Investing into blockchain startups can be rather challenging for small investors. Nevertheless, working with funds can open new opportunities for them.
It is obvious that investing (regardless of which type of market we are talking about) can be a rather difficult task, especially for those who still haven’t gained enough experience and knowledge in this sphere. Without any doubts it is absolutely true about the blockchain market.
Nobody will deny that fear of scam, security issues as well as lack of understanding of the market can prevent small investors from making the right choice. But there is another problem for them – they just do not have an opportunity to communicate directly with startups. And it is a significant difference between small and larger investors.
To survive and operate, blockchain projects need to have huge amounts of capital. If you have a startup you need to pay to your team, allocate money for go-to-market strategies and legal fees associated with regulations. As a result, there is no surprise that a lot of startups count on funding from established funds.
Nevertheless, nowadays, there are such blockchain funds that can enhance the opportunities of small investors in ICOs. Being large investors, they have influence over their interaction and their transactions with various startups. They can establish such terms and requirements on special deals that an average small investor just won’t have a possibility to meet them. Moreover, they can get special discounts on their investments thanks to the volumes of capital that they promise to bring in.
A mixed contract is one of such schemes with special terms. According to Nick Evdokimov, one of the experts and pioneers in this sphere, such a scheme starts working when a fund wants to purchase equity in a blockchain startup.
As a rule, funds do not have a possibility to buy tokens directly. That’s why, this fund purchases shares in the startup and then it gets an amount of tokens that is equivalent to the price of purchased shares as insurance on its investment.
As you can see from such terms, the fund has a more privileged position if compared with other investors. Funds can get much more profit in the long-term and in the short-term thanks to their access to a startups’ equity and its tokens.
At the same time, if a small investor offered similar terms to a startup, such a proposal would be rejected. In such a situation, we can make a conclusion that small investors can have more opportunities if they invest through a fund than if they decide to invest directly in the same startup.
Another advantage of working with funds for small investors is that they get an opportunity to take part in ICOs without providing large capital volumes. It is also rather beneficial for funds that have a chance to create a good pool of investors.
Working with funds, investors get the discounts available for funds as well as both tokens and equity. But when they make their investments directly through the ICO, they obtain only utility tokens.
That’s why it is very important for small investors to know that such opportunities exist. Investing in startups through a fund can significantly reduce risks and bring more benefits.