2021 has broken any records for the money flown into the Cryptocurrency market. The crypto industry is getting mature and being developed blazingly fast. Therefore, a big wave of traditional investors has joined this new potential market. Venture capitals and institutional investors are looking for investment opportunities in cryptocurrency enterprises.
People often bring their investment strategies in other markets, such as stock, to the crypto market and use them. And following the VC’s investment is also one of those. Although this strategy seems to be a “lazy” one but quite effective. Clearly, a professional VC has reasons to bet a huge amount of money on a project. Why don’t we do that? That project has potential, isn’t it?
It could be right, but not that easy. Let CoinF Research give some examples of events showing that prominent VCs also have violations. These events include the drama story between Ribbon and VC Divergence, the collapse of Terra (LUNA), the scandal of a tier A capital - Three Arrows Capital, or a little bit further, in traditional investors, it’s the fall of Theranos.
If you are using the strategy of following the whale, here is your must-read article. CoinF Research would give you some advice and tell you about lessons to help you understand crystal clear fundraising and investing activities.
- Fundraising is not just about money. Although its name includes the word “fund”, this activity has more value then. When projects approach VCs, they have to take VC's advantages. For example, they can have their VCs as advisors, use the brand's value, promote their project, etc. You might think that a big VC won’t ever shill any projects. Nope, you get it wrong because they still do that, officially on their Twitter account. However, they do that in a delicate way, by tweets and posts about their evaluation, which is made by their pro-research team. Of course, they have already selected good projects to invest in. So, showing their opinion about those projects would be a normal thing.
- Choose the wrong tier VC to approach. There are lots of VCs in this crypto market, and they are classified by their reputation. So that, in the early stages, projects have to determine their position, where they are and to whom they should connect. You cannot invite bad, flipper-tier VCs to join your project’s fundraising just because you don’t get enough money from good VCs. It’s really ridiculous. Their flipper tier VCs would sell their investment under any condition, profit or loss. They only find us a money-making tool. “Take my money and build your product. When you're launching, I will take profit”. We must change our mind that the project's quality is not judged by VC's quantity.
- The presence of reputable VCs but just for brand name marketing. Some projects use the reputation of VCs as a marketing tool. They will put the name of that VCs on their website and backers list. Instead, those VCs will receive an amount of funds for that. Probably this will affect their reputation a lot. However, this seems a small trade to them. For us, retail investors, our fund is really important; it could be a saving in years. Protecting our funds must be our priority.
- Overview of the fundraising, and find out who leads this round. Let’s think a little bit. If a really big VC, who is managing hundreds of million assets, only has a chance to invest $100k in a project, how will they feel? With such a small amount of money, will they spend their time involved in the project's development process?
- Is that category the advantage of VCs? All reputable VCs have their own investment thesis, which is suitable for their support ability. So the next time you see a VC investing in a project, let's figure out whether the VC is taking their advantage or risking in a new field.
“Following the whale” is a popular investment strategy due to its efficiency and our bias. Through a list of CoinF Research’s suggestions, we hope you guys have a crystal clear view of this strategy. It is hard to get money but easy to lose. Investors, take time to widen your knowledge and be responsible for your investment, concludes CoinF Research.
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