How The Blockchain Business Model Disrupts Venture Capital

The traditional startup model uses angel investors to identify promising startups, venture capital firms to nurture the best of the crop and institutional investors to take the company public so the earlier investors can cash out their investments.

Now, an entirely new model has come to the forefront and it is driven by the meteoric rise in blockchain popularity. As we have seen, blockchain-based companies are increasingly choosing to sell their tokens in a crowd sale to raise seed capital.

For the company, the benefits are clear. The coin (or token) used in the company’s application gain immediate wide-spread adoption in the crowd sale. The people who contributed to the application, through software development, marketing expertise or evangelism get paid for their efforts with the coin. Finally, coin holders can convert the coins into any number of other cryptocurrencies or local currency if the coin is carried on an exchange.

This model turns the venture capital model on its head as the crowd sale makes a coin widely available and not just offered to a select few. Further, a decentralized governance model is the antithesis of typical corporate governance models which concentrate power in the hands of the politically adept and not often in the hands of the greatest contributors. It is probably the case that only the combination of the internet and cryptocurrency could have created such a decentralized, yet still viable, business model.