Why Venture Capital (VC) Needs to Democratize
CoinEdition
Published Dec 13, 2021 06:42AM ET
Updated Dec 13, 2021 07:00AM ET
Why Venture Capital (VC) Needs to Democratize
What comes to mind when we think of venture capital? For most people, the term conjures up images of large companies getting millions in funding rounds from top VC firms and headlines of the millions being pumped into the next Uber (NYSE:UBER) or Facebook (NASDAQ:FB). Most of us, however, think of the VC world as an exclusive one that can only be participated in by the wealthy and elite.
To a great extent, this is true as the average person would need at least a few million dollars to get started as a venture capitalist and this, of course, excludes most of the population. This is the way the VC sector has worked for decades but should this be changed?
Why Venture Capital Has to Change
In the past, virtually the only way that a company could raise funds at its inception stage was through personal funding, angel investors, or venture capital. The world is different now, thanks to the internet and the many ways in which people can connect over it. Sites like Kickstarter have already shown that everyday people can chip in to support budding ideas and get innovative products and services off the ground and this shows no signs of stopping. The 2010s also saw the rise of blockchain and cryptocurrency which have gone on to disrupt the financial sector.
In the case of cryptocurrency, it empowered everyday people to invest in ways that they otherwise could not, buying up cryptocurrencies with pennies and often making a profit during bull runs. Blockchain, the technology that cryptocurrency is based on, has been used to democratize many investment vehicles. Through tokenization (the sale of a single asset as smaller, digital representations), people are now able to invest in real estate, art, and so on at a fraction of the traditional cost. The effect of all of this is that institutions and investment vehicles that had been previously seen as untouchable or out of the reach of the common man are being demystified. Take the Gamestop saga of early 2021 in which Reddit users banded together to drive up the price of a stock in order to get back at hedge funds.
Venture capital will also go through the same evolution as more offerings pop up to democratize it. Take companies like RevenueCoin that are leveraging blockchain technology to allow users to invest in venture capital with more ease and greater accessibility.
Unlike traditional VC firms, RevenueCoin does not require millions of dollars for direct investment in promising companies. Instead, RevenueCoin users buy as much of its native $RVC token as they want, and the funds raised from the sale of the token are given to the chosen companies.
After the companies used the raised funds to expand their operations, they then commit up to 10% of their profits to buying back and then burning $RVC tokens. This act of buying and burning then artificially reduces the supply of the token in the market, thus driving up its value and generating a profit for initial investors.
Get The News You Want
This method is beneficial to the investors because they are able to buy as much or as little $RVC as they want and as they can afford it. They also have a say in which specific companies are invested in as a result of RevenueCoin’s voting system. Finally, they can retrieve their initial investment and profit whenever they want by selling their tokens on crypto exchanges. For companies that do not want to deal with traditional VC firms’ stringent restrictions, this provides an alternative to funding.
With options like RevenueCoin on the market, the old exclusive way of VC will need to change. Every day people are now exploring their options at democratized investing and as this becomes more popular, startups will also realize that they have more options as well. Over time, the monopoly that large VC firms had on the sector will reduce significantly and the landscape will be a much more accessible one.
Continue reading on CoinQuora
Written By: CoinEdition
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.