According to a report from Bloomberg, crypto startups have adopted new approaches by adopting traditional venture capital models for open-ended or “rolling” funding rounds.
Through this unique method, companies can raise capital continuously and inflate valuations quickly using a conveyor belt of fresh investor money.
The birth of these rolling rounds reflects two things: Crypto’s recovery from the bear market that happened in 2018, and VC funds’ desire to get rid of their cash reserves as soon as possible. Early investors enjoy immense benefits as valuations increase together with each late-stage backer’s new commitment.
Some argue that the so-called “fluid valuations” lack solid foundations while others think that traditional VC is not designed for the fast pace at which digital asset firms operate.
“Capital formation in crypto is always evolving,” said Matt Luongo who works at a venture studio called Thesis. He added that governance, liquidity, and other key concepts are often different compared to what happens with traditional startups.
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