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What comes to mind when we think of venture capital? For most people, the term conjures up images of large companies getting millions in funding rounds from top VC firms and headlines of the millions being pumped into the next Uber or Facebook. Most of us, however, think of the VC world as an exclusive one that can only be participated in by the wealthy and elite.
To a great extent, this is true as the average person would need at least a few million dollars to get started as a venture capitalist and this, of course, excludes most of the population. This is the way the VC sector has worked for decades but should this be changed?
Why Venture Capital Has to Change
In the past, virtually the only way that a company could raise funds at its inception stage was through personal funding, angel investors, or venture capital. The world is different now, thanks to the internet and the many ways in which people can connect over it. Sites like Kickstarter have already shown that everyday people can chip in to support budding ideas and get innovative products and services off the ground and this shows no signs of stopping. The 2010s also saw the rise of blockchain and cryptocurrency which have gone on to disrupt the financial sector.
In the case of cryptocurrency, it empowered everyday people to invest in ways that they otherwise could not, buying up cryptocurrencies with pennies and often making a profit during bull runs. Blockchain, the technology that cryptocurrency is based on, has been used to democratize many investment vehicles. Through tokenization (the sale of a single asset as smaller, digital representations), people are now able to invest in real estate, art, and so on at a fraction of the traditional cost. The effect of all of this is that institutions and investment vehicles that had been previously seen as untouchable or out of the reach of the common man are being demystified. Take the Gamestop saga of early 2021 in which Reddit users banded together to drive up the price of a stock in order to get back at hedge funds.
Venture capital will also go through the same evolution as more offerings pop up to democratize it. Take companies like RevenueCoin that are leveraging blockchain technology to allow users to invest in venture capital with more ease and greater accessibility.
How RevenueCoin Works
Unlike traditional VC firms, RevenueCoin does not require millions of dollars for direct investment in promising companies. Instead, RevenueCoin users buy as much of its native $RVC token as they want, and the funds raised from the sale of the token are given to the chosen companies.
After the companies used the raised funds to expand their operations, they then commit up to 10% of their profits to buying back and then burning $RVC tokens. This act of buying and burning then artificially reduces the supply of the token in the market, thus driving up its value and generating a profit for initial investors.
This method is beneficial to the investors because they are able to buy as much or as little $RVC as they want and as they can afford it. They also have a say in which specific companies are invested in as a result of RevenueCoin’s voting system. Finally, they can retrieve their initial investment and profit whenever they want by selling their tokens on crypto exchanges. For companies that do not want to deal with traditional VC firms’ stringent restrictions, this provides an alternative to funding.
A New VC World
With options like RevenueCoin on the market, the old exclusive way of VC will need to change. Every day people are now exploring their options at democratized investing and as this becomes more popular, startups will also realize that they have more options as well. Over time, the monopoly that large VC firms had on the sector will reduce significantly and the landscape will be a much more accessible one.