As the crypto market continues to plummet, founders in the space are struggling to hold on to investors who are now trying to minimize their risk and backing out of funding rounds.
This week, the global crypto market capitalization fell below $1 trillion for the first time since January 2021. As many companies prepare for a potential recession, founders building crypto startups are still trying to raise money amid the market chaos.
Earlier this month, a number of investors told TechCrunch that there was a valuation reset going on, and now is “the time to buy” as the market shifts to a VC-friendly landscape. But not every founder is happy with the way they are being treated now that investors are back in the driver’s seat.
“Won’t call out names, but there are a number of VC firms playing games with founders when it comes to fundraising,” Imran Khan, a core contributor for the DAO and web3 accelerator Alliance, tweeted. “Turns out investors are ghosting and or forcing founders to give up more. When founders invite investors, it should be considered a privilege, not a sales deal.”
Two web3 startup founders who spoke to TechCrunch under the condition of anonymity said VC firms not staying true to their words has cost them time, money and more.
“Unless your [crypto] project is getting good traction, no one is getting a valuation over $30 million right now.” Founder of a web3 gaming platform
“We started raising about two and a half months ago, when markets were rosy and everything was going well,” the founder of an NFT-focused startup said. “We got commitments, and then the market obviously crashed hard after the [Terra/LUNA] situation.”
The founder said one traditional VC investor bought him a swanky beachfront lunch during the Bitcoin Miami conference in April to persuade him to let him into the company’s funding round. “After lunch, he committed to a $250,000 investment, and then when he found out the other investors [in the round], he upped to $500,000. He subsequently changed his mind after the UST Terra crash.”
“That’s when I started thinking, what does commitment even mean to them? If you’re committed, you understand you’re in the hard times and the good times,” the founder said.