CoinFund’s Seth Ginns on why the crypto downturn has spared early-stage startups • TechCrunch

by Arthur · September 21, 2022

Crypto token prices have been on the decline over the past year, with both BTC and ETH down over 50% since last September. Despite the decline in cryptocurrency prices, early-stage web3 startups have shown remarkable resilience in their valuations, Seth Ginns, managing partner and head of liquid tokens at investment firm CoinFund, told this Tuesday’s episode of Chain reaction.

Startups haven’t been completely immune to the downturn — late-stage companies have taken the biggest valuations during the downturn, Ginns said. Ginns has broad insight across different parts of the crypto market as an investor at CoinFund, which distributes capital across private investments such as startups as well as liquid investments such as crypto tokens.

You can listen to the entire episode with Ginns here:

“When liquid markets represent the best opportunities, we can lean more into liquid markets, and when venture markets represent the best opportunity, we can lean more into that,” Ginns said of CoinFund’s strategy. While Ginns said he has seen late-stage crypto startups suffer valuations over the past few months, the downturn appears to have spared early-stage companies to some extent, he observed.

“I would say earlier stages, you just see a step down in where valuations are for [startups where] either the team has just come together and is launching the real pre-seed round, or the next phase right after that, where you’re not sure if they’ve done product market fit yet, but have a great team and some good early momentum on BD- since, I’d say the initial valuations out of the gate have gone down a little bit, says Ginns.

For early-stage startups, valuations have fallen about 15-30%, Ginns estimated, a drop much less severe than what we’ve seen in token prices and even public tech stocks.

Early-stage crypto startup valuations are “not where traditional tech was at that stage two or three years ago. They’re also not where crypto was at that stage two or three years ago, and I’m not sure they’re going to to get there,” Ginns said, explaining that he doesn’t think valuations for these early-stage companies will fall as low as they have in previous market cycles.

So what is driving that resilience?

“I think one of the really interesting dynamics in crypto is that every cycle we see network values for protocols increase by an order of magnitude, I don’t think it’s going to continue to be an order of magnitude every cycle, but they take big steps up. And every time you if it steps up, you have a validation of this new valuation area, which means you end up with people thinking about how to value their early stage startup referring to the last mark you got in the last bull market,” explained Ginns.

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