As an analyst with over two decades of experience in the venture capital industry, I wholeheartedly agree with Hootie Rashidifard’s insights on the current crypto market landscape. Having witnessed numerous cycles of boom and bust, I can attest to the importance of setting realistic valuations for startups.
Today, incorrectly assessing the value of cryptocurrency startups might result in squandered effort and suboptimal fundraising results, according to a managing partner at hash3xyz. Translation: It’s essential to accurately evaluate the worth of crypto startups because making mistakes could lead to wasted time and unfavorable fundraising outcomes, as stated by the managing partner at hash3xyz.
The mood among crypto investment firms has dipped to its lowest in the last few months of 2022. This is due to reduced evaluations, as investors tread carefully because of depleted funds, disappointing public results, and a perceived shortage of fresh ideas.
In a recent discussion on X, Hootie Rashidifard, the managing partner at hash3xyz, underlined the risk of determining a startup’s value before approaching investors. He cautioned that in today’s market, overestimating the valuation could lead to wasting considerable time and resources by setting unrealistic expectations.
If you overestimate the value of your venture, you might spend an excessive amount of time discovering that the actual market price is less than your estimation, exhaust a considerable number of investor presentations along the way, and ultimately settle for a lower valuation and potentially less favorable partnerships.
— Hootie Rashidifard (@Hootie_R) September 5, 2024
Entrepreneurs who set too high a value for their startups might find themselves needing to adjust their goals, which could lead to unfavorable conditions and less advantageous deals, as Rashidifard points out.
As a researcher, I’ve observed that numerous venture capitalists might choose to forgo a potential deal when presented with a revised, reduced valuation. The reason behind this is often because a lower valuation can imply that “the opportunity has been thoroughly scrutinized and rejected by others for some reason.”
As a crypto investor, I understand that revisiting potential partners with a reduced valuation might not yield favorable results. Here’s why:
— Hootie Rashidifard (@Hootie_R) September 5, 2024
Rather than pushing for a specific high valuation, Rashidifard recommends adopting a more adaptable strategy. He proposes that founders could either establish a lower valuation than desired or allow the market to determine it instead.
[…] once the process gains traction, the cost might continue to rise. Interestingly, those who are fully invested tend to be more comfortable with paying a higher price as they perceive themselves as having ‘triumphed’ in the negotiation.
Hootie Rashidifard, managing partner at hash3xyz
Additionally, Rashidifard pointed out a common practice among founders who choose to hold off on fundraising until market conditions become more advantageous. However, he cautioned that this approach might backfire, since the desired circumstances could take months or possibly years to materialize.
VCs face scrutiny over crypto prices
Currently, it appears that digital tokens supported by venture capital are facing challenges in the long term. Over recent months, we’ve seen substantial drops in their prices, leading to discussions within the industry concerning the root causes behind this trend.
Back in May, a researcher from SwissBorg, going by the name @tradetheflow_, disclosed on their X post that approximately 80% of cryptocurrency tokens listed on Binance since early 2024 have decreased in value since their initial listing. The analyst pointed out that many of these depreciating tokens were supported by significant venture capital firms like Coinbase Ventures, Pantera Capital, Paradigm, and Dragonfly.
As a crypto investor, I’ve been keeping an eye on the recent token price drops, and Haseeb Qureshi from Dragonfly Capital has offered some insightful thoughts on this matter. Instead of blaming venture capitalists for dumping tokens, he suggests that these price fluctuations are largely driven by broader market dynamics. According to him, these digital assets maintained their stability until a widespread market downturn in April, which was primarily influenced by geopolitical tensions. Furthermore, Qureshi debunked theories of venture capital manipulation, pointing out that most VCs have extended vesting periods and are still committed to their investments.
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2024-09-06 14:04