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<p>Blockchain startups should <a href="https://www.thecrowdfundinglawyers.com/is-equity-crowdfunding-right-for-your-company/">equity
crowdfund</a> their projects. Today most don’t. Instead, they rely on Silicon Valley
venture capital dinosaurs. VCs create massive exits for themselves whilst hindering
flexibility and draining vitality from dynamic companies. It is the old way,
and it should end. </p>
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<p>Over <a href="https://www.crowdfundinsider.com/2019/09/151257-stripe-announces-new-lending-services-for-internet-companies/">70%</a>
of startups have capital needs. And raises always involve tradeoffs. But for
those boldly creating Web 3.0, using a 1987 funding model defies logic. Since
the JOBS Act of 2012, blockchain startups can now <a href="https://www.thecrowdfundinglawyers.com/is-equity-crowdfunding-right-for-your-company/">equity
crowdfund</a> via <a href="https://www.thecrowdfundinglawyers.com/reg-a/">Reg
A+</a> and <a href="https://www.thecrowdfundinglawyers.com/reg-cf/">Reg CF</a>.
Visionaries can bypass VC middlemen and merge their funders and users into one
crowd. </p>
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<div class="wp-block-image"><figure class="aligncenter is-resized"><img src="https://www.thecrowdfundinglawyers.com/wp-content/uploads/2019/06/Jen-An2.gif" alt="" class="wp-image-981" width="540" height="232"/></figure></div>
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<h2 style="text-align: center;"><strong>Venture Capitalists are running away from blockchain startups </strong></h2>
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<p>Anything new and exciting brings scammers. The 2017 <a href="https://www.thecrowdfundinglawyers.com/sec-unleashes-hurricane-ico/">ICO
craze</a> flooded <a href="https://www.thecrowdfundinglawyers.com/five-ico-donts/">swindlers</a> and
unprepared honest brokers with gobs of cash but little corporate or government oversight.
VCs were not immune. Fraudsters hosed them with other FOMO investors. Now they have
retreated, creating a supposed cash crunch. As one analyst <a href="https://www.crowdfundinsider.com/2019/09/151229-report-private-crypto-and-blockchain-investing-slumped-in-2019/">noted</a>,
“VCs still like blockchain they just like it less.” &nbsp;&nbsp;</p>
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<p>The numbers agree. Crunchbase <a href="https://news.crunchbase.com/news/blockchain-and-crypto-deals-are-down-sharply-in-2019/">reports</a>
VCs have given $3.38 billion to blockchain ventures this year representing a major
drop from 2018’s $12.86 billion. </p>
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<!-- wp:image {"id":3741,"align":"center","width":588,"height":376} -->
<div class="wp-block-image"><figure class="aligncenter is-resized"><img src="https://www.thecrowdfundinglawyers.com/wp-content/uploads/2019/09/VC-Graph-1-1024x656.png" alt="" class="wp-image-3741" width="588" height="376"/><figcaption><strong>Source: </strong><a href="https://news.crunchbase.com/news/blockchain-and-crypto-deals-are-down-sharply-in-2019/"><strong>Crunchbase</strong></a></figcaption></figure></div>
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<p>This remains so even when removing tainted ICOs. </p>
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<!-- wp:image {"id":3742,"align":"center","width":585,"height":376} -->
<div class="wp-block-image"><figure class="aligncenter is-resized"><img src="https://www.thecrowdfundinglawyers.com/wp-content/uploads/2019/09/VC-Graph-2-1024x657.png" alt="" class="wp-image-3742" width="585" height="376"/><figcaption><strong>Source: </strong><a href="https://news.crunchbase.com/news/blockchain-and-crypto-deals-are-down-sharply-in-2019/"><strong>Crunchbase</strong></a></figcaption></figure></div>
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<p>According to <a href="https://bitcoinexchangeguide.com/2018s-sharp-rise-in-blockchain-venture-capital-declines-60-in-2019-bitcoin-is-the-smarter-bet/">Bloomberg</a>,
this year blockchain startups will see 60% less cash. Famed VC firm Andreesen
Horowitz typifies this trend. It has <a href="https://www.crowdfundinsider.com/2019/09/151229-report-private-crypto-and-blockchain-investing-slumped-in-2019/">dropped
funding</a> from $850 million last year to $75 million. </p>
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<p>But despite the dip, VC’s <em>love</em> blockchain. Since 2014,
they have <a href="https://bitcoinexchangeguide.com/2018s-sharp-rise-in-blockchain-venture-capital-declines-60-in-2019-bitcoin-is-the-smarter-bet/">favored
these startups</a> over everything else. According to <a href="https://www.forbes.com/sites/yoavvilner/2018/11/23/evolution-of-venture-capital-structure-in-the-age-of-blockchain/#249c212929a1">Crunchbase</a>
July 2018, “set a record for the number of nine-figure rounds raise worldwide…
</p>
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<!-- wp:paragraph -->
<p> $15 billion in venture capital deal flow, July was a good time to raise
$100 million or more.” &nbsp;Just ten years
ago <a href="https://news.crunchbase.com/news/an-outsized-series-a-a-call-for-change-and-whales/">Series
A yielded</a> a few million dollars, today that’s a seed round. 

</p>
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<h2 style="text-align: center;"><strong>Blockchain startups can break replace venture capitalists with equity crowdfunding </strong></h2>
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<p>No doubt, many blockchain startups see the dip as worrisome.
After all, some conflate success raising cash with market success. But blockchain
startups should view it as an opportunity. Grabbing big quick money may garner
press and speaker invites but has real drawbacks. </p>
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<p>According to one <a href="https://www.riversaascapital.com/the-venture-capital-success-rate-for-startups/">Harvard
professor</a> VCs lose 75% of their bets with over a third completely busting. And
VCs force out founders of startups that win. They also get <a href="https://www.thecrowdfundinglawyers.com/venture-capital-versus-equity-crowdfunding/">management
power</a> and exert pressure for quick returns. </p>
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<div class="wp-block-image"><figure class="aligncenter is-resized"><img src="https://www.thecrowdfundinglawyers.com/wp-content/uploads/2019/07/Michael-Scott-GIF-No.gif" alt="" class="wp-image-3463" width="484" height="395"/></figure></div>
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<h2 style="text-align: center;"><strong>Blockchain represents the future web, venture capitalists funded the old one </strong></h2>
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<p>Beyond control and pressure are doctrinal concerns. Instead
of the <a href="https://www.thecrowdfundinglawyers.com/kik-lawsuit-must-decide-decentralization-question/">decentralized</a>,
individualized future <a href="https://www.thecrowdfundinglawyers.com/its-happening-the-blockstack-reg-a-token-sale-and-a-new-internet/">blockchain
represents</a>, a small group of elite investors get richer. Familiar names
like Union Square Ventures and Sequoia Capital buy more yachts whilst the public
often pays with intrusive access to their lives and data. Interestingly those funding
blockchain startups seem oblivious to their role in this cycle, as per a recent
Andreessen Horowitz <a href="https://a16z.com/crypto/#vertical-landing-investment-thesis">post</a>: </p>
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<!-- wp:quote -->
<blockquote class="wp-block-quote"><p>In an era in which the internet is increasingly <a rel="noreferrer noopener" href="https://medium.com/@cdixon/crypto-tokens-a-breakthrough-in-open-network-design-e600975be2ef" target="_blank">controlled</a> by a handful of large tech incumbents, it’s more important than ever to create the right economic conditions for developers, creators, and entrepreneurs. Trust also enables new kinds of governance where communities collectively make important decisions about how networks evolve, what behaviors are permitted, and how economic benefits are distributed.</p></blockquote>
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<p>Of course, through its model AH thwarts the “right economic
conditions for developers, creators, and entrepreneurs . . . and a fairer way
for how “economic benefits are distributed.”</p>
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<p>Blockchain promises to fix Web 2.0 maladies, particularly control
of personal data and embedded, censorious middlemen. <a href="https://www.thecrowdfundinglawyers.com/its-happening-the-blockstack-reg-a-token-sale-and-a-new-internet/">The
next web</a> will fell gatekeepers, protect user data, and aid peer-to-peer business
models. </p>
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<p>This what George Gilder in ‘<a href="https://www.thecrowdfundinglawyers.com/what-will-life-be-like-after-google/">Life
after Google</a>’ called the “great unbundling.” Yet if VCs control the purse
how <a href="https://www.thecrowdfundinglawyers.com/kik-lawsuit-must-decide-decentralization-question/">decentralized</a>
can the new web be? Just as blockchain can reorient the individual’s
relationship with the web, so should blockchain startups discard old funding
models for the crowd. </p>
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<div class="wp-block-image"><figure class="aligncenter is-resized"><img src="https://www.thecrowdfundinglawyers.com/wp-content/uploads/2019/05/dwight-2.gif" alt="" class="wp-image-398" width="542" height="305"/></figure></div>
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<h2 style="text-align: center;"><strong>Equity crowdfunding is more democratic and inclusive but harder </strong></h2>
<!-- /wp:tadv/classic-paragraph -->

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<p>Equity crowdfunding allows blockchain startups to bypass VCs.
It merges users and investors. Capital raising becomes democratic, inclusive,
and mission oriented. </p>
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<p>This path is harder. It means additional risk and effort. But
those with the courage and moxie to create a new internet should welcome the
challenge. <a href="https://www.thecrowdfundinglawyers.com/is-equity-crowdfunding-right-for-your-company/">Equity
crowdfunding</a> via <a href="https://www.thecrowdfundinglawyers.com/reg-a/">Reg
A+</a> and Reg CF get results and allow someone beside <a href="https://twitter.com/fredwilson">Fred Wilson</a> to profit. </p>
<!-- /wp:paragraph -->

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<p>After years delay, the SEC finally approved <a href="https://www.thecrowdfundinglawyers.com/its-happening-the-blockstack-reg-a-token-sale-and-a-new-internet/">Blockstack’s
Reg A+ token sale</a>. Now other blockchain startups can follow. <a href="https://www.thecrowdfundinglawyers.com/reg-a/">Reg A+</a> has a $50 million
limit, tokens can be instantly liquid, and the raise is open to all. For the
less ambitious, <a href="https://www.thecrowdfundinglawyers.com/reg-cf/">Reg CF</a>
has a $1.07 million limit and provides restricted securities. Yet it is viable.
<a href="https://www.thecrowdfundinglawyers.com/reg-cf/">Reg CF</a> portal
Republic recently secured the first token air drop. Like <a href="https://www.thecrowdfundinglawyers.com/reg-a/">Reg A+</a>, <a href="https://www.thecrowdfundinglawyers.com/reg-cf/">Reg CF</a> is open to all.</p>
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<p>Blockchain startups are rightly proud of creating a better
web. One that is better, safer, more individualized, and democratic. An internet
free of suffocating data silos and chokepoints. Thus, it makes no sense they
should approach funders who created the current mess. Blockchain’s promise
should include capitalization. It should be open to everyone. Blockchain startups
can make this happen.</p>
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<!-- wp:paragraph -->
<p>By <a href="https://twitter.com/thecrowdfundlaw">Jossey PLLC</a>
via <a href="http://www.thecrowdfundinglawyers.com">www.thecrowdfundinglawyers.com</a>
</p>
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