Retail investor boom can accelerate the growth of a blockchain startup

Retail investor boom can accelerate the growth of a blockchain startup

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According to research by Vanda, retail investors have flocked to 400 billion dollars In the stock market since 2020. That’s double the number of shares they’ve bought in all recent years combined. Traditionally, financially vulnerable and risk-averse retail investors avoid risky asset classes and stick to a 60/40 investment strategy. However, the scenario has now changed.

Riding on the back of fintech and blockchain technology, retail investors are now establishing their presence in new areas. Fintech applications have made it easy for retail investors to access the stock market, introduced commission-free trading, and introduced pre-made tools that provide convenience like never before. In fact, the impact of fintech has been very strong 72% of investors are in the US They are more likely to change banks if their bank does not support their preferred fintech application.

Meanwhile, Blockchain technology has democratized financial markets and lowered their entry barriers. Asset classes such as securities, derivatives, equities, debt and commodities, previously out of the reach of retail investors, can now be easily accessed via the blockchain, thanks to asset tokens. Blockchain-based protocols have recently opened the doors to venture capital for retail investors. And their entry into the VC market is a revolution that has the potential to propel the startup ecosystem.

Retail investors in the startup ecosystem: where do they fit in?

Startup finance has always been the home of venture capitalists. Indeed, the venture capital market is a driver of innovative startups. But this space is mainly occupied by institutional investors; Individual investors account for only 1% of it. This leads to a myriad of problems. Institutional investors’ dictatorship over the venture capital market puts start-ups in a suffocating grip. According to Take CrunchVC is killing more startups than slow customer adoption, technical debt and founder infighting — combined.

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why? Simply because venture capital operates with a aggressive growth-first attitude and cares more about its wellbeing than the wellbeing of startups. Investment capital takes big swings and they want big gains very quickly. So the founders are forced to expand and branch out prematurely. They are given minimal time to innovate, develop products and build a brand. Moreover, the share of the founders in the business is significantly weakened by the capital investors. The founders are lucky if they still have 20% of the stake by the end of the funding rounds.

source: OpenVC Articles

At the end of the day, if early expansion fails, aggressive investors buy or take down the startup. Both outcomes kill the founders’ vision and mission.

With retail investors coming into the picture, the monopoly of institutional investors ends, and the venture capital market becomes democratised. Retail investors can regain the innovation-first attitude and drive the long-term growth of startups. But it is not as easy as it seems.

The Retail Investor’s Entry into the Startup Industry: Obstacles and Solutions

As mentioned earlier, individual investors traditionally avoid risk and, unlike venture capitalists, do not take large swings with their money. Retail investors also lack the capital to fund startups per se and the knowledge to carefully screen potential startups. These factors can hinder their entry into the venture capital market, leaving startups once again at the mercy of venture capital.

Enter the blockchain-based incubators and accelerators. These platforms provide the ramp required for retail entry to the venture capital market, bypassing obstacles. Blockchain-based business incubators and accelerators foster promising startups from the ground up and provide them with essential tools and strategies for success. So, the scan is already done. These platforms contain entrepreneurs and expert advisors who can learn about the potential of startups. Now, all that remains is to connect these promising startups with retail investors.

This can be done by promoting global fundraising campaigns and allowing multiple retail investors to raise capital to fund startups. In this way, the problem of low capital is reduced, and the risks associated with it are distributed across a group of investors. Investors can invest as much or as little as they want in startups and no one can afford the complete downfall.

In other words, entry barriers for retail investors are greatly reduced. And if the NFTs support these fundraising campaigns, the barriers will drop even more. NFTs have recently emerged as the most popular and sought-after asset class. NFT groups that hold company dividends, board voting rights, and other distinct features can easily interest retail investors and get them into the startup ecosystem.

There is a version of this already in place in the entertainment industry, where producers are using NFTs to fund their films. Even big names like marvelAnd the Capital And the heavy Metal They are quickly jumping on the NFT bandwagon to attract fans to the digital revolution.

In conclusion, blockchain-based accelerators that do global fundraising with NFTs at their core can bring an influx of retail venture capital investors. This mass entry of small investors can be beneficial in the continuous development and launch of high potential startups.

Democratizing the startup ecosystem is the way forward

With the rise in popularity and value of blockchain technology, major industries around the world are looking to decentralization as the way forward. From finance and entertainment to the internet and social media, there is a paradigm shift in power dynamics, wresting control from central institutions. Of course, the startup ecosystem is following suit.

Lowering entry barriers and bringing retail investors into the startup space ensures that innovation thrives and founders are free to build and expand at their own pace, driving the growth of startups over the long term.

Gaurav Dubey is the CEO of TDeFi.

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