Build up war chests for 'prolonged' crypto market downturn, VCs say

Quick Take

  • Turbulence in financial markets is prompting crypto companies to build up stronger cash positions, venture capitalists said.
  • Two Sigma Ventures principal Andy Kangpan said “runway is key.” 

Crypto companies are locked in a fierce race to bolster their coffers in anticipation of a "prolonged downturn" in financial markets, leading venture capitalists said.

Pantera Capital partner Lauren Stephanian has advised clients to raise more capital to build a "war chest" to ride out the bear market, she said during a CoinDesk conference panel on the state of VC crypto investing and adoption by traditional financial firms.

"Quality companies are still going to get funding, but at a more realistic valuation," Christine Moy, head of digital assets at Apollo Global Management, said at the same panel.

Venture funding decreased roughly 35% in the third quarter from the previous one, to about $6.2 billion, according to The Block Research. Funding in dollar amount has now declined for two consecutive quarters as web3 asset prices have slumped.

Moy also predicted there will be "more discipline" around building products and finding out how to monetize them.

"With the excitement, and the FOMO and frothiness, everyone just has to get back to really hyper-focus on the basics to survive," Moy said. The executive left JPMorgan Chase in February where she co-led the 2020 launch of the bank's blockchain unit Onyx.

Moy noted it is a market with great promise to engage consumers. 

"Every NFT is like a pass to a social community or social club that you can participate in," she said. "I've always thought of NFTs as the possibility of souped-up loyalty points."

Two Sigma Ventures principal Andy Kangpan is another executive who raised red flags about turbulent markets ahead.

"Certainly runway is key," Kangpan said. "We're telling all of our companies that you should not assume that there's going to be someone there to fund you. You should try to extend your runway as much as you possibly can."

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