In a decentralized environment, services are provided not by a single entity but through a peer-to-peer network. Here, blockchain is governed more by the laws of supply and demand than by the top-down decision-making typical of centralized systems. Factors like transaction fees, token prices, and the trustworthiness of a network are determined by the market, introducing uncertainties and unexpected surprises.

Developing applications on the blockchain requires new design patterns, and similarly, fundraising for early-stage startups and managing incentives requires new approaches.

For instance, if a project receives funding in crypto assets or liquidity to bootstrap its multi-sided applications, it needs a robust risk management plan. Cryptocurrency values can fluctuate rapidly, so blockchain startups must have contingencies to manage these movements. Storing crypto assets is also different from handling fiat funds.

So, what are the ways to fund an idea and grow it into a product in this new environment, a global blockchain ecosystem?

Funding of Crypto Startups - What Is Available?

All standard funding methods—crowdfunding, angel investments, venture capital funding, incubators, and accelerators—are still valid for crypto startups. Some have adapted specifically to the crypto space, while others remain largely unchanged.

Blockchain-specific funding methods, such as Decentralized Autonomous Organizations (DAOs), further expand the range of options. This guide offers useful tips on how to navigate and interact with each of these funding methods for crypto companies to benefit the most.

Bootstrapping

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Bootstrapping is a self-funded strategy where founders of early-stage projects use their own resources or easily accessible funds to finance their crypto startups. Think of it as constructing your business brick by brick, with resourcefulness and controlled growth as key elements.

Bootstrapped crypto startups focus on developing a sustainable and profitable business model from the outset, rather than seeking significant external investment. Here are some common bootstrapping methods:

• Personal Savings: Entrepreneurs often use their personal savings to fund their crypto startups. This provides complete control over decision-making but may limit resources for the rapid growth of their crypto companies.
• Loans from Friends and Family: Friends and family can be valuable sources of funding for early-stage projects, offering flexible terms and favorable interest rates compared to traditional loans.
• Crowdfunding: Platforms like Kickstarter and Indiegogo connect crypto and blockchain startups with an extensive network of potential investors, allowing a crypto project to raise capital and validate its concept with a broader audience within the blockchain community.
• Revenue-Based Financing: This model lets early-stage companies secure funding based on a percentage of their future sales, making it an attractive option for businesses with a clear path to profitability.

Bootstrapping cultivates a culture of financial discipline and resourcefulness within a startup. Entrepreneurs are incentivized to manage their finances carefully and prioritize cost-effective strategies, leading to a strong foundation built on organic growth and profitability.

Bootstrapping: Advantages

• Maintain Control: Bootstrapping allows you to retain complete control over decision-making, from product development and company building to marketing strategies.
• Financial Discipline: Managing with limited resources instills financial discipline within your team, fostering resourcefulness and a focus on cost-effective solutions.
• Strong Foundation: Bootstrapped crypto-based projects often build a robust foundation based on organic growth in the blockchain sector and profitability, which can attract future successful investors or potential acquirers.
• Ownership Stake: Retaining a larger ownership stake in your company can be highly beneficial if your startup achieves a successful exit.

Bootstrapping: Disadvantages

• Slower Growth: Limited funding can restrict your ability to scale aggressively by leveraging cutting-edge technologies, making rapid expansion and market dominance challenging.
• Limited Resources: Relying on a smaller team and fewer resources can impede innovation and competition with rivals with significant financial backing.
• Limited Expertise: Without the specialized knowledge and networks that venture capitalists and top crypto investment funds provide, strategic decision-making may be hindered.
• Potential for Stress: The financial constraints of bootstrapping can cause stress and strain on the founding team, making careful financial management crucial.

Angel Investors

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Angel investors have become increasingly prominent in the startup ecosystem over the past decade. These individuals typically invest in the project's business development during the seed stage, the earliest official funding round, using their private funds.

They are generally interested in high-risk, high-reward opportunities. Similar to investment funds and crypto venture capital firms, the activity of angel investors in the crypto industry has surged in recent years.

What to Look Out For

• Find Angel Investors and Reach Out: Use online resources such as AngelList or leverage networking opportunities to identify and connect with angel investors whose portfolio projects contain early-stage companies operating in the crypto industry. Personal introductions are often the most effective way to establish contact.
• Identify Their Needs and Articulate Yours: The one-on-one relationship with an angel investor allows for early alignment of expectations for the seed funding. Be prepared to answer questions about anticipated returns and timelines honestly. Don't hesitate to ask about the amount they are willing to invest and their expected level of involvement post-investment.
• Be Flexible: Working with individuals differs from dealing with crypto venture capital firms. The process from introduction to investment will vary with each interaction, requiring you to adapt accordingly.

Crypto Venture Capital Firms

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In this model, technology companies operating in the crypto space present their businesses to specialized investment firms known as crypto venture capital firms (VCs).

These crypto venture capital firms manage funds from institutions (institutional investors) and wealthy individuals, seeking to invest in high-growth startups with the potential for substantial returns. In exchange for their investment, crypto venture capital firms typically receive ownership equity in the startup.

Despite occasional fluctuations in crypto funding, investments of crypto venture capital firms remain crucial in bolstering innovative projects within the crypto industry, nurturing both innovation and adoption.

Breakdown of the Venture Capital Firm Funding Process

• Investment Stages: crypto venture capital firms invest at various stages of a startup's business development. Seed funding is provided early on, Series A funding supports initial growth, and subsequent Series B, C, and beyond fuel further expansion in the crypto market.
• The Pitch Deck: To secure the funding of crypto venture capital firms, entrepreneurs need to create a compelling pitch deck that clearly communicates their vision, business model, and growth potential. Mastering the art of convincing a venture capital investment fund to invest in your startup is crucial.
• Due Diligence: Before committing funds, crypto venture capital firms conduct thorough due diligence, assessing a startup’s financial health, market opportunity, and management team.

Crypto Venture Capital Firms: Advantages

• Rapid Growth: Funding from crypto venture capital firms accelerates your business's growth by providing resources for rapid scaling in the blockchain space. You can recruit top talent, invest in marketing and market research, and establish a strong presence in existing markets.
• Valuable Expertise: Crypto venture capital firms bring extensive experience and offer valuable mentorship and guidance by top hedge fund managers. Their networks can unlock new opportunities for your startup.
• Brand Credibility: The backing of crypto venture capital firms enhances your startup's credibility, attracting customers and partners. An association with an established venture capital fund or a venture capital arm elevates your brand image.

Crypto Venture Capital Firm: Disadvantages

• Loss of Control: A crypto venture capital firm has a say in major decisions, potentially diluting your control over the company's direction.
• Pressure to Perform: The pressure to deliver high returns on investment can be intense, leading to stress and a focus on short-term gains for the crypto venture capital firm over long-term vision.
• Ownership Dilution: Each round of venture capital firm funding reduces your ownership stake in the company, impacting potential profits in the long term.
• Focus on Exit Strategy: A venture capital investment fund often prioritizes an exit strategy like an IPO or acquisition, which may not align with your long-term vision for the company.

Crowdfunding

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Blockchain projects can utilize funding mechanisms commonly found elsewhere such as crowdfunding. For instance, consider the recent ChainMonsters Kickstarter campaign. This project, supported by Flow, employed a distinctive aspect of blockchain technology: non-fungible tokens (NFTs). By distributing unique digital assets to its backers, ChainMonsters created scarcity and significantly boosted funding.

What to Consider

• Choose the Right Model: While reward-based crowdfunding, such as Kickstarter, is prevalent, other models like private equity-based and debt-based crowdfunding exist. The European Commission provides a comprehensive guide detailing each type's characteristics and suitability, as well as legal requirements for a project to launch its campaign based on its crypto asset.
• Build a Community: Crowdfunding relies heavily on engaging and convincing the crowd about your vision. In the world of decentralized finance built on blockchain technology, communities drive engagement and excitement, especially during crowdfunding. Here, traditional PR methods are replaced with organic marketing and direct communication via platforms like Discord or Telegram.
• Specify the Product: Since your investors are not a single entity, it's essential to clearly define the product you intend to deliver. By transparently communicating with your community, you can prevent misunderstandings and foster trust among your backers.

Accelerators and Incubators

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Blockchain incubators and accelerators offer valuable resources for startups at various stages, from conceptualization to having a minimum viable product (MVP).

While they provide funding, their benefits extend far beyond financial support. These programs often provide essential mentoring, which is particularly beneficial in navigating the complexities of the blockchain industry. Additionally, they offer networking opportunities that can facilitate growth and enable strategic investments even after the program ends, along with introductions to potential investors.

What to Consider

• Research Programs: The landscape of blockchain incubators and accelerators is dynamic, with new opportunities for getting blockchain capital emerging regularly. Platforms like "incubator list" can help identify active programs, but it's crucial for startups to ensure their project aligns with the program's objectives. Incubators may suit startups with promising ideas needing structure, while accelerators may prefer projects with a more defined timeline and readiness to bring a product to market.
• Prepare Your Application: Respected programs typically have rigorous application processes. In addition to perfecting your pitch and anticipating tough questions, thoroughly research the program and its underlying philosophy. Reviewing past graduates can also provide insights into the types of startups the program favors.
• Maximize Your Participation: Once accepted, make the most of your time in the program. Utilize the networking opportunities, engage with advisors, acquire new skills, and gather feedback to refine your post-program strategy. These resources are invaluable for driven founders looking to accelerate their startup's growth.

Top Accelerators and Incubators

BullStarter

BullStarter serves as a bridge between startups and potential investors, offering post-IDO liquidity management tools for businesses built by utilizing blockchain technology.

Operating as a decentralized, multi-chain blockchain gaming initial DEX offering launchpad, BullStarter leverages BullPerks and operates on the Binance Smart Chain (BSC).

Using an adaptive tier system, BullStarter offers early-stage deals to its community, incentivizing token holders. Unlike traditional decentralized crypto launchpads, BullStarter ensures that early investors receive the best tiers and deals as token prices rise. Participation in an IGO on BullStarter, a leading crypto launchpad, requires staking between 500 and 200,000 BLP tokens. At the highest tier, Titanium Bull, investors receive a 50% allocation from the first three deals and 25% from the fourth deal.

GamesPad

GamesPad is a prominent gaming and crypto launchpad focusing on emerging crypto projects in gaming, NFTs, and the metaverse.

Operating as a multi-chain crypto launchpad, GamesPad simplifies investment and provides numerous opportunities for buyers.

Partnering with leading crypto ventures and projects across various blockchains, including Ethereum, Binance Smart Chain, and Polychain Capital, GamesPad prioritizes community involvement.

Its decentralized IDO platform ensures accessibility to resources for investors and entrepreneurs, fostering a positive community experience. A specialized team reviews each project before launch to ensure only the most promising blockchain projects are available, offering investors a unique entry into the initial game offering (IGO) space.

DAO Maker

DAO Maker stands out among Ethereum-centric launchpads, known for its quality offerings to both new projects and token holders.

Pioneering various token sale formats like the dynamic coin offering (DYCO) and strong holder offering (SHO), DAO Maker democratizes project access.

Users participate in SHOs by holding a minimum of 500 DAO tokens and registering on the DAO Pad, with higher tranches offering better chances of securing a slot. DAO Maker has conducted SHOs for notable projects like My Neighbor Alice and Orion Money, showcasing its impact in the market.

Binance Launchpad

As the world's largest cryptocurrency exchange, Binance hosts its token launch platform - Binance Launchpad.

With stringent selection criteria, Binance Launchpad supports initial token sales for exceptional early-stage crypto projects. Hosting a project on Binance Launchpad provides exposure to a massive audience, making it a top choice for high-profile developers working in the crypto industry.

KuCoin Spotlight Launchpad

KuCoin, known for its extensive support of numerous trading pairs, has become a hub for crypto enthusiasts exploring lesser-known coins. In 2022, KuCoin expanded into the realm of crypto launchpads with the introduction of KuCoin Spotlight.

Gaining entry into KuCoin's token launch platform is a rigorous process. A dedicated team of over 20 experts meticulously vets applicants, subjecting them to scrutiny from three independent teams and four levels of review. With less than 10% of applicants securing a spot, KuCoin Spotlight has earned respect in the crypto space for its exclusive endorsement of top-tier projects.

Notable successes on KuCoin Spotlight include Victoria VR (VR), a multiplayer metaverse similar to The Sandbox, which saw a 212-fold increase in token value following its Spotlight debut. Similarly, ClearDAO (CLH), dedicated to democratizing derivatives trading in crypto markets, experienced a remarkable 73-fold increase in token value upon listing.

Participation in KuCoin Spotlight involves committing KuCoin's native cryptocurrency, KCS, to a pool. However, eligibility requires verification on the KuCoin platform, with certain countries excluded from participation.

Kraken Launchpad

Kraken stands out as one of the leading digital currency exchanges in the crypto world, facilitating the buying, selling, and trading of various cryptocurrencies. With the introduction of Krakenpad, a dedicated crypto launchpad platform, Kraken offers investors early access to promising projects and ensures fair token distribution in the early stages of a project's life.

Krakenpad has supported high-caliber projects across major blockchain networks such as Ethereum, Binance Smart Chain, Avalanche, Solana, and others.

Unlike typical token sale platforms, Krakenpad provides a comprehensive suite of services for both developers and investors, including the Kraken Swap DeFi exchange and Kraken Prediction, a decentralized platform for prediction markets.

While Krakenpad is still refining its platform, it aims to address any potential issues. Project launches are announced on Kraken's social media channels several weeks before the subscription opens, and participation is straightforward, with investors able to sign up by connecting an eligible wallet.

Despite limited data available, Kraken's reputation for innovation, security, and excellence positions its launchpad as a promising contender to emerge as one of the industry's leading incubators.

Grants and Loans

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Numerous blockchain projects have initiated grant programs to incentivize contributors and select the most promising use cases and proposals aligned with their mission, vision, and values.

If you're a small startup or an individual coder enthusiastic about Web3, and you know that securing venture capital fund support will be difficult, or if venture capital financing conditions do not align with your vision, explore the list of ongoing grant programs to discover potential funding sources for your business ideas. Starting out in the Web3 world to support enthusiasts like yourself is quite accessible!

Below are the top grants available in 2024 to attract attention and secure funding for your blockchain venture.

Aptos Foundation’s Grant Program

Purpose: Accelerate the growth of the Aptos ecosystem.

Requirements: Applicants can apply for one grant category, aligning with the Aptos ecosystem's current needs.

Eligible Categories: Developer tooling, SDKs, blockchain development tools, core protocol contributions, and various blockchain-based applications.

Funding: Not specified.

Duration: Ongoing.

EOS Network Foundation

Purpose: Support projects advancing the EOS ecosystem through research and software creation.

Requirements: Open-source code projects, prioritizing MIT projects.

Eligible Categories: Developers of all types and scales specializing in EOS-based development.

Funding: Available in three forms based on project scale.

Duration: Ongoing.

Chainlink Grant Program

Purpose: Support community development initiatives contributing to Chainlink's growth.

Requirements: Contributions accelerating the Oracle and Network Security Cycle.

Eligible Categories: Critical developer tooling, blockchain data, and service development on Chainlink.

Funding: Not specified.

Duration: Ongoing.

The Solana Foundation Grants Program

Purpose: Improve the growth, decentralization, and cybersecurity of the Solana ecosystem.

Requirements: Open to individuals, NGOs, companies, and governments.

Eligible Categories: DAOs, developer tooling, academic research, and financial inclusion projects.

Funding: Not specified.

Duration: Ongoing.

Osmosis Grants Program

Purpose: Sponsor projects that add value to the Osmosis system and improve infrastructure.

Requirements: Projects leveraging the Osmosis stack and requiring financing beyond governance proposals.

Eligible Categories: Analytics, tooling, infrastructure, and ecosystem growth.

Funding: Grants ranging from $5,000 to $500,000.

Duration: Ongoing.

Velas Grants Program

Purpose: Support the growth of the Velas ecosystem with $100 million in grants.

Requirements: Submissions in English with expertise in blockchain coding and ethics.

Eligible Categories: DeFi, DEX, NFTs, games, educational projects, and dApps bridging Velas and off-chain apps.

Funding: General pool of $100 million.

Duration: Ongoing.

Decentralized Autonomous Organization (DAO)

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While DAO-based startup funding remains relatively underexplored compared to other fundraising methods, it presents an intriguing opportunity. It differs significantly from venture capital financing and other funding forms.

Picture a decentralized investment fund where investors participate as smart contract contributors, with their voting rights directly tied to their investment levels.

The concept gained attention in 2016 with The DAO's creation, but subsequent hacking and dissolution hindered its progress. Nonetheless, the recent emergence of initiatives like The LAO suggests the potential for a robust, investment-focused DAO ecosystem that eventually may replace venture capital financing.

What to Consider

1. Conduct Due Diligence: Before pursuing DAO funding, grasp the decentralized decision-making dynamics and understand the legal implications. DAO structures vary widely in decentralization levels, with some resembling centralized funds with minimal community engagement.
2. Engage with the Community: Active involvement within the DAO community enhances your chances of securing funding. Cultivating organic enthusiasm around your startup significantly bolsters your prospects in decentralized funding channels.

Conclusion

In the dynamic landscape of crypto startup funding, diverse strategies offer entrepreneurs a range of options to finance and grow their ventures. Whether through traditional methods like bootstrapping, angel investments, or getting funds from a venture capital investment fund, or through innovative approaches like crowdfunding, accelerators, grants, and DAOs, the opportunities are abundant.

Bootstrapping empowers founders to build their businesses incrementally, fostering financial discipline and organic growth.

Angel investors inject early-stage capital, often seeking high-risk, high-reward opportunities and providing valuable mentorship.

Venture capital of VC funding fuels rapid growth with substantial investments, bringing expertise and networks to the table.

Crowdfunding leverages community support, while accelerators and incubators offer resources and mentorship crucial for startup success in the world of decentralized finance.

Grants and loans provide vital funding for blockchain projects, incentivizing innovation aligned with ecosystem goals. Meanwhile, DAOs represent a decentralized approach, where investors participate directly through smart contracts, offering a promising yet evolving avenue for startup funding.

Navigating these strategies requires thorough research, due diligence, and active engagement with the community. By leveraging the strengths of each approach and adapting to the decentralized nature of the blockchain ecosystem, entrepreneurs can effectively fund and grow their crypto startups in this dynamic environment.