Public VC Funding: Stopgap or Future Solution for Blockchain Startups?

"This applies across the startup ecosystem, not only to the blockchain ecosystem. I see public capital and private capital as complementary in a start-up funding journey. On top of COVID-related support, public capital is currently a catalyst to boost early stage investments in blockchain startups."

Speaking about VC deals in general, Michal Nespor, partner at crowdinvesting platform Crowdberry, told Cointelegraph: "The Covid-19 crisis accelerated the withdrawal of traditional VC funding from riskier [funding] phases or new deals." This has created an opening for those investing public capital - as well as private funds, he added.

An ongoing trend?Fetyko told Cointelegraph that he expects to see more publicly funded VC firms working with blockchain startups.

With private VC funds drying up in parts of the world - like in Central and Eastern European countries - amid the COVID-19 crisis, it can be argued that public capital can help plug the gaps through entities such as the European Investment Fund.

According to Fetyko, while altFINS' funds were ultimately provided by the government of Slovakia, it was VC firm Crowdberry that was actually selecting the startups that would be funded, and only about 5% were eventually supported.

Private funding still criticalPuel doesn't view public funding of blockchain startups as a long-term solution for a prosperous blockchain industry, however.

Elsewhere, blockchain funding via initial public offerings is now getting more attention with deals that are more transparent and better in terms of the quality of the underlying assets, noted Nespor, though this is not ideal for every business model.

"Funding dynamics for blockchain start-ups are no different from the rest of the tech ecosystem. Private venture capital remains the preferred funding option to support the growth of start-ups, their product development and/or geographical expansion. As the blockchain ecosystem matures, we will certainly see a rising number of blockchain start-ups looking to raise capital through IPOs.".

Are publicly funded VC firms built to last?All in all, given the liquidity pressures on traditional VC firms as a result of the coronavirus pandemic, we might expect to see more public capital for early stage blockchain enterprises, particularly in undercapitalized parts of the world.

"Especially in the seed phase of companies - the riskier development phase of a company - we expect more public funding to be available as opposed to private funding post coronavirus," Nespor told Cointelegraph.