VC: Reflections and Way Forward

There couldn’t be a better time to talk about this challenging topic. Be it the recent SVB, Silvergate bank and Signature Shut down, or the Terra Luna collapse, FTX crashing, or bankruptcy filing by multi-billion firms like Voyager and 3AC, regulators might have stepped up to save some of the depositors. Still, the VCs and Shareholders have lost their capital. While the statistics below paint a low-flying image of the VC market, the blog discusses the way forward.

1. The number of unicorns in 2022 declined by 50% to 308 from 596?
2. Total funds raised declined by 55%?
3. There’s more than 600 bn worth of Dry Powder piled up in VC firms

In a panel discussion among top venture capitalists - Vineet Budki - Cypher Capital , Mustafa Kheriba - ICEBERG Capital , Ikuma Mutobe - Tané and Alexandre F. - SwissBorg the focus was on the value that venture capital has created, not just the negative aspects of the market.

Venture capital (VC) plays a significant role in the growth of industries, providing entrepreneurs with money and encouragement to innovate. The trust and sweat that VCs put in to back entrepreneurs make way for companies like Open AI and Blockchain-based dApps. The VC industry has seen its share of ups and downs, with the recent bear market causing losses of capital and trust for some. However, looking at the bigger picture, the adoption of technology and digital assets is still growing globally, presenting investment opportunities for VCs.

When it comes to VC investments, one needs to look at the horizon of four to ten years, depending on the type of fund. Funds are made for equity investments and crypto investments, and they are made for different time frames, such as 10+1+1 years. Focusing too much on a bear market is illogical in the longer term, as one year out of every four years tends to be a bad market. Furthermore, adoption is happening globally; 110 million wallets were added last year, particularly in Latin America and Africa. Therefore, the market is growing, and investors must look beyond the bear market and position themselves for the future.

Investing responsibly with fundamentals is crucial in passing through the market cycles. It is all about perspective and the investor's preferred horizon and returns. Some investors wait for the next big idea and are willing to wait for ten years, while others opt for much shorter-term returns. Regardless of the perspective, investors should invest responsibly and look beyond the bear market's short-term effects.

Market cycles should encourage investors to take risks and invest in innovative ideas. Over-inflated valuations and other metrics may have caused some companies to fail, resulting in a loss of capital and distrust among investors. Still, it is essential to understand that investment opportunities and potential in venture capital are vast as long as the fundamentals and people behind the product are sound.

One common issue that Crypto VCs have faced is that while in Equity, the fund raised is distributed to multiple rounds pegged to the milestones achieved. In contrast, Crypto startups raise loads of money before the Token Generation event. But this also leads to reckless spending without focusing on generating product revenues.?Incubators like TDeFi | TradeDog Token Growth Studio plays a critical role in the handholding of its port cos through their Unique model of engagement with the companies.

Cockroach Approach

On being asked about the secret sauce of Unicorns, Mustafa from Iceberg said- "I have a slightly different approach, so I do like to make money, obviously, but I also look for a cockroach kind of company, and a cockroach kind of company is essentially a company that will survive on a much more extended period without the support whether it's Financial or not.

Active Advisory

Sweat is more expensive than Capital. Other than the past few months, startups in Crypto have not faced any challenges raising funds; however, they need an ecosystem. All the panellists emphasized the value of the ecosystem. TDeFi as an incubator has developed an ecosystem to support the companies through collaborations and partnerships across the portcos.

Conclusion

In conclusion, while the VC industry has faced challenges, it remains an essential aspect of the growth of any industry. VCs should focus on the people behind the company, invest responsibly and have a longer view. As the adoption of cryptocurrency grows, there are opportunities for VCs to support the growth of the industry and provide investment opportunities to start-ups and entrepreneurs.