How Cryptocurrency Is Changing Venture Capital

Picture1.png

Cryptocurrencies have been changing the landscape of our economical transactions, and venture capital is no different. It has been likewise affected by the influx of various tokens available that circumvent the need for third-party verifications systems.

It was necessary, in a traditional setting, for a startup to develop their pitch deck, and while that is still true, it is often not a requisite that they create a business plan. This, often laborious, step can now be substituted with a simple white paper that is more like a report on a company’s proposed solution to a felt need than it is a detailed model of the way in which they intend to conduct business.

It is still absolutely integral for those in venture capital to develop their offering for presentation to a financial institution to receive the backing that they need. For many, however, cryptocurrency is finding alternative routes to providing the ever-important funding that is the lifeblood of any endeavor.

The ICO Approach

For cryptocurrencies that need to raise capital but who do not possess the familiar structure of a company in its beginning stages, there is another way. The Initial Coin Offering or ICO is a means of bypassing the usual model of selling equity in a business. Instead, this method involves creating tokens for distribution to those who provide them with funds.

This means that firms are no longer giving shares of their future revenue away and with it, a part of their company. This serves the double purpose of both growing their holdings, and it also puts this digital form of money in the hands of people who will, hopefully, go and spend it. These early adopters help legitimize this novel form of currency, emboldening others to try the recently created coin.

DAPPS, Tokens Types, And The Need For A Common Denominator

We’ve just discussed tokens used as currency, yet there is another type – the work token. But to understand this, we first need to understand DAPPS. The creator of Ethereum wished to invent a system of exchange that improved upon the technology of Bitcoin and that would become another internet unto itself. This platform gives users the ability to write their own apps, referred to as decentralized applications or DAPPS, and their uses can be diverse.

Once the DAPP is written, its inventors will enlist the help of those who are prominent in the world of blockchain to attest to their DAPP’s viability. The startup will need to decide the total number of token they want to exist, the decimal point to which they can be divided, and a symbol to represent their cryptocurrency. Once this has been accomplished, an ICO can go public.

To solve the obvious problem of having too many token systems in the world to manage in a single wallet, coins are transmitted using a master form of exchange called ECR-120.  This works by providing all new tokens with a ready platform on which to burst onto the world stage. In addition, there are four main websites on which developers can place their ICOs to an audience of hungry investors that isn’t unlike a Kickstarter for ICO startups.

Cryptocurrencies are slowly and steadily changing the way business is done throughout the word, as they exert their influences on the institutions we have, so long, taken for granted. Banking is still a staple for fledgling startups to amass capital, but there is absolutely a growing segment of innovation that is taking place using the blockchain.

We’re seeing the potential for growth expand, as more mainstream businesses and retailers are accepting cryptocurrency or are floating the idea of working it into their current model. ICOs have shown time and time again to be a fast way of helping a startup become fully funded. Time will only tell whether the initial vision behind Ethereum that it become a new frontier, an Internet built on the infrastructure of blockchain, will come to pass, changing how we engage in business forever.

AI Capital Advisors can help you better your business to achieve a higher valuation by improving your presentations, capital raise and financial structures and your strategic planning. Feel free to contact us for more information, and we look forward to working with you.