5 tips from Bitcoin entrepreneurs on how to raise money

Simon Burns, co-founder of Wealthcoin, a bitcoin investment service startup that recently emerged from California incubator Boost VC, shares his experience seeking seed funding.

One of the most talked-about trends in the Bitcoin ecosystem is that it’s harder to raise funding as an early-stage Bitcoin startup than it was a year ago.

Sure, we’re in a period of dramatic year-over-year growth in bitcoin investment, but on a quarterly basis funding is trending down, and there are other reasons why VCs are hesitant to enter the bitcoin space.

In 2012, the growth rate of this segment was still unclear, so it was quite easy to "sell the dream, not the data." Now that the data around wallet usage and merchant adoption rates among consumers everywhere is out, some investors are pretending not to see it. Based on this situation, our team began to look for seed round financing.

I have been meeting with Bitcoin entrepreneurs in San Francisco and New York. These entrepreneurs range from Bitcoin data service providers with a few customers to wallet companies with hundreds of thousands of consumers.

While these companies differ on fundraising advice, they also share many common insights. Here are five things I’ve learned so far:

1. Look for Bitcoin VCs first, never look for ordinary VCs

The most common advice I hear from industry entrepreneurs is: Never discuss a project with a VC who doesn’t understand Bitcoin.

This advice comes from founders of different businesses, both enterprise and consumer facing, because almost every founder I talked to had a story like this: they were asked to meet with partners of a well-known venture capital fund. Next thing you know, the VC realized that they were not the target of the investment, they were just pet guinea pigs to teach the investment team about Bitcoin.

This is obviously less than ideal, and a huge waste of time.

While these billions of dollars of funds opening up Bitcoin have the potential to invest only in your startup, don’t count on it. Focus. A list of Bitcoin venture capitalists is public on Crunchbase, Mattermark and other sources.

My favorite list aggregates all of these resources and is published here by CoinDesk.

While it’s possible that billions of dollars of investment funds will open their doors to Bitcoin and invest in your startup, don’t count on it. Be careful. Lists of Bitcoin venture capitalists are publicly available on Crunchbase, Mattermark, and other sources.

My favorite lists are compiled from all of these resources and published by CoinDesk.

2. It’s never been so easy, and it’s never been so difficult

The company founders I approached for advice were scattered across a range of fields, many of whom had been in the Bitcoin space for years, while others were new to the space.

While the experience of running a Bitcoin startup varies, that doesn’t mean the “golden age” is over.

I can’t tell you how many times I’ve heard “it was so much easier before X, and now you’re going to have a hard time.” X could be “Coinbase,” “Mt Gox,” or “Bitcoin hitting $1,000.” In every industry, there is a time when it’s easier to raise money, and a time when it’s harder.

Few people talk about how difficult it is to raise money during Bitcoin’s downturns, whether it was the low price or the hard fork in 2013. Don’t let that distract you.

Melanie, CEO of Case Wallet, advises:

“Keep it short and sweet — we have ‘We are the best Bitcoin hardware wallet’, find your own catchphrase.”

3. The East Coast likes to focus on private blockchains, while the West Coast likes to focus on consumers

I admit that this is a very broad generalization, and I apologize to others who don’t fit my assessment.

Through our first round of meetings with Bitcoin VCs, it has become clear that VC focus is split along geographic lines. California-based VCs are excited about the emergence of 21 Inc — a global exchange and consumer revolution with billions of wallets.

In contrast, East Coast VCs tend to focus on disintermediating Wall Street through private blockchains and other businesses using the Bitcoin blockchain as a distributed ledger.

Both sides are a bit extreme, and neither side is correct.

4. Release products early and bid continuously

There are several benefits to making your product public.

It’s become apparent during the fundraising process that investors are more likely to invest if the meeting starts with “I’ve seen you on Twitter, people love the product and I can actually see how the business could scale.”

The meeting usually starts with a 15-minute assessment of the market space and letting the VC know how you see the current world, where your product fits into the ecosystem, and how you plan to scale.

Saving time and talking about more intricate details is better for both the VC and you. The only way you can get to this point is by getting the product into people’s hands and being public about what you’re building.

Matt Schlicht, CEO of bitcoin social network Zapchain, said:

"Go out there and never stop bidding. Don't bid on the small stuff, bid on the biggest vision you want to build."

5. Find a mentor

For early-stage entrepreneurs who are looking to raise funds right now, take my advice, don’t go in blindly, and talk more with venture capitalists.

While I’m no expert at raising seed rounds, I was still excited to go back and forth on my pitch with some of the best founders in the Bitcoin space, get the right introductions, and ways to prepare for the meeting as best as possible.

Take the time to discover three to five Bitcoin company founders you admire, then send them a well-thought-out email that emphasizes how much you appreciate their contributions to the Bitcoin ecosystem and how much you love their product.

Build your network through these founders.

Practicing your pitch will be extremely valuable, and a presentation to an investor is worth 10 times more than the presentation itself.

Original article: http://www.coindesk.com/five-insights-bitcoin-founder-funding/
By Simon Burns
Translator: Orange
Reward address: 1FCiRAuQYUqMzyy7XHueLs5SCRzd11P6kj
Editor: printemps
Source (Translator): Babbitt Information