It will help you understand how it all works.

crowd funding and ways to fund projects

Bootstrap Funding: Starting Your Blockchain Business With Existing Resources

Bootstrap funding (or bootstrapping) is a method of financing a company with your savings.

If your blockchain project doesn’t require a huge investment and you think you have saved enough money to finance it, this is a valid option.

The first cash you’ll see, however, will be from making sales. You’ll have to be very careful when making your business plan with money that comes from your pockets.

FFF (Friends, Family, and Fools): Inexperienced Investors for Your Company

Technically speaking, the FFF method is a type of blockchain crowdfunding. However, there’s one thing that makes it unique. Your “crowd” will mainly consist of your relatives, friends, acquaintances, and investors who are not very experienced.

In other words, some people will always be willing to fund your blockchain project (or any other project) because they want to show support.

Moreover, some people will be overly enthusiastic about your project, although they don’t know who you are or whether the project can be successful. These mainly tick the “fools” box.

Getting Non-Repayable Funds: Where to Find Blockchain Grants?

The words “grant” always puts a smile on the faces of people looking to fund their start-ups and businesses. Basically, grants are non-repayable, which means you don’t have to give anything in return. It’s free money for your project.

Governments or non-government organizations usually support this type of funding. For example, if a country wants to improve its culture, it offers grants to aspiring artists.

Blockchain grants exist too, you just have to know where to look.

  • This article by Ethereum Community Fund Network offers a great overview of available grants for those who want to start a blockchain project using the Ethereum platform.
  • Hackernoon also published the results of research that provided an up-to-date list of grants for blockchain ecosystems.
  • One of the companies that supports blockchain development is ConsenSys, so make sure to check out their Grants page.
  • For projects inside the European Union, feel free to check the Information and Communication Technology page that is part of TechFunding.eu.

Note that applying for grant money is not an easy process. If you find an organization offering non-repayable funds for blockchain businesses, you need to prepare well for them. Whenever free money is up for grabs, it’s only natural that the competition is fierce. That’s why you need to be very attentive when filling out forms and collecting necessary documents for grants.

Above all, you need to read grant eligibility details. Organizations that offer grants tend to be very specific when it comes to the type of projects they want to fund. You should consider whether your type of project fits into that category in the first place.

Finally, how you present your project is of utmost importance — that’s what wins you the money. Make sure to be very specific and clearly define what your start-up is about in the first paragraph.

You should avoid jargon and focus on making the project description as appealing as possible. Don’t be afraid to consider hiring a professional who could help you with the application process.

Counting dollars focused

VC Funding: Is It Possible for Cryptocurrency or Blockchain Projects?

VC stands for “venture capital” and is a type of funding provided by companies or investors who are looking to invest in companies in their early stages. They basically exchange the investment for equity or stake in the company.

VC funding is mainly targeted at start-ups nowadays. By investing in these projects, investors risk a lot, as many new firms don’t turn out to be successful. On the other hand, there’s always a possibility that the returns will be high if they invest in the right start-up.

Are VC Firms Interested in Blockchain Projects?

With the growing popularity of companies such as Ethereum, some claim that investors will only focus on blockchain.

However, the figures say otherwise. According to CBInsights, the year 2019 saw a huge decline compared to 2018, as only $1.6 billion was invested in 454 deals. In 2018, blockchain-based start-ups were funded with a total of $4.1 billion.

Nevertheless, there are a couple of VC investors interested in blockchain technology that are still actively seeking opportunities. Some of them are listed in this PitchBook article.

Blockchain Angel Investors: What Are They and Where to Find Them?

One thing you should know about VC investors is that they don’t fund projects that have just started. Instead, they require start-ups to give them something and win their trust.

But how can a start-up get money at the very beginning? That’s where angel investors come in. They are usually wealthy individuals who provide capital for businesses and use it either to get ownership equity or exchange it for convertible debt.

If you’re looking for blockchain seed funding, this is one of the valid options to consider. You can find a comprehensive list of people who make this type of investment on this Angel.co page.

Blockchain angel investors are also organized in the so-called angel groups such as Satoshi Angels.

Accelerators and Incubators: Blockchain and Crypto Start-Up Funding

Accelerators and incubators are two ways to fund your blockchain start-up. Although these are often used side by side, they are actually quite different.

Incubators vs. accelerators pie diagram

Start-up incubators are collaborative programs that help start-ups in their early stages. Apart from providing seed funding, incubators also help start-ups by providing training, mentoring, workspace, and more.

Basically, they help entrepreneurs grow from the very beginning. One of the ways to get blockchain seed funding and additional support is to find incubators that focus on blockchain-based start-ups.

On the other hand, accelerators are there to boost your start-up. Unlike incubators, which are willing to cooperate with entrepreneurs who only have ideas, accelerators want a bit more. In fact, you need to have an MVP, a formed team, and a working business model in order to attract accelerators for your company.

Time also plays an important role here. Incubators are willing to work with start-ups over long periods, whereas accelerators are much faster. They literally “accelerate” your business.

What should you focus on? This article on Mass Challenge explains the difference between the two types of start-up programs in detail.

Blockchain Crowdfunding: What Are Popular Methods?

If you’re starting a blockchain project, there’s probably no need to explain what crowdfunding is. Nevertheless, let’s take a quick look at how this technology revolutionized it.

Crowdfunding is the practice of raising money for your project by inviting a large number of people to invest in it. Sites such as Kickstarter made it possible to fund your idea online, with people all around the world making donations. All you have to do is present your idea on the site and hope people are going to like it.

However, blockchain crowdfunding revolutionized that since it introduced the so-called ICOs — Initial Coin Offerings. Instead of just asking for money, blockchain projects often give coins in return. Here, investors exchange their currency for a coin that is part of the ecosystem of the blockchain-based start-up.

In fact, some of the most popular blockchain companies were funded this way. Although ICOs were popular in the past, it seems that their popularity has been rapidly decreasing, as numerous scams caused investors to back down. Yet, some other forms of blockchain crowdfunding have emerged lately and are worth taking into account.

Blockchain Funding Through Loans

Funding projects through loans have been practiced for a very long time. There are several ways to loan money, and the most common one is via banks. However, one practice proved quite useful for projects nowadays — peer-to-peer lending (or just P2P lending).

What Are Peer-to-Peer Loans?

Simply put, P2P loans are conducted by one or more individuals willing to loan you money to finance your project.

To loan money this way, you need to sign up on a lending platform and find a suitable investor or group of investors who will support your idea. The loan is usually returned via monthly payments.

Things Investors Are Looking for

Having an idea for a start-up is great. However, in most cases, that is not enough. In order to attract investors, you need to give them something to gain their trust. When it comes to cryptocurrency and blockchain projects, investors tend to be rather specific.

According to TNW and Data Driven Investor, here are some of the things investors like when choosing blockchain start-ups.

  • Further innovation – Blockchain technology is yet to be explored and its potential harvested, so many investors are looking for start-ups that focus on innovation in the blockchain world.
  • Data-oriented startups – Some investors believe that blockchain’s primary focus in on the way data is processed as part of this technology, which is why start-ups that focus on data creation, management, and sharing can be particularly inviting.
  • Problem-solving projects – There are many real-world problems that require solutions only blockchain can provide. Investors are very fond of people who adopt the “problem-solving” mentality.
  • Viable solutions – Investors are looking for projects that could promote blockchain and help it reach mainstream adoption by creating viable solutions native to decentralized ledger technology.
  • Combining blockchain with other technologies – Apart from blockchain, some other popular technologies developed at the moment are internet-of-things, AI, AR/VR, etc. Investors often look for start-ups interested in “tech convergence.”

Tips on How to Get Blockchain Seed Funding

In the age of the Internet, everything is done quicker, and so is getting funds for your start-up. If you’re looking for investors for your newly founded company, however, you need to take a couple of things into account before you embark on this extraordinary money-seeking journey.

The seed round funding gradient table

Find a Good Team

First of all, you need to make sure that your team consists of trustworthy, hard-working, and aspiring individuals. Seed investors often aren’t looking for anything specific. Sometimes, just having a group of great people is what can attract them.

Find Something Different About Your Start-Up

According to this article by Slidebean, another thing that attracts investors is showing what makes your start-up different. You can point out a particular problem you’re going to solve with your product or service, for example.

This doesn’t have to be anything that your company can do at the moment. In some cases, it can be one of the features of your product that will be added in a later stage of development.

In Case of Crowdfunding — Pay Attention to Marketing

If you decide to adopt crowdfunding practices such as ICOs, you need to pay a lot of attention to your marketing strategy. Start with promoting your start-up to potential investors.

It’s All About MVP

In order to pass the seed round successfully, you need to have a product that works. This product doesn’t need to have all the cool features you’ve planned for it. Ideally, you would use minimum resources and enable your product to solve the problem you originally intended to solve. Even if it solves it on the smallest scale, that means it works.

Making a minimum viable product (aka MVP) has never been easier in this day and age, and it seems MVPs are very important when it comes to blockchain projects. Start-ups that use blockchain need to pay special attention to things such as visual identity, branding, blockchain architecture, technical whitepapers, token design, and interactive prototypes.

Conclusion: Make Some Effort When Seeking Blockchain Funding Options

If your friend asks you for some money that they will repay you later, would you lend them? It’s always difficult giving money to someone, especially when there’s no guarantee that you’ll see it ever again.

The point is that funding means asking someone to give you money on the basis that your project is going to be successful in the future.

The good news is that people who want to know how to fund their blockchain or crypto projects do not lack options. However, almost all of them require certain effort from you to get it, as well as a little bit of luck. That’s why you shouldn’t lose hope if you fail in funding your start-up on the first try. Explore possibilities, stay updated on new opportunities, and make sure to always present your project in the best possible way.

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