We recently had the conversation with Aleksandar Jovanovic from the DeFi Seedfinder project on Youtube, about his plans and the current CFP. This is a very interesting project that we want to write about again here for those of you who prefer to read.
You can also watch the video again here:
The idea came about because Aleksandar and his team are having problems financing their project DFSneo. A CFP funding round failed, and the community rejected funding from the CFP Fund. But since it is just as difficult to raise capital from financial investors at the moment, he came up with the idea of developing his own launchpad for the DeFiChain community and from the community.
The advancing development and adaptation of Web3 technologies such as cryptocurrencies and blockchain applications offers a new and untapped market for startups and solo entrepreneurs.
In addition to the appropriate technical aptitude and required programming skills, raising outside capital for project financing is critical to whether a venture succeeds or fails.
Unlike traditional startups, blockchain entrepreneurs struggle with a fraudster stigma fueled by media hype and a knowledge gap that is difficult to bridge when seeking investors. Blockchain entrepreneurs’ visions are not physically tangible, are often technically abstract, and are difficult for an outsider investor to validate.
Parallels between traditional startups and blockchain companies can be drawn, however, in funding requirements. Appropriate financial resources are indispensable for the conception, production and marketing of a product or service. Often, the financing requirements for human resources of blockchain companies, justified by the given technical and cognitive prerequisites, even exceed those of traditional startups.
Therefore, many promising and innovative companies fail to find investors and are not able to exploit their potential. The market for Web3 technologies thus still offers a disproportionate amount of free space for profitable ventures.
On the other hand, many laymen and individuals exist who have built medium to large fortunes in or thanks to cryptocurrencies, understand the world of Web3 technologies, are aware of the given potential, and would like to invest in aforementioned startups.
However, the latter is difficult for several reasons.
Direct investments in startups are usually reserved for professional VCs and seed investors. In addition, meaningful diversification is only possible with very large assets. In the alternative of ICOs, which is popular especially in the field of cryptocurrencies, there is often great intransparency and, quite fundamentally, the necessary due diligence in most cases exceeds the capabilities and capacities of private investors.
The aim of the DeFi-SeedFinder is to bring together competent Web3 startups and thematically interested small investors in a safe and transparent way. Thus, more Web3 projects can be realised and investors can participate in their financial success while contributing to the strengthening and expansion of the corresponding ecosystem.
Similar to the platform “Kickstarter”, the DeFi-SeedFinder offers start-ups a stage to present themselves to the, in this case crypto-savvy, audience and to collect financial resources for their project. The difference between platforms like Kickstarter and DeFi-SeedFinder is, besides the targeted industry, that DeFi-SeedFinder will not be a crowdfunding but a crowdinvesting platform.
Crowdfunding platforms allow start-ups to incentivise their investors by allowing them to be the first to receive the finished product or otherwise receive preferential treatment as customers. The investor target group of crowdfunding platforms is thus limited to people who are interested in the specific product of the company, but not in its entrepreneurial success.
However, as a crowdinvesting platform, DeFi-SeedFinder will enable investors to be rewarded for supporting the project not only with products or services, but also with a potential investment return. This greatly expands the target group of potential investors.
The company shares that the investor receives for his investment are represented by an easily manageable, project-specific and limited ERC-20 token.
The tokens are issued and managed by Smart Contacts.
Ownership of the project token entitles the investors to profit distributions, if this was determined by the StartUp at the beginning. In addition, the company shares in token form can be freely traded at any time or, at a later date, exchanged for the actual company shares.
DeFi-Seedfinder acts as an intermediary and contractual partner between the investors and the companies, ensuring that only trustworthy and active projects are listed or financed and that all contractual agreements are adhered to.
Within the framework of investor protection, DeFi-Seedfinder regularly reviews the progress, capital requirements and due diligence compliance of financed projects in order to, based on pre-defined milestones, gradually distribute the collected funds to the companies. This creates a high level of transparency, trust and fairness between the investors and the companies, as they have to provide probity and evidence of funds needed as well as used. This ensures that the funds collected are used for the intended purpose. At the same time, this procedure prevents possible fraud and minimises the risk of a total loss through the gradual distribution according to milestones.
This chapter is dedicated to the concrete benefits that DeFi Seedfinder creates for crypto affine investors and the projects to be financed.
Added value for investors
Due to the guaranteed pseudonymity of the blockchain and the lack of possibilities to withdraw misappropriated funds, a negative stigma and a general rejection of community-funded companies has spread.
Through DeFi-Seedfinder, potential fraud is prevented and the risk of misappropriation of funds is minimised, or the potential damage is limited, as DeFi-Seedfinder acts as an intermediary between investor and entrepreneur, making legally binding agreements with the companies in the name and will of the investors and holding them accountable in the event of a breach of contract. Furthermore, DeFi-Seedfinder only gives the companies access to the collected funds step by step and according to pre-defined, publicly communicated milestones. This means that the status quo and development of a project are clearly comprehensible to investors. In the event that a company fails or the entrepreneurs abandon the project, DeFi-Seedfinder is able to pay back the remaining funds in a trust account to the investors on a pro rata basis, thus preventing a total loss through fraud.
1 — Dividend distribution
Should a company promise investors a share of the profits as part of its financing request, investors will be allocated their dividends on a pro-rata basis in the event of a dividend distribution. Thus, an investor benefits directly from the financial success of a financed company.
2 — Increase in value of the shares
Each investor receives a proportional share of a project token. These tokens, which are unique and limited for each project, can be traded OTC at any time and later on a decentralised basis. The investor thus owns a tokenised share in the company, which he can dispose of independently and which always proportionately reflects the value of the company.
3 — Buy-back by the company
At a certain point in time, it may be attractive for the financed company to make a buyback offer to the investors and thus buy them out of the company. Since such a procedure is only carried out by successful projects, the investor receives a multiple of his original investment per share.
DeFi-Seedfinder thus offers investors the opportunity to invest safely, transparently and independently in Web3 ventures.
Mehrwert für Unternehmer
If one wants to build up a profit-oriented company based on Web3, one is faced with the question of how to raise the necessary financial resources.
If the entrepreneur himself does not have the — sometimes justifiably high — funds to carry his company to break-even, the only option at present would be to approach external investors. In addition to the usual hurdles involved in winning over a traditional investor, the chances of success are further reduced by the complexity and abstract value creation methods of Web3 companies.
Thus, most projects that themselves have a lot of potential and would represent a great enrichment for the Web3 sector are doomed to failure from the outset through no fault of their own.
This will be revolutionised by the DeFi-Seedfinder. The DeFi-Seedfinder offers starting Web3 projects a platform to present their idea within the community and to inspire investors.
It also provides a strong network of like-minded DeFi entrepreneurs and resources to make their project launch even better.
In addition, the DeFi Seedfinder offers companies a way to let their investors participate directly and easily in the financial success of the company and thus give something back to their own community.
Concept and procedure
DeFI-SeedFinder und StartUp legen zusammen die Finanzierungshöhe und die Beteiligungsgröße fest. Zwischen den beiden Parteien werden sämtliche Rahmenbedingungen vertraglich festgehalten. Zur Realisierung der StartUp Finanzierung durch Crowdinvesting erstellt DeFi-Seedfinder für jedes StartUp einen individuellen Projekt-Token, der auf 10.000 Stück limitiert ist und dessen Preis in direkter Korrelation zu der angefragten Finanzierungsumme in Dollar steht und während der Finanzierungsphase keinen Schwankungen ausgesetzt ist. Dazu wird ein Smart Contract programmiert und veröffentlicht,
Die Unternehmer sammeln während ihrer Finanzierungsphase USD in Form von USDC ein, welche in ihrem entsprechenden, projektbezogenen Smart-Contract zusammengetragen werden. Sollte das Unternehmen nach Ablauf der Frist sein Finanzierungsziel erreicht haben (und somit alle Projekt-Token distribuiert sein), bekommt der Antragsteller die eingenommenen USDC Coins automatisch vom Smart Contract ausgezahlt. und überschreibt anschließend die vereinbarten Firmenanteile an DeFi-Seedfinder,
Erwirtschaftet das finanzierte Unternehmen einen Gewinn in FIAT und hat sich zu einer Dividenden- / Gewinnausschüttung verpflichtet, muss es die entsprechenden Gewinne in USDC tauschen und im Smart Contract hinterlegen. Jeder Projekttokenhalter hat daraufhin die Möglichkeit, seine Projekt Token für den Ausschüttungszeitraum im Smart Contract zu hinterlegen und nach der Ausschüttung, inkl. der Dividenden / Gewinne in Form von USDC, auf seine Wallet zu transferieren.
Advantages for the DeFiChain Community
Due to the current developments and discussions about for-profit startups seeking funding from the Community Fund, it has become difficult or rather impossible to get funding through it. At the same time, the DeFiChain urgently needs scaling companies that create real value and demand on the chain and bring more global customers into the ecosystem.
Cakedefi is also working on a launchpad, but this does not help decentralisation. Yes, there is decentralisation, but it is in the cosmos of Cakedefi. An independent launchpad will help the DeFiChain to fund more startups and at the same time allow the community to share in the proceeds and opportunities.