Darren Lau: How should a blockchain project choose a VC? Here is a framework for consideration

This article is reproduced from Lianwen

Written by: Darren Lau, a well-known blockchain investor

Compiler: Perry Wang

1/ Funds are abundant now. Everyone has money and they want to invest it. The amount of money pouring into the crypto space increases every week to satisfy this desire.

But what makes a good fund?

How should a cryptocurrency founder choose from the ever-growing list of funds and angel investors?

Let's dig deeper 🧵

2/ This is an exemplary framework that comes to mind when evaluating venture capital funds (VC). into five considerations:

1. added value
2. financial support
3. Past investment record
4. allocation size
5. manpower

3/ 1. Add value - identify areas in tokenomics where you need help

Can they help out? (like @Delphi_Digital's collaboration with @AxieInfinity)

4/ Governance:

Do they vote or make any governance proposals? (eg @anjan_vinod proposed to add @barn_bridge on @AaveAave)

Have they even commented on any projects? Have you supported any projects?

Some Anonymous are more active than VCs in governance forum participation. (e.g. @MonetSupply):

5/ Allocation:

What is the reach of VC?

Are they affiliated with the agency? market maker? exchange?

marketing personnel? podcast? newsletter? youtube up master? Tiktok influencer?

(e.g. @mrjasonchoi with @theBlockcrunch, and @spencernoon with @OurNetwork__)

6/ Technical Strength:

Do they have technical staff who can help with code reviews? Can they run validator nodes?

Do they have a lab department - building products to support your project? (eg @hiFramework and @Delphi_Digital)

Can they make custom data dashboards using @DuneAnalytics or @nansen_ai?

7/ Recruitment

Do they have a job board? (eg @DeFianceCapital and @MechanismCap)

Do they have a dedicated hiring manager (like @dragonfly_cap) who can help you find the right fit for your program?

8/ Network:

Check out their existing portfolio companies:

Will there be synergy? Will there be conflicts?

If so, why invest in us when VCs are already backing our competitors?

9/ Compare them to other institutions/previous investors in the round:

Do they provide the same added value?

See them as part of the same team / hope they complement each other. Some VCs believe that larger VCs will do all the work - and end up adding less value.

10/ 2. Capital Support: Guiding Liquidity to the Protocol

Attract capital inflows with considerable scale and long binding period to bootstrap the platform!

Most retail liquidity is purely profit-seeking:

Projects like @goldfinch_fi raise liquidity. For example, a one-year deposit in exchange for a fixed share of tokens

11/ Several Polkadot (DOT) and Kusama (KSM) projects are also asking VCs to stake their DOT/KSM to bid for parachain slots.
You want your VC to be the largest and most active user of your protocol.

12/ 3. Previous Investment Records

What industries does this VC usually invest in?

What expertise can they bring to your project?

Ask for a list of companies they invest in so you can check!

Also go to @dovemetrics for a list of publicly announced investments.

14/ You want to look for any minefields from past records:

• VC tries to change terms
• Trying to get more out of a funding round
• unfulfilled promise
• hidden time bomb

Ask other investors for their thoughts on this round. Everyone in the crypto VC space knows each other.

15/ 4. Allocation size

What percentage of the network will you sell to the fund?

How do you adjust expectations?

Is that a high percentage relative to their previous portfolio?

VCs don't always offer the same level of support: -> $5m position, more popular than $50k investment.

16/ Some VCs view investments as call options.

Not particularly bullish, just promising a small amount of investment as a "check of support." If it's good for them, cash in on the gains, and make a big deal about your vision. If the project is going to fail, invest a small amount of money.

17/ 5. Manpower

First, who is managing the fund? What can you learn about them?

Check out more of their twitter accounts and see what they're tweeting about. Listen to their podcasts and read their blogs to learn why they do what they do.

The best investors in DeFi do it, and not just for the money!

18/ When looking at funds holistically, consider their team size.

As a founder, will your project be staffed full-time? Will you gain support from other members of the company?

It's worth considering the person's expertise/focus on your project.

19/The corporate culture of the VC also matters.

How was your experience working in that VC? Investigate or ask them if they spend more time finding deals, or supporting the companies they invest in.

If you can find former VC employees, it's worth reaching out to them and asking for their original input.

20/ Are you willing to take funding from this VC because of the analyst/partner you spoke to, or do you want the entire team and brand?

If it's really because of the guy who closed the deal, ask them to write an angel investor check.

Regardless, the current incentives for most funds are broken and could one day be threatened.

21/ Lastly, what kind of people are they?

Will they be willing to answer the phone at 3am because there is a problem in your agreement?

If they came to your place, would you drink with them?

22/ At the end of the day, by raising capital, you are selling an equity stake in your company and, by extension, your child.

Do you really want someone to get something for nothing for your hard work?

Or do you want someone who fought alongside you in the trenches?

Source link: twitter.com

Cointelegraph Chinese is a blockchain news information platform, and the information provided only represents the author's personal opinion, has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial advice. Readers are requested to establish correct currency concepts and investment concepts, and earnestly raise risk awareness.