Diffusion Digital 2020 - Fundraising in a Financial Crisis

TL;DR

Fundraising during a financial crisis takes longer and demands clearer utility, product-market fit, and a credible path to revenue. Diffusion Digital panelists from ConsenSys, Playfair Capital, and LongHash Ventures explain why investor meetings and sales cycles are being delayed, how valuations and funding rounds are affected, and why founders need both strategic and emotional support. Read on for practical perspectives from blockchain investors across London and Singapore.

Transcript

hello everybody and we're life so thanks for everybody for joining us for the fusion digital I'm Anna from the investment and the Basecamp team and outlet ventures and I want to say welcome to our panel on fundraising in a financial crisis I have been investing for a little over three years now and I've started from a more generalist and traditiona... Read More

Key Insights

• 😀 Startups in the web 3 and blockchain space face unique challenges in fundraising during a financial crisis.
• 🛝 Valuations have decreased, and some funding rounds have been postponed or canceled.
• 🫷 There is a push towards utility and product-market fit in blockchain startups.
• 😚 Token crowdfunding has lost some appeal due to past negative experiences, but there is potential for future growth.
• ❓ Emotional support becomes crucial for founders during a crisis, alongside financial and operational support.
• 🖐️ VCs play a critical role in guiding startups through uncertain times and helping them navigate challenges.
• 🏛️ Growth hacking and community building are essential for startups to thrive in the current environment.

Questions & Answers

Q: How does a financial crisis affect fundraising for Web3 and blockchain startups?

Investor meetings, client conversations, and sales cycles can be delayed or put on hold during a global crisis. Although crypto startups may operate in a relative microcosm, they still face many of the same fundraising and customer-acquisition challenges as other ventures.

Q: What do investors expect from blockchain startups during a financial crisis?

Investors want a clearly defined use case that delivers benefits such as cost savings, increased security, or better data protection. They also place greater emphasis on product-market fit, revenue generation, and a visible path to monetization.

Q: Did ConsenSys change its Web3 investment thesis during the pandemic?

ConsenSys said its investment thesis had not fundamentally changed because it remained focused on backing strong talent as a long-term partner. It continued to have conviction in its portfolio while recognizing that progress could take longer than originally expected.

Q: How were startup valuations and funding rounds affected by the crisis?

The panel noted that valuations had decreased in the difficult investment environment. Some funding rounds were also postponed or canceled, making fundraising timing and expectations more uncertain for founders.

Q: Why is utility especially important for Web3 startups in a downturn?

A downturn increases pressure on startups to explain the practical benefit of their technology. Blockchain applications need to show whether they reduce costs, improve security, protect data, or otherwise solve a clear problem.

Q: What opportunities did investors see for decentralized finance during the crisis?

The panel saw a significant opportunity for decentralized finance, especially where products let people trade, interact, or manage wealth online. Some early-stage companies were also showing strong traction and growth despite the broader challenges.

Q: What role should venture capitalists play during a crisis?

Venture capitalists can support founders with guidance, resources, and help navigating operational decisions, not just capital. Emotional support becomes particularly important when founders face difficult choices such as layoffs and cost-cutting.

Q: How did the panel view token crowdfunding during the financial crisis?

Token crowdfunding had lost some appeal because of regulatory concerns and earlier negative experiences involving limited substantive value. The panel nevertheless saw potential for renewed growth as financing models evolve toward greater fairness and transparency.

Summary & Key Takeaways

• Panelists discuss the challenges faced by entrepreneurs in the current investment scene, with longer sale cycles and industries being impacted differently.

• They highlight the importance of clarity in use cases and a push towards utility in blockchain startups.

• The panelists share their experiences in different regions, with insights on the impact of the pandemic on fundraising and token financing.