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Renowned blockchain entrepreneur and investor summarizes his thoughts on capital formation incentives in crypto, natural rivalry between VCs and retail investors, evergreen indicators for seed round participants and tough times for early-stage fundraising.
Teams are constrained by dominant meta, Kain Warwick admits
In 2024, even the most successful Web 3.0 teams looking for fresh funds are constrained by the current meta if they want to raise big rounds, Warwick shared in his latest thread on X with 123,000 followers.
It’s been a while since I’ve put my theadoooooor hat on, so let’s have a little chat about capital formation incentives in crypto.
— kain.eth (@kaiynne) May 3, 2024
From the seed investor's point of view, the signals of project's traction — in terms of user base, potential customers, airdrop farmers — remain unchanged: VCs are looking for products with growing TVL, large numbers of X and Telegram followers and so on.
That said, investors are still using these primitive indicators of social engagement to calculate the potential number of retail token buyers.
As such, introducing points, pioneered by Blast, an overhyped OP Stack L2, became the natural way for teams to prepare for fundraising:
So when points meta pops up everyone kind of has to do it. Because competition in early stage raises is intense. If you can incentivise activity and TVL at zero cost you can raise bigger rounds
Seed rounds completed at $10 million-$50 million in FDV are "pure cope" for investors, and almost each of them is in profit at the end of the day, Warwick admitted.
Crypto fundraising 101 by Synthetix founder
Personally, he recommends to reveal a token for retail at $10 million-$1 billion valuation after three rounds of private/seed funding with VCs:
In order to break the current anti-retail meta you need to be face the wrath of VCs and regulators. No 1st time founder is going to do this. The incentives are too strong. Do a low float token launch after 1-3 private rounds and have paper 8 to 9 or even 10 fig networth. Or try to shift the meta and get rekt most likely
Also, he admitted the role of retroactive airdrops of 2021-2023 as a way to introduce tokens to a large percent of retail owners.
As covered by U.Today previously, Warwick estimated the euphoria of meme coins as a natural catalyst for Ethereum's L2s adoption.