Victor Ugochukwu · Oct 22, 2020 . 5min read
The romance between DeFi Projects and VC Investments has been going on for a while
At least 34 DeFi projects listed on DeFi Pulse have collectively raised over $500 million dollars, thus advocating the romance between VC's & projects.
By Victor Ugochukwu · Sep 8, 2020 . 7min read
There’s hardly any talk about cryptocurrencies these days without referencing the recent exponential DeFi growth which sparked off this year’s bull run. Notwithstanding the current hyper-growth of DeFi sector, little attention has been paid to the romance between DeFi projects and VC investments that have taken root since 2018.
At least 34 DeFi projects listed on DeFi Pulse have collectively raised over $500 million dollars. Notably among them are Maker which has raised $61.5M, Compound protocol raising $33.2M and Uniswap’s $11M Series A raise.
From 2017 when ICOs were the rave of the moment, some blockchain projects which we now comfortably regard to as DeFi protocols raised considerable fundings through token sales. Heavyweights like Bancor, Kyber, Loopring and Aave cashed in on the ICO hype. They raised adequate funding which anyone can arguably say has kept them pushing till date. For context, Bancor raised a whopping $153M in token sales in 2017. This was the 9th biggest ICO then considering EOS’s $4B and Telegram’s $1.7B. Kyber Network went on to raise $52M, Loopring $45M and Aave then ETHLend raised $16.2M.
Since then, we have seen VC investment flow into different DeFi projects. The trend observable now is private sales of equity and/or tokens to VC funds. And in this trend, some VC names have quickly established themselves as the go-to VC funds for crypto investment. Polychain Capital, A16z, Paradigm Capital, 1Confirmation, Bain Capital Ventures, Coinbase Ventures, and KR1 are among the most active funds.
And within the DeFi space, Lending protocols like Compound, Aave, Maker etc. attract most of the VC investments. Data from The Defiant shows Lending leading the other subsectors like DEX, Derivatives, etc., with about $120M in VC investments.
Newer DeFi protocols launch out mocking established projects that have raised VC investments.
Many DeFi protocols like YAM Finance, Sushiswap and a few others that have launched keep mocking those who raised some form of VC investments. They claim it is against the ethos of decentralization and these VCs are just in to make the gains.
However, a16z, which was part of those who led the investment rounds, is barely exercising its voting rights in Compound Protocol. This is particularly interesting even though it has 3.45% voting weight by virtue of COMP token it holds.
Even Sushiswap’s Nomi Chef couldn’t resist the temptations to cash out after SUSHI token rose to over $10. This is after the Chef bashed Hayden Adams of Uniswap accusing him of receiving investment funds from VCs and paying himself with it.
Whatever is the case, VC’s are betting big within the DeFi space in the latest trend. Who knows, perhaps many Unicorns may be rising from this space to dominate global finance.
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Komal Joshi · Oct 22, 2020 . 5min read