Decoding Fundraising for Crypto Startups: The Ultimate Guide

Crypto fundraising is a transformative method for blockchain and crypto projects to raise funding and scale their ideas. Unlike traditional fundraising, crypto startups have several ways to raise capital, including ICOs, IEOs, IDOs, private sales, and more.

Crypto fundraising refers to the various methods startups in the blockchain and crypto industry raise capital for their projects or initiatives. Crypto fundraising methods transcend the world of traditional fundraising by introducing several decentralized and transparent mechanisms for collecting investments in their ideas.

In crypto fundraising, projects create and issue their own tokens or cryptocurrencies representing a stake or utility within the project. These tokens are offered to investors or supporters in exchange for their cryptocurrency contributions. Powered by blockchain technology, all such transactions or contributions are immutable.

Crypto fundraising allows for participation from a global pool of investors, breaking down geographical barriers. on the blockchain, ensuring transparency and accountability. It has opened up new opportunities for startups and entrepreneurs to access capital quickly and efficiently, often bypassing traditional financial intermediaries.

In the crypto industry, projects and startups can raise funds to develop their ideas and launch their services in several ways. Here are some of the most popular means for blockchain and crypto startups to raise funds:

2013 Onwards: Venture Capital (VC) Funding

Venture Capital (VC) funding is a crucial avenue for crypto startups to secure financing for their projects. In VC funding, startups seek investments from established venture capital firms specializing in crypto and blockchain. One of the earliest fundraising modes, VCs remain the evergreen choice for raising capital for startups in the crypto and blockchain industries to date.

Venture capital funding for crypto or blockchain startups began around 2013. This was the period when Bitcoin started gaining recognition, and the potential of blockchain technology began to be realized.

One of the earliest instances of VC funding in the crypto space was when Andreessen Horowitz, a well-known VC firm, invested $25 million in Coinbase, a digital currency exchange, in December 2013. This marked one of the largest single investments into a Bitcoin-focused startup at the time. Other notable examples include Chainlink, with approximately $32 million, and Solana, raising about $21.8 million.

These VCs provide funding in exchange for equity or tokens, enabling startups to fuel their development and growth. Despite occasional fluctuations in crypto funding, VC investments continue to play a pivotal role in supporting innovative projects within the blockchain industry, fostering innovation and adoption.

2013 Onwards: Crowdfunding

Crowdfunding in the blockchain space involves raising capital from a distributed network of individuals who contribute funds to a project or venture, often in exchange for tokens or other rewards.

Crowdfunding for crypto startups began around 2013-2014 with the rise of blockchain technology and cryptocurrencies. The concept was popularized by the launch of Ethereum in 2014, which itself was crowdfunded through a public sale of ether, Ethereum's native cryptocurrency. The most common form of crypto crowdfunding is the ICO, which became particularly popular in 2017 and 2018.

Notable examples of successful crowdfunded crypto projects include Tezos, which raised over $230 million for its blockchain platform, and The DAO, which raised approximately $150 million but faced controversy and a contentious hard fork.

Top crypto crowdfunding platforms that facilitate these fundraising campaigns include Gitcoin, Meridio, Koinify, QuantmRE, and Brickblock, offering various models such as reward-based, donation-based, and ICOs. Crowdfunding has emerged as a democratized means of financing blockchain initiatives, allowing diverse participants to support projects and contribute to the growth of the crypto ecosystem.

2014-18: Initial Coin Offering (ICO)

An Initial Coin Offering (ICO) is a capital fundraising method where new cryptocurrencies or tokens are issued to investors in exchange for established cryptocurrencies like Bitcoin or Ethereum.

ICOs gained immense popularity during the crypto boom in 2017-18. In 2017, ICOs raised around $5.6 billion, which was a massive increase from the $240 million raised in 2016. The trend continued into 2018, with ICOs raising approximately $7.8 billion.

Some notable examples include Ethereum's ICO, which raised approximately $16 million in 2014, and EOS's ICO, which secured over $4 billion in 2018, making it one of the largest ICOs to date.

ICOs allowed crypto projects to tap into a global investor base but faced regulatory challenges due to their unregulated nature. The average ICO had around 4,700 contributors, showcasing the decentralized and accessible nature of this fundraising method.

The Pitfalls: Initial Coin Offerings (ICOs) popularity has significantly declined due to increasing regulatory scrutiny and a high incidence of scams. Investors are now more cautious, and blockchain projects are exploring alternative fundraising methods, leading to a drop in ICOs.

2018 Onwards: Security Token Offering (STO)

A Security Token Offering (STO) is a capital fundraising method that involves the issuance of security tokens representing ownership in an underlying asset, such as real estate or company equity. STOs are known for their compliance with financial regulations, making them a secure option for investors. STOs started gaining traction around 2018 in response to the regulatory issues surrounding ICOs.

Notable examples of successful STOs include tZERO, which raised over $134 million to create a regulated security token exchange, and Blockchain Capital's BCAP, which secured $10 million in funding for blockchain-focused investments. Prominent STO platforms and launchpads include Polymath and Securitize, providing comprehensive solutions for tokenizing assets and conducting STOs.

STOs have gained traction due to their regulatory adherence, offering investors a legally sound path to participate in blockchain-based investments and addressing fraud and investor protection concerns.

The Pitfalls: The decline in Security Token Offerings (STOs) can be attributed to their complex regulatory compliance requirements and limited adoption compared to other fundraising methods like ICOs. The challenges related to market maturity and infrastructure for STOs have also contributed to their decreased popularity.

2019 Onwards: Initial Exchange Offering (IEO)

An Initial Exchange Offering (IEO) is a crypto fundraising method where blockchain-based startups raise capital through crypto exchanges. Unlike Initial Coin Offerings (ICOs), IEOs are administered by cryptocurrency exchanges, providing a more secure alternative as fundraising is backed by the crypto exchange's reputation and stringent screening process.

IEOs began to gain popularity in 2019 as a new fundraising trend in the cryptocurrency industry. They emerged as an evolution of ICOs, which had been the dominant method of raising funds for crypto projects since 2017, as ICOs began to face regulatory scrutiny and a tarnished reputation due to numerous scams and failed projects.

Some prominent examples of successful IEOs include the BitTorrent IEO hosted on Binance Launchpad, which raised $7.2 million in just 15 minutes, and Fetch.AI's IEO on Binance, raising $6 million in 22 seconds. Other popular IEO platforms include KuCoin Spotlight, Bittrex, and Huobi.

Find the best IEO launchpads for token sales.

According to ICObench statistics, in 2019, 94.44% of blockchain projects opted for IEOs, highlighting their growing significance in the crypto fundraising landscape. IEOs offer investors the convenience of participating in token sales directly through trusted exchange platforms, offering people deep liquidity and more trading options after their launch.

The Pros: The rise in popularity of Initial Exchange Offerings (IEOs) can be attributed to the increased trust and security they offer, as they are conducted on established cryptocurrency exchange platforms. Additionally, IEOs provide immediate liquidity and access to an existing user base, making them an attractive fundraising method for blockchain projects.

2020 Onwards: Initial DEX Offering (IDO)

An Initial DEX Offering (IDO) is a crypto fundraising method where crypto projects raise capital through decentralized exchanges (DEXs). Unlike traditional ICOs and IEOs, IDOs provide a more decentralized and accessible approach to fundraising without completing their KYC formalities.

IDOs began to gain traction in 2020 as a new method of raising funds in the cryptocurrency space. They emerged as an evolution of ICOs and IEOs, both of which faced various challenges.

The first significant IDO was conducted by the project called Raven Protocol on Binance DEX in June 2019. However, the concept of IDOs truly took off in 2020 with the rise of DeFi and DEXs like Uniswap.

Some noteworthy IDOs include the Polkastarter IDO of the project Reef Finance, which raised approximately $20 million, and the Trust Wallet IDO, which secured around $5 million. Top IDO platforms, such as Polkastarter and BNB Chain-based launchpads, offer projects the opportunity to launch their tokens in a decentralized manner, often with community participation.

The Pros: The surge in popularity of Initial DEX Offerings (IDOs) is largely due to their decentralized nature, allowing anyone with a wallet to participate, and their lower fees compared to centralized exchanges. Furthermore, the inclusive and permissionless nature of DeFi platforms on which IDOs are typically launched appeals to a broad range of investors and give access to early-stage token sales.

2021 Onwards: Initial Game Offering (IGO)

With the rise of GameFi and SocialFi in the crypto community, an Initial Game Offering (IGO) has emerged as a unique crypto fundraising method explicitly tailored for gaming projects to raise capital. It enables these projects to raise capital by offering tokens to investors and players.

IGOs started gaining traction in 2021, primarily driven by the rise of blockchain-based games and the growing popularity of the play-to-earn model.

IGOs started prominence within the GameFi ecosystem in 2021, allowing gaming platforms to secure funds for development and expansion. Notable IGO examples include the DeRace IGO, which raised approximately $7.5 million, and the Axie Infinity Shard (AXS) IGO, generating over $7 million in proceeds.

While IGOs are still evolving, popular platforms for launching them include Binance and other blockchain-focused launchpads. The success of IGOs lies in their ability to engage both gamers and crypto enthusiasts, combining the gaming world with blockchain investment opportunities. This approach has contributed to the rapid growth of the GameFi sector and the increasing utilization of IGOs as a means of crypto fundraising.

The Pros: The surge in Initial Game Offerings (IGOs) popularity is due to the increasing overlap of blockchain and gaming, where tokens improve in-game experiences and rewards. IGOs also promote community engagement and potential for community-led development, appealing to both gamers and developers.

Apart from the above methods, crypto and blockchain startups can also use the following methods to raise funds:

Private Sales: A private sale in crypto fundraising is a method where cryptocurrency tokens are sold to a select group of investors before a public offering. This strategy, often executed through private placements or direct negotiations, is used to secure initial funding for blockchain projects. It incentivizes early participation by offering tokens at a lower price. Successful examples include Telegram, raising $1.7 billion, and Filecoin, securing $257 million. Private sales are favored for raising substantial capital from institutional and accredited investors.
Airdrops: Airdrops in crypto fundraising are a promotional strategy of distributing free cryptocurrency tokens to specific wallet addresses. They are used to reward existing token holders, attract new users, or generate platform interest. The scale can range from a few to millions of tokens, primarily aiming to raise awareness and create a user base. Examples include Ripple's XRP, Stellar's Lumens (XLM), and Uniswap's UNI tokens. While not a direct fundraising method, airdrops can foster a vibrant community and increase token value, indirectly contributing to a project's success.
Grants: Grants in crypto fundraising are non-repayable financial support provided to crypto projects by organizations within the blockchain ecosystem, aiming to foster innovation and development. Successful examples include Polkadot, supported by the Web3 Foundation. The funding can vary, with some grants exceeding millions. Top grant programs include ConsenSys Grants for Ethereum projects and programs by CollectiveShift. Grants are crucial for driving innovation and advancing blockchain technology.

Method	Pros	Cons
Initial Coin Offering (ICO)	Global investor access, rapid fundraising, investor liquidity.	Regulatory challenges, scam risk, lack of investor protection.
Initial Exchange Offering (IEO)	Project vetting by exchanges, immediate token listing, access to user base.	Limited availability, potential centralization, regulatory compliance.



Initial DEX Offering (IDO)	Decentralized, lower fees, inclusive.	Scam risk, limited liquidity, lack of regulatory oversight.



Initial Game Offering (IGO)	Tailored for gamers, community engagement, and potential for community-driven development.	Limited appeal, oversaturation risk, industry fluctuation impact



Security Token Offering (STO)	Asset tokenization, enhanced liquidity, investor protection.	Complex regulatory compliance, limited adoption, and infrastructure challenges.



Private Sales	Targeted fundraising, negotiable terms, early capital.	Limited retail investor access, the potential for insider deals, and reduced liquidity.



Airdrops	Wide user base, interest generation, potential for viral marketing.	Token dumping risk, high distribution cost, targeting difficulty.



Crowdfunding	Diverse backers, early validation, and community support.	Crowded space, regulatory compliance, project failure risk.



Grants	Non-repayable funding, support from organizations, and encourages open-source projects.	Limited funding, stringent selection, dependency on providers.

Here's a list of some of the most popular fundraising platforms for crypto projects and how much of an impact they have had in driving the growth of the blockchain industry:

KuCoin Spotlight

As the top altcoin exchange, KuCoin Spotlight is a prominent go-to platform where you can find the next crypto gem. It falls under the category of IEO platforms. KuCoin Spotlight is known for its vast user base, strict screening process, stringent security measures, and high ROI, with users actively participating in token sales and supporting innovative blockchain initiatives. This broad user engagement has contributed to the success of the platform and the projects it hosts.

KuCoin Spotlight has supported 26 noteworthy blockchain projects as of September 2023. These projects have leveraged KuCoin Spotlight to raise funds and gain exposure within the crypto community. Among the all-time high (ATH) ROI of top projects supported on KuCoin Spotlight, VR has offered an ROI of 212x to participants. Other Spotlight projects that have registered a three-digit increase in ROI include LYXE, CWAR, and CHMB.

Learn more about KuCoin Spotlight.

Binance Launchpad

Binance Launchpad is a prominent centralized exchange fundraising platform specializing in Initial Exchange Offerings (IEOs). Binance Launchpad assists blockchain projects in raising capital and expanding their reach across the crypto ecosystem.

As of September 2023, Binance Launchpad has helped 75 projects raise more than $101 million in funding from over 4 million participants. The platform has been instrumental in connecting these users with promising blockchain projects, contributing to the growth of both the projects and the Binance ecosystem.

Some of the top projects supported by Binance Launchpad include Polygon (MATIC), MultiversX (EGLD), Axie Infinity (AXS), The Sandbox (SAND), and Injective (INJ), among others. These projects have benefited from Binance's vast user base and the platform's reputation in the crypto industry.

CoinList

CoinList is a prominent crypto fundraising platform that primarily operates in the category of ICO platforms. CoinList has facilitated fundraising for numerous notable blockchain projects, including:

Filecoin (FIL): CoinList hosted Filecoin's ICO, which raised over $200 million in 2017. Filecoin is a decentralized storage network.
Celo (CELO): Celo conducted its ICO on CoinList, raising $30 million in 2019. Celo aims to make financial tools accessible to anyone with a mobile phone.
Mina Protocol (MINA): CoinList supported Mina Protocol's token sale, which raised $18.75 million in 2021. Mina Protocol focuses on creating a lightweight, accessible blockchain.
Near Protocol (NEAR): NEAR Protocol raised approximately $21.6 million through CoinList in 2020. It's a platform for building decentralized applications.

The total funds raised on CoinList have surpassed $260 million across various projects. The platform has garnered a substantial user base, with numerous investors and participants actively engaging in ICOs and token sales.

DAO Maker

DAO Maker is a prominent crypto fundraising platform primarily operating as an IDO and IGO platform. Examples of top projects listed on DAO Maker include XCAD Network (XCAD), which has given an ATH ROI of over 90x, MyNeighborAlice (ALICE), LTO Network (LTO), Orion Protocol (ORION), and VAIOT (VAI).

Since its inception, DAO Maker has supported more than 120 startups, received $53 million in contributions, and distributed $550 million to supported projects. The platform is used by over 1 million users worldwide, including 307,000 KYC-verified users.

Polkastarter

Polkastarter is a prominent crypto fundraising platform that operates as a decentralized multi-chain fundraising platform. It primarily facilitates Initial DEX Offerings (IDOs), a decentralized way for projects to raise funds and distribute tokens.

Top projects supported by the Polkastarter DEX include Wilder World (WILD), SuperVerse (SUPER), Ethernity (ERN), Stratos (STOS), Push Protocol (PUSH), and Polkadex (PDEX).

Polkastarter has helped 111 crypto projects raise nearly $50 million in funding from over 35,000 participants. The combined market cap of all projects supported by Polkastarter till September 2023 stands at $417 million.

Polkastarter's IDO platform is recognized for its decentralized and multi-chain approach, enabling innovative blockchain projects to access funding and engage with a broad community of crypto enthusiasts.

Balancer

Balancer is a DeFi-powered crypto fundraising platform that provides users with a decentralized automated portfolio management and liquidity provision protocol. While Balancer primarily focuses on liquidity provision and automated portfolio management, it has been used for fundraising purposes in the DeFi space.

Balancer is designed more for decentralized asset management and liquidity provision than fundraising for individual projects. Users can create and manage liquidity pools on Balancer to earn fees and incentives.

As of September 2023, Balancer enjoys a TVL of just under $700 million and a market cap of over $136 million.

In the world of crypto fundraising, understanding the nuances of each method is crucial for both entrepreneurs and investors. The choice of fundraising method should align with the project's goals, regulatory compliance, and target audience.

With a multitude of options available, you need to do your own research before investing in any crypto project. This will help you get early-on potential returns on investment while contributing to the success of blockchain projects and the growth of the crypto ecosystem.