Concerns about financing methods in the AI + Crypto track

AI + Crypto financing in the track has concerns, with funding amounts lower than traditional projects, and subsequent connections with either traditional or encryption venture capital face many issues regarding rights and trust.

Written by: Dao Talks Blockchain

I often share my thoughts on the AI + Crypto space in my articles. Although my focus of thought mainly revolves around AI + Crypto, in reality, any competition involving AI is by no means limited to the encryption ecosystem; it also faces competition from various AI in traditional fields. Compared to the encryption ecosystem, the latter has a larger mass base and a stronger talent base.

Recently, a very popular AI project called Concourse has emerged in the traditional finance sector. This project focuses on a very niche area—helping companies process various financial data. It is claimed that this system can increase the efficiency of financial processing for companies by 10 times.

Frankly speaking, compared to the numerous AI agents in the AI + Crypto space that have some concepts but rarely show practical utility, I find such AI applications much more valuable.

However, what worries me more about the current AI + Crypto track is another piece of data disclosed by this project:

It raised $4.7 million in seed round financing from top giants like A16Z and YC.

Note: This 4.7 million dollars is seed round financing, which means the project obtained 4.7 million dollars in the first round of external financing.

This immediately reminds me of the Genesis Launches that Virtual is currently holding, just to compare the two.

Projects launched on the Genesis Launches platform must allocate 37.5% of the total token supply for the presale. What is the amount of financing for the presale?

Currently, there are approximately 40,000 Virtuals, and at the current price of Virtual, that amounts to nearly 80,000 USD. For ease of calculation, let's assume it's 100,000 USD.

Comparing this way, a problem becomes apparent:

The amount of financing for the projects launched on this platform will not be large. If the amount of financing is not large, the project will not be too complex in terms of complexity.

I'm not saying that the more complex a project is, the better, or that the more funding it receives, the better. However, if a project is too simple and the funding is too low, what can we really expect in terms of its practicality and functionality?

Compared to the $4.7 million financing of Concourse, $100,000 is really too small. What kind of projects can be made with such a small amount of financing? What kind of problems can be solved?

This is a question worth serious consideration.

Let's continue to think further:

If a project has successfully developed through financing on Genesis Launches, it will definitely need further financing to continue promoting the project ----------- it is impossible to nurture a small seedling into a towering tree with only $100,000.

But once further financing is required, a new problem arises:

If a new round of financing is to be conducted, given the current state of the venture capital industry, this project is likely to have a hard time avoiding traditional venture capital, because overall their financial strength and network are still far superior to that of encryption venture capital.

If you want to find traditional venture capital, what will this project use to finance?

Use tokens or equity?

If tokens are used, will traditional venture capital recognize them?

I believe there are legally ambiguous boundaries that are not clearly defined here. I wrote in a previous article: Does this token actually have any real rights? How much real rights does it have? If I obtain more than 50% of the tokens, can I actually have complete control over this project?

This point is currently very unclear. If it is unclear, will traditional venture capital recognize it?

If it is equity, then what do the tokens that have already been issued for the project count as? How are tokens and equity linked? What are the differences in rights?

This point is currently very unclear. If it is unclear, it will also be an area prone to disputes in the future.

Let's take a step back. Suppose this project is very lucky and does not need to seek traditional venture capital, but instead finds capital-rich giants in the encryption ecosystem. These giants are willing to invest in its tokens according to the default rules of the encryption ecosystem.

This also has problems:

In recent years, the encryption ecosystem has almost formed a trend: treating VC as a joke during casual conversations, laughing at them for missing out on selling opportunities due to token lockup, resulting in the worst losses.

Many VCs have not only seen no returns but have also incurred significant losses in their investments in the encryption ecosystem over the past few years. In this situation, they have become tight-lipped.

In this case, are they still willing to invest in the project's tokens?

If a project cannot easily obtain traditional venture capital funding and cannot attract the favor of encryption venture capital, how should the project's future growth be promoted?

Launching a project using encryption ecosystem methods for financing may be relatively easy, but there are still many urgent issues that need to be addressed in order to continue financing and making progress.