The increase in blockchain technology may change the VC investment landscape

Venture Capital-backed investment agreements have presented strong performance indicators in recent years, although the global pandemic caused some companies to put investment agreements aside for a while.

According to reports from KPMG, VC-backed companies raised more than $ 808 billion globally through 5,418 agreements at the end of 2020. Now investors are steaming forward, as global VC funding rose to over $ 300 billion, becoming the second largest year in VC – supported financing since the turn of the decade.

So far, 2022 has presented a robust global VC investment market, with more than $ 144.8 billion in global financing agreements for the first quarter of 2022.

Q2 2022 hedge fund letters, conferences and more

Industry experts are fighting among their peers to secure big deals with future entrepreneurs and startups. And now with the prevailing innovation and development in blockchain-based technology, venture capital agreements may soon look much different in the years to come.

Big money for Blockchain

Blockchain has seen incredible support in recent years, with more competitors entering the market and larger funding rounds than ever before. Global blockchain financing saw its biggest year in 2021, with investments increasing by 713%, amounting to more than $ 25 billion on VC-supported financing agreements.

The figures present more than the traditional understanding of the supporting blockchain technology tools and platforms has received in recent years.

Globally, venture capital parked in blockchain companies and startups has grown faster than some experts first expected. The United States saw record investments of $ 6.36 billion with more than 157 agreements.

According to Dale. W. Wood, CEO and founder of Dale Ventures, a global investment firm, said changes and adaptability will help to see a new type of VC investment agreement, revealing how intangible the global market can be.

Dale Wood launched Dale Ventures back in 2017, after working with various industry experts, and wanted to create value-adding investment opportunities for startups and entrepreneurs. Dale Ventures has been able to generate remarkable success that is now directly linked to a range of investment groups, allowing them to diversify their resources and venture capital approaches.

Consumer interest and institutional demand for digital assets such as cryptocurrencies and non-fungal tokens gathered strong support after the leading cryptocurrency Bitcoin (BTC) reached its highest ever peak in November 2021 at more than $ 69,000.

Democratization of the markets and trading platforms has also led to more investors, from different environments and economies, being able to use digital trading and blockchain-based products or services.

Digital Currency Group broke through all the noise and led the pact last year, investing more than $ 72 million in crypto, fintech and blockchain companies. The New York-based VC firm has become a household name among venture capitalists, backing seed, early and later stages of investment rounds.

Another important name in this category is SVB Financial Group (NASDAQ: SVIB), closer to the end of 2021, and looks forward to expanding its influence in the technology and software sector. After establishing a new branch of interest – Tech Investment Banking Team – SVB Financial was able to become a prominent player among other competitors to support blockchain-based and technological startups in space.

Safeguard Scientifics, Inc. (NYSE: SFE) has so far made more than 173 investments, according to CB Insights. The company focuses primarily on entrepreneurs in the technology and healthcare sector, and supports upcoming businesses and companies that are open to pushing the boundaries of what modern blockchain technology can do for other organizations. In 2021, Safeguard generated more than $ 61 million in revenue after selling 7 positions, resulting in the company returning more than $ 41 million to its shareholders.

Regardless of their size, or the amount of cash they pour into blockchain-based startups and companies, these venture capital investors, among other names, are turning to the growing interest in blockchain and the digitization of the broader VC market.

With the increasing amounts companies are willing to invest in, what can blockchain in return mean for VC investors?

Tokenized bet

Under conventional circumstances, entrepreneurs and start-up owners will be able to secure financial financing from venture capitalists. But as the emergence of blockchain-based technology and software takes shape, blockchain can help eliminate the barriers that may stand in the way of entrepreneurs securing the deals they need to get their business up and running.

With better blockchain-based solutions, retail investors can now reduce risk, and put the investor in direct contact with the entrepreneur.

As startups are now able to raise funds using blockchain, both VC and retail investors can be offered more liquidity through tokenized efforts.

Tokenized bets allow investors to purchase tokens or startup-specific digital assets. From these assets, investors can decide whether they want to keep, trade or sell their assets on the market or within the company’s business.

Blockchain is developing a new cycle and investment funds. By owning and trading digital assets, investors continue to put financing back into the company, while ensuring their protection and liquidity throughout the project’s life cycle.

If investors feel that a project may fail, or lose faith in the potential asset growth, they still have the chance to unload digital assets, by selling them back to the business or linking them to real values ​​such as currency or commodities.

Although tokenized efforts provide better risk reduction, it requires startups to have the necessary technology and software available to offer investors digital assets. Whether it is tokens, crypto or even non-fungible tokens (NFT), startups are constantly willing to innovate the investment process to attract potential investors.

There is still potential for small business entrepreneurs to obtain financing through traditional capital markets. It reduces the risk they may have to take on the development of digital assets, but it reduces their pool of potential investors.

Provide guidance

Traditionally, venture capital financing has mainly been about providing financial support, but with the advent of modernized technologies, VC investors can provide guidance and support to owners who want to get their business up and running.

Through early investment based on blockchain technology, owners can revive their understanding and understanding of the business world. This further pushes them to gain a new perspective on their business ventures.

Nevertheless, VC investors can simply offer basic guidance, but through blockchain it means that they can participate actively in the project cycles. Better performance figures allow VCs to see how their investments can grow.

The potential for a blockchain in the market for VC investments creates opportunities for a new era of venture capitalism culture. Perhaps the modernized era has proven to offer more than digital assets to users and consumers, but improves risk reduction throughout the investment and growth process.

Dynamic coin offering in venture capitalism

Dynamic Coin Offering (DYCO) is a development model introduced by DAO Maker. Through a dynamic coin offering, companies can offer utility symbols that can be supported by US dollars.

However, DYCO is a short-term solution, which can only support startups and investors for the first 16 months with company-specific projects and entrepreneurs.

Simply put, a DYCO will allow VC investors to see initial growth in their investments, but as projects begin to become more profitable, investors will be able to decide to either hold or sell their tokens.

Startups and companies can determine the number of tokens in circulation, and as investors begin to repay their tokens, these are permanently taken from the DYCO circulation.

The good news is, as the token supply begins to decline, its value begins to increase. For venture capitalists, this can mean that when other investors start reselling or refunding tokens, and projects start to pick up, the token value can increase significantly.

The bottom line

Whether this is able to be determined in the years to come, it will be up to investors and entrepreneurs to work together to ensure that guidance and business support are provided throughout the project cycle.

The investment industry sees significant change and innovation through the use of blockchain. It may still take time before VCs can take full advantage of what blockchain has to offer for its investment capabilities, but it is establishing a new line of opportunities for entrepreneurs and start-up owners.

Companies mentioned in this article

Compare these stocks Add these stocks to my watchlist

7 ESG shares leading the way to a better world

It is becoming increasingly popular for investors to “vote their values”. One way they do this is by investing in companies that make a demonstrable effort to improve the world. This creates a category of stocks known as ESG stocks.

ESG stands for Environmental, Social, and Governance and covers a wide range of issues. The environmental component is relatively straightforward. This analyzes and measures how companies handle problems such as carbon emissions, deforestation and initiatives for green energy, including sustainability efforts built into their supply chain.

The social component covers issues such as an organization’s commitment to issues such as pay gaps and diversity, but also areas such as data security, sexual harassment guidelines and fair work practices. The management component affects areas such as diversity in the company’s board and management salaries.

The focus of this presentation is to provide you with seven companies that provide more than just lip service to ESG initiatives. One of the criteria used when selecting shares in this presentation was the company’s Net Impact Ratio. This is calculated from data produced by Upright Projects Net Impact Model.

The net effect model is a mathematical model of the economy that produces continuously updated estimates of companies’ net impact using an information integration algorithm. MarketBeat captures key insights and presents them under the “Sustainability” tab on your company profile page.

See “7 ESG stocks leading the way to a better world”.