Nov 078 min read

How we raised $500 000 from NFT sales

Fundraising via NFT sales vs the traditional VC/angel route.

This summer we were fortunate enough to try both approaches. We started with the VC route, which is the most obvious option when a startup is seeking funding, network, and knowledge to elevate the growth. Throughout around 30 meetings with various VCs and angels we got better at our pitching game, negotiations and also found how awesome and supportive lots of VCs are. The feedback we received during and after the calls forced us to ask some hard questions that turned out to be critical in shaping the current business model of our company.

However, with all the learnings and useful advice, our state in terms of growth, size, and innovative business model turned out a great fit for just some investors, which made us take a step back and rethink how we want to fund our company.

Maybe, just maybe the traditional way of financing was not the way to go for us? Should we do a mix of both, should we drop the traditional model? These were the hard debates we had during prolonged google meet calls.

We talked a lot, we slept on it, and in the end decided to go for it and become one of the first startups in the world to raise the funds via NFT sales.

From an emotional perspective, it was super easy to get behind this concept as all of us are going full speed when it comes to decentralisation, web 3.0 technologies, and data ownership. Crypto startup raising funds with crypto technologies, makes total sense.

From a practical perspective, it was an uncharted territory as almost no one had done it before. There are no videos on Youtube explaining how we should pitch the project to the outside world or what our mindset must be taking this route. We knew only that it will involve a lot of work in the art, tech, and community side of things. So we started to do all things in parallel and realised that this is a completely different fundraising as the one mentioned above.

You really need to immerse yourself within the Discord chats, Twitter conversations and not only interact with the community interested in project but immerse yourself within it. Sixteen-hour days on Discord and NFT Twitter for all of us became a reality, all that while building the technical and artistic side of the project. It was hard, but similarly to the VC approach, it takes a lot of relationship-building just in a very different environment.

NFT which gives you a free lifetime membership to Sigle premium services.

When we decided to pursue the route of fundraising via NFT sales, it was immediately clear that we want to add a utility to our tokens. For us it was not just "the hyped way" to get the funding, we thought long and deep about how we can empower our users and at the same time build a community of people who would be interested in participating in this adventure long term.

So what it all came down to is that we took the approach of a free lifetime subscription to Sigle premium services for all of the NFT token holders at any given time. Meaning if you own the token, you will be able to use the premium features within our platform. Effectively outside of the speculative value and artwork we are adding one more aspect on top for everyone who participates in the sale and therefore fundraising of our company.

Highest standards for the tech and artistic output.

We promised ourselves that we have to release something that we can be proud of and that is of the highest quality . For the technical side of things we really dug deep into the best patterns used in the projects on other chains ( we are building on the Stacks blockchain, by the way ) and came up with metadata storage on Arweave and using provenance hash to ensure fair distribution during the minting process.

As for artistic output. All of the NFTs you see in our Explorer Guild collection, are a result of 271 hand-drawn attributes that were crafted for more than a month. That is then taken and mashed into various combinations with the image generation script that randomly picks layers and puts one on top of each other. Given the feedback we received about our artistic work, we are happy with the outcome from that perspective too.

Responsibility to community.

No matter which approach of fundraising you choose, as a company and as a co-founder you will have to listen and be responsible for your actions in front of your investors.

Within the VC-Startup relationship that is probably more clearly defined as they usually get some % of the company and that means you need to take into account their views of how a company should evolve. Of course, it depends on the type of deal and the relationship dynamics, but usually, the structure is fairly formal and clearly defined around some sort of previously signed agreement.

Within the NFT buyers-Startup relationship is something completely different. First of all similarly to traditional crowdfunding campaigns you now are connected with a much larger amount of people who will both support and also very often demand certain things to be done. In fact, 20 minutes ago I read that around 10 people want something to be changed in one of the features we just released. We have to listen to that and we are listening to suggestions and different kinds of feedbacks as long as they are laid out reasonably and in a constructive way. Lots of them are, but not all. Which sometimes makes it challenging to digest that something you and your team love so much and is pouring the soul in, is torn down by someone from the community.

However, some very unique positive interactions are possible only when community members feel like they are part of the story. We have had several developers reach out with ideas, propositions and even built out stuff around both Sigle and our NFT collection. This feels like the true nature of Web 3.0. Token holders of a supporting project take ownership and start to strengthen it with the tools available to them.

Challenges with fundraising via NFTs.

To achieve what has not been achieved, you have to do what has not been done mindset comes with its downsides too. Compared to the relatively simple SAFE contract that you have when raising money from VCs, we had to go through quite the legal process to make sure that we will be able to take funds from the crypto wallet to the company's accounts. In the end we were lucky to work with a lawyer that is specialising in the intersection of crypto and traditional finance, so we managed to get everything set up properly and fairly quickly. Another aspect apart from complex logistics that you have to account for is the tax regulation within your legislation and the processes around that. We won't escape the tax man nor do we intend to, but with the SAFE contract you almost receive all of the money and nothing is taxed, however with crypto you might have to pay some.

We are a startup looking to raise money, should we try the NFT sale approach?

Depends. First of all, you should consider the community aspect of your startup. If there is that layer of community aspect around your business ( think of running apps, some social check-in apps here ) then it perhaps could be a good idea to consider it. A big part of NFT collections are focusing on forming communities of like-minded people that are keen to hang out with each other and very often also produce some interesting projects together. That would be the first question I asked myself: how would the NFT buyers benefit from our companies projects later on aside from the speculative value of getting a tradable asset?

In our case, it was very straightforward because building a community of people very naturally fits within our growth and sustainability plan. However if your business is more built around providing individuals separately then it will be a bit taller task to build the community narrative around your NFT sale, but then again where is a problem or challenge, creativity can come into play and figure out something that makes sense even in that setup.

The next aspect you should definitely pay a lot of attention to is technical execution. Especially if you are not a crypto related business, my personal suggestion would be to just join some Discord channels, talk to the NFT artists, the community and developers. You and your project will benefit a lot by immersing and understanding the nature of this space. I know it sounds silly to ask when you probably have 9 deadlines coming up, but spending an hour of your time on NFT Twitter will give you so much insight that after two months of doing it you will have a quite good understanding of what values people hold within the community and therefore act accordingly. Raising money via NFT sales is definitely not the easy path, but it's an adventurous one for sure.

If you like this article and have something to add, discuss or chat about, DM or tag me on @akirtovskis.

*Image credit: https://pixabay.com/photos/nft-bitcoin-crypto-blockchain-6288805/

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