To take off OR to accelerate & scale - your web3 startup will need to raise funds at some point in time.
Two common sources (and no-brainers) where one generally heads to, are -
Angel Investors.
Venture Capital (VC) Firms.
Both have their own pros & cons as per the scenarios.
Are you confused about whom should you go behind & pitch for your web3 startup?
Buckle up! Because we’re going to dive into just that.
What’s The Difference Between an Angel Investor and a VC Firm?
Angel Investor
An Angle Investor is an individual who provides capital to startups (because he/she has a high net worth & enough money to invest) in exchange for equity ownership.
These investors typically invest smaller amounts of money than VC firms and are often more hands-on in their involvement with the startups they invest in.
Angel investors may also be able to provide valuable mentorship and connections to help the startup grow.
Venture Capital (VC) Firm
A VC firm, on the other hand, is a professional investment firm that provides capital to startups in exchange for equity ownership.
These firms typically invest larger amounts of money than Angel Investors and are usually more passive in their involvement with the startups they invest in.
VC firms typically focus on startups that have the potential to achieve significant growth and returns on investment.
Web3 Startup Funding Scenario
The funding landscape for web3 startups has likely evolved in the past couple of years and will continue to do so as the industry grows and develops.
Blockchain-based products and decentralized applications (dApps) are still relatively new. But recent projects like Nike NFTs and Starbucks Odessey are slowly bringing its utility potential to the limelight.
As a result, there is likely to be increasing interest in investing in web3 startups from a variety of sources, including Angel Investors and VC firms.
But looking at the complex business structure in web3, not all investors have the required mental model to understand the dynamics. A lot of them are here out of curiosity or out of FOMO.
Thus, many web3 startups are preferring to seek out multiple sources of funding and build a diverse investor base.
So, which type of investor should you prefer for raising funds? The answer depends on your needs and goals.
Whom Should You Approach?
3 Advantages of Raising Funds From Angel Investors
1. Flexibility
Angel investors are generally said to be more flexible in their approach. They are willing to take on higher levels of risk than VC firms.
This can be particularly attractive for web3 startups, which may be working on innovative and unproven technologies.
2. Patience
Angel investors tend to be more patient and are willing to wait longer for a return on their investment. They are often in it for the long haul.
VC firms on the other hand are often looking to cash out as soon as possible.
Angels will give you better peace of mind when growing slowly but steadily.
3. Mentorship
Angel Investors are mostly willing to provide mentorship to the founders.
You as a web3 startup founder will have a much easier time getting your business started if you find an investor who has been in your shoes before.
They will know exactly what to do and what to avoid, thus benefiting your startup.
3 Advantages of Raising Funds From VC Firms
1. Deeper Pockets
To put it straightforwardly, VC firms have deeper pockets.
Thus, they are able to provide a large amount of funding to promising startups.
If your goal is huge, VCs have it for you!
But remember, this also comes with a lot of pressure of scaling up quickly. If that’s what you are looking for, you are good to go here.
2. Better Resources
VCs have a network of industry connections and resources that can be helpful for startups looking to grow and expand.
While Angel Investors can provide you with mentorship & contacts, VCs can introduce you to the network or syndicate that can take you to new heights.
3. Passive Involvement
VCs don't actively manage the startups that they've invested in.
It's in their nature to have a portfolio of companies, focus on the big wins, and not sweat the small stuff.
They have no role in the companies they fund beyond the initial investment and usually have little to do with the company's management.
If you prefer it that way, it’s a huge advantage.
Your Call!
Ultimately, the decision of which type of investor to work with will depend on the specific needs and goals of your web3 startup.
Revising the above points, you should consider factors such as -
The amount of funding needed
The level of involvement desired from the investor
And the potential for growth and returns on investment
…when deciding which type of investor to work with.
Nail Your Pitch
Whoever you approach, remember that investors sit through hundreds of pitches.
In order to convince them, don’t fail to deliver a fantastic pitch.
Here’s how you can build an investor pitch deck to take them on an emotional journey, back your claims with logic, and look like a promising business opportunity to invest in.
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