Crypto startups see rapid growth through ‘fluid valuations’ and decentralized cap tables — Bloomberg

Two formula one race cars speeding down track leaving fire trails representing the risky turbocharged growth of crypto startup valuations through aggressive fundraising approaches

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Cryptocurrency startups are increasingly adopting an aggressive form of fundraising known as open-ended or rolling funding rounds.

This approach allows startups to continuously raise capital and rapidly boost their valuations, in contrast to the traditional venture capital model of discrete funding rounds spaced over several years.


According to a report from Bloomberg, the rise of open-ended funding rounds in the crypto industry reflects both the sector’s recovery from the 2022 bear market and venture funds’ desire to deploy previously static cash.

With this fundraising model, earlier investors benefit from the rapid increase in a startup’s valuation driven by commitments from later backers.

While some investors and industry experts view these “fluid valuations” as perplexing and potentially lacking in fundamental drivers, the report claims that the traditional approach to venture capital formation may not be suited to digital-asset companies.

“Capital formation in crypto is always evolving — governance, liquidity, and other important concepts that we’ve figured out in traditional startups are often a little different,” said Matt Luongo, chief executive at Thesis.

Thesis is a venture studio, which helped develop and launch Mezo, a Bitcoin L2 protocol designed as an economic layer.

Ed Roman, managing partner at Hack VC, noted that crypto startups generally prefer “decentralized cap tables” to help with governance, making the traditional priced rounds with a single, large, lead investor less suitable.

Michael Heinrich, co-founder of 0G Labs, a blockchain startup focused on decentralized and modular artificial intelligence, noted that this type of structure is becoming more common when a deal is highly oversubscribed.

“Investors are still willing to pay higher prices because it is seen as a signal of market success, even if in rapid succession,” Heinrich said.

0G Labs itself raised $35 million in March through a rolling fundraise, with offers exceeding its planned raise by 20 times. The company’s valuation ranged from less than $40 million to hundreds of millions of dollars, depending on the investor.

According to data from The Block Research as cited by Bloomberg, the average Series A round in crypto reached $26 million in the first quarter of 2024, the highest since early 2022. Overall venture investment in the sector increased to $2.5 billion during the same quarter.

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