TLDR:
- Crypto startup valuations are facing tough market conditions
- VC expert warns that misjudging valuations can lead to wasted time and unfavorable fundraising outcomes
In a recent thread, managing partner at hash3xyz, Hootie Rashidifard, highlighted the challenges faced by crypto startups in today’s market. Declining valuations and investor caution have led to a tough fundraising environment, driven by fund exhaustion, poor public performance, and a perceived lack of innovation. Rashidifard warns that setting valuation expectations too high can result in wasted time, resources, and less favorable partnerships for founders.
Founders who overestimate their startup’s valuation may find themselves in a position where they are forced to lower their expectations, resulting in suboptimal terms and partnerships. Venture capitalists are likely to pass on deals with revised, lower valuations, signaling to investors that others have already passed on the opportunity.
Rashidifard advocates for a more flexible approach, suggesting that founders should either set the valuation lower than desired or let the market set it. Waiting for a more favorable fundraising environment may not be productive, as market conditions may not improve for months or years.
Meanwhile, VC-backed tokens have faced significant price declines in recent months, sparking a debate within the industry about the underlying causes. An analyst at SwissBorg revealed that 80% of tokens listed on Binance since early 2024 lost value, many of which were backed by major venture capital firms. Dragonfly Capital’s Haseeb Qureshi argues that these price drops are more about broader market dynamics than VC manipulation, as most VCs are locked into their investments with long vesting periods.
Overall, it’s essential for crypto startups to carefully consider their valuations in the current market conditions and be prepared to adjust expectations to ensure successful fundraising outcomes.
