How to raise a seed round in crypto

Navigating the crypto investor landscape

While fundraising activity in the crypto space has attracted significant attention, it has been the more eye-catching fundraises that have attracted most of it — very little has been written about the experience of founders in the space. Despite what headlines might suggest, fundraising in the space remains challenging and opaque. If you’re fundraising for an early blockchain company, there are still many unknowns — who the reputable funds actively investing in the space are, which ones might be good fits for your company, and how to diligence them.

A few weeks ago I asked in the Telegram group from the last Unplug Retreat if anyone had seen a good overview of the investor landscape:

When I came up empty handed, I realized that if some of the smartest and most connected people in the space hadn’t seen a solid map of the investor landscape, I imagine most founders in the space haven’t either.

Venture capital has evolved into a relatively transparent fundraising market and process because people like Nivi and Naval Ravikant (who began writing Venture Hacks in the early 2000’s) and institutions like Y-Combinator have worked tirelessly to make the fundraising process better for founders. Not only does crypto remain more opaque than venture, it’s also more complicated — there are both a larger pool of potential investors (VC, advisors, syndicates, hedge funds) and more fundraising mechanisms (tokens, equity).

As someone who remains incredibly bullish on the space, I believe that it’s better for founders — and the industry overall — if early stage companies have as much information as possible when fundraising. Fundraising does nothing to move the industry forward — the quicker that companies can close rounds and get back to building, the faster the space will evolve. My aim here is to give founders some data points that are (hopefully) useful in running a fundraising process. Taking money from outside investors is one of the most consequential decisions that early-stage founders make and it’s one that they should be able to make on an informed basis.

Seed stage venture capital

Prior to CoinList, I worked on the investing team at AngelList where I was fortunate to get a broad exposure to the venture model by working on 100+ early stage financings (I wrote about that experience here). While VC remains far from perfect, if you’re building a SaaS business in SF, there are:

• Widely known accelerators (Y-Combinator, Techstars)
• Fairly established lists of top angel investors (ie this one from Forbes)
• Highly public lists of of top venture firms and partners

This isn’t to say that crypto fundraising should evolve to mimic venture — it has many, many, problems. However, the venture fundraising process remains more transparent and better documented for founders.

Early stage crypto financing

The crypto world is opaque, rapidly evolving, and significantly more complicated than traditional venture. There are a few reasons for this:

• The ‘crypto investing’ landscape is very new — the first proper crypto fund (Pantera Capital)— launched in 2013 and the vast majority of new funds are less than two years old.
• The space is changing quickly —100’s of new crypto-focused funds are now being formed each year.
• Most VC funds have institutional LP’s (passive investors that give money to managers) and so operate fairly conservatively. Given that a lot of new crypto funds are investing their own capital (or their friends), they tend to shoot from the hip.
• Almost all VC’s follow the same basic strategy — buy and hold. There are a much wider array of investing strategies in crypto including long/short hedge funds, arbitrage funds, mining pools, and staking funds.

Running a fundraising process

These are a number of key questions that entrepreneurs face when fundraising for a blockchain company that are not yet well-documented:

Who are all of the funds I could talk to?

In my experience, most founders start fundraising processes by making a list of all the reputable investors that are actively investing in the space. This is also where I’ve decided to start researching as it’s a pre-requisite to the rest of the fundraising process.

Which of those people should I be talking to?

Most crypto funds are still fairly under the radar and so as a founder it can be tough to figure out which funds are investing in companies like yours. It’s generally helpful to prioritize funds that invest in similar stages, types of companies, geographies, etc.

What should I ask them?

There are many unanswered questions in the space that are highly consequential for founders. For example, if you’re selling equity in your company to a a crypto hedge fund whose investors can withdraw their money quarterly, what are they going to do with your illiquid equity if they face a lot of withdrawals? Founders should know what to ask investors to make sure their goals are aligned.

The Crypto Fund Landscape

If I were raising an early financing round, I’d start with this list of ~100 of the top funds actively investing in the space:

The Crypto Fund Landscape

I compiled this list in order to give founders a place to start when they think about raising an initial funding round for a blockchain-related company. This list is informed by my experience over the past year of working with blockchain companies going through early funding rounds. Between working with some of the top projects in the space at CoinList and investing personally, I’ve been involved in 25–30 early fundraising rounds.

This is not to say that these are the top 100 or that you shouldn’t take money from people not on this list. Rather, these are ~100 of the top funds globally that are actively investing in blockchain companies. I’ll do my best to keep it up to date — you can find me on Telegram [reganbozman] if you have any suggestions or updates. I also plan to add additional information over time like average check size and fund mandate (ie can only invest in equity).

Caveats

• This is informational and not an endorsement of any of these funds. This is based on publicly available information and could easily be wrong
• These are my personal views — CoinList has no involvement in this list
• I purposefully excluded angel investors (and personal investment vehicles) because there are a huge number of them and less information is publicly available. I plan to add to the list at some point in the near future.
• This is a US centric view of the world — this list is largely US and European investors
• This list is designed for early-stage founders and so I’ve excluded funds that do not invest at this stage (i.e. quant or growth equity funds)

I started by compiling a list of funds in the space because that tends to be the first step in a fundraising process, but I’m planning to publish more on topics like figuring out which funds to talk to and how to diligence funds.

If you’re fundraising in the space and have questions or suggestions on topics, please don’t hesitate to reach out via Telegram [at] reganbozman.

A huge thank you to Parker Thompson, Stefano Bernardi, and Sebastian Markowsky who helped inspire this post and provided extensive feedback on it. Andy Bromberg, Andrew Young, and Pradyuman Vig also provided useful feedback.

Disclosures:

• These are my personal views and not those of CoinList.
• I have small indirect LP positions in some of the funds listed via a fund of funds investment.
• Some of the funds listed are investors in CoinList. You can see a full list here.
• I am not a lawyer and nothing here should be construed as legal or investment advice.