Hello world, and welcome to the fourth issue of Thursday Thoughts.
Each week, founders and investors will share their thoughts on fundraising trends and strategy.
DeFiDollar is a multichain DeFi Protocol Lab with products including Stablecoin Index - $DUSD, Interest bearing Bitcoin - ibBTC, and Opeth - Option powered Synthetics.
Last October, they raised a $1.2M Seed funding round, co-led by Divergence Ventures, Standard Crypto, and Accomplice.
Siddharth Jain is the Co-Founder of DefiDollar and takes care of Business Operations. Prior to this, he was heading Ecosystem Growth at Polygon.
DeFiDollar is based in India - did this make it harder to access top Western funds?
We raised our round when the pandemic was raging and the DeFi summer sun was shining brightly. The markets were flush with capital so we could afford to take our pick of the lot.
The pandemic leveled the playing field neutralizing the geographical disadvantage that Indian entrepreneurs are usually up against. We were lucky to work with some of the best folks early on - like Divergence Ventures, MCV and Parafi. This was a decisive factor - you need early believers who are well entrenched in the ecosystem that help you access smart pools of capital.
A warm intro from a founder operator or a top venture partner goes a long way to get further meetings or bridge the geographic divide. We got an immense interest in DefiDollar and ended up doing a Round led by Divergence, Standard Crypto, and Accomplice.
Some are not as lucky as us as there is still a geographic divide, although there are funds and angels alike who are working to close this gap in tandem.
It has since become easier to raise from western funds given the increased incoming interest. This is possible today due to the quality of products being shipped and the sheer talent that is building from India.
What tips would you give to Indian founders willing to get on top investors' radar?
It helps to get the word out and by writing about your idea and eliciting feedback.
This is by far the most important bit to get traction from investors and generate incoming interest. Some founders are hesitant to share their idea/roadmap but there are high integrity people in the ecosystem who could provide the right guidance for the project to take the leap.
The platform can be Twitter, Medium, or Discord - as long as you can get the word out to the target audience.
It’s a plus to have a functional MVP that can help people engage and understand the concept/product better. Reduces the friction to help investors understand the flow and utility of the product.
DefiDollar was conceived during EthGlobal - hack money. We had an MVP in place and had the opportunity to brainstorm with the best minds in the space at Ideo Co-labs Product Validation day. This gave us a lot of clarity on the kind of partners we wanted backing us.
Also, pitch to angels and operators first to hone your pitch instead of launching straight into the big leagues. We found some of the most interesting questions and curveballs come to us from these folks which helped us prepare better.
We've read a lot about how quickly the Indian investor ecosystem is growing - does that line up with your experience?
Let’s evaluate this via the lens of both Matic and DefiDollar to draw comparisons.
We were raising for Matic back in the second half of 2018 and it was a totally different landscape in India back then. There were few funds actively looking to invest in Indian Startups.
We had a tough time raising from the venture route and finally had to ditch it altogether and ended up doing a Binance IEO and raising from the retail investors.
There were a few operators who were active and some of them did participate in the fundraise but it was a minor percentage of the raise.
Contrast this to late 2020 when we did the raise for DefiDollar - the ecosystem had a very active angel operator network that was oversubscribing seed rounds. This included both domestic and overseas investors! Crypto giants like Binance announced funds dedicated to India. We have also seen increased interest and participation from both Asian and Western funds with Polychain picking up stakes in CoinDCX and Binance acquiring WazirX.
Slowly the ecosystem has evolved to have a healthy balance between early-stage angel networks and funds from the west with a global footprint. The competition is on the rise.
We now have seasoned operators like the DeFi Alliance, doing the groundwork to empower entrepreneurs with their India Chapter in order to cement their presence.
We are also seeing increased interest from traditional venture funds - they are yet to get involved in a big way as they are still coming up to speed with their thesis and regulatory/compliance measures.
What's Indian biggest asset to make the country a major crypto hub?
India has talented manpower when it comes to tech. We’ve regularly shipped a lot of talent over to the FAANG’s of the world. Sunder Picchai and Satya Nadella are Indians now at the helm of Google and Microsoft respectively.
The developer base in India is huge and it is just waking up to exploring blockchain and crypto applications. Big setbacks due to the regulatory uncertainties have marred the pace but the ecosystem is on track to get stronger.
Initiatives like ETH India have paved the way for startups like InstaDapp to burst onto the scene. My foray into Ethereum started with ETH India organized by Devfolio as well.
We are now entering the third generation of Crypto startups in India that are finding a firmer footing due to the efforts of earlier generations of startups and operators. There is increased awareness among the talent.
With capital and talent in abundance we are gearing up for a Cambrian explosion in not just Dapps, but protocols that will be built in India for the world.
What did you wish you knew before you started this fundraising round? Any other advice for founders fundraising right now?
Right fit:
It is of utmost importance to understand what value your investors bring to the table. With DefiDollar we knew that we would eventually want to target a market beyond DeFi and thus we brought experienced operators at the intersection of Web 3.0 and Web 2.0.
Given this status quo, founders need to deny the temptation to raise from just about anyone and hold out to find the right Venture partners for their product. Instead of taking on every call, do a pre-screening - Understand the fund’s thesis if available - there are some that you will straight away realize they might not be a good fit for your vision or stage.
Value add:
Some venture funds help with your launch by becoming early power users of the protocol and not just testing the application but also locking up significant liquidity. This is a vote of confidence not just for the team but also for the community that might be sitting on the fringe waiting for a signal to start exploring.
Some first-time founders shy away from asking for help - Capital is not the only value add, There is nothing wrong in asking the investors what they can help you with - can be introductions, help with your launch, testing the alpha and sharing feedback, or just getting together for a brainstorming session. The best even commit to your GitHub!
Round composition:
There has been a trend to allow overcrowding of rounds where a lot of people are left holding smaller stakes and the project succumbs to a tragedy of the commons. Try to veer away from this situation and have a fund anchor your round if possible.
A plausible solution to open up space is to raise from operator angels who have - “been there done that”. Angels can save a lot of time for the founders by helping them navigate the tricky crypto waters and guiding founders not to make the same mistakes that they did. All this while taking a relatively smaller cheque and providing substantially more face time to discuss issues at hand.
Thanks again Siddharth for providing such detailed and valuable insights.
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See you on Tuesday for Dove Mountain Weekly #8,
The Dove Mountain Team