Concerns about Financing Methods in the AI + Crypto Sector

I often share some thoughts on the AI + Crypto space in my articles. Although my focus is primarily on AI + Crypto, in reality, any competition involving AI is not limited to the crypto ecosystem; it also faces competition from various AI in traditional fields. Compared to the crypto ecosystem, the latter has a larger grassroots base and a stronger talent foundation.

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 said that this system can improve the efficiency of financial processing for companies by tenfold.

Frankly speaking, compared to the existing plethora of AI agents in the AI + Crypto space that are mostly conceptual with little practical utility, I find such AI applications to be much more valuable.

However, what raises my concerns about the current AI + Crypto space is another piece of data released by this project:

It secured $4.7 million in seed funding from top giants like A16Z and YC.

Note: This $4.7 million is from seed funding, meaning the project obtained this amount during its first round of external financing.

This immediately reminds me of the ongoing Genesis Launches by Virtual, which allows for a comparison between the two.

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

Currently, it’s about 40,000 Virtual, which at the current price of Virtual is nearly $80,000. For easier calculation, let’s round it to $100,000.

By comparing, a question arises:

The amount raised by projects launched on this platform is not large. If the financing amount is not large, then the complexity of the project is unlikely to be significant.

I’m not saying that more complexity or more funding is always better, but if a project is too simple and the funding is too low, what can we realistically expect in terms of practicality and functionality?

Compared to Concourse's $4.7 million in funding, $100,000 is indeed too small. What kind of project can be created with such a small amount of funding? What problems can it solve?

This is a question worth serious consideration.

Let’s think further:

If a project successfully develops through financing on Genesis Launches, it will certainly need to continue raising funds to sustain its progress—$100,000 alone cannot nurture a small seedling into a towering tree.

But once it needs to continue financing, new problems arise:

If it seeks new rounds of financing, given the current state of venture capital, this project may find it difficult to avoid traditional venture capital, as their overall financial strength and network are still far superior to that of crypto venture capital.

If it seeks traditional venture capital, what will the project use to raise funds?

Tokens or equity?

If it’s tokens, will traditional venture capital accept them?

I believe there is a legally ambiguous boundary here. I wrote in a previous article: Does this token have actual rights? How significant are those rights? If I hold more than 50% of the tokens, can I actually control this project completely?

This point is currently very unclear. If it’s unclear, will traditional venture capital accept it?

If it’s equity, then what about the tokens that have already been issued? How do tokens and equity correlate? What are the differences in rights?

This point is also very unclear at the moment. If it’s unclear, it could easily lead to disputes in the future.

Let’s take a step back. Suppose this project is very fortunate and does not need to seek traditional venture capital, instead finding a capital-rich giant within the crypto ecosystem. These giants are willing to invest in its tokens according to the default rules of the crypto ecosystem.

This also presents problems:

Over the past few years, the crypto ecosystem has almost formed a trend: treating VC as a joke, laughing at them for missing selling opportunities due to token lock-ups and suffering the most.

Many VCs have not only seen no returns from their investments in the crypto ecosystem over the past few years but have also incurred significant losses. In this situation, they have become very cautious.

In such circumstances, would they still be willing to invest in project tokens?

If a project cannot easily secure financing from traditional venture capital and cannot gain favor from crypto venture capital, how can its future growth be advanced?

A project may find it relatively easy to initiate financing using methods from the crypto ecosystem, but there are still many urgent issues that need to be resolved for continued financing and sustained progress.