Cryptocurrency startups scare investors with 80x valuations
An industry executive said many cryptocurrency startups are losing venture capital opportunities due to their revenue multiples being too high.
According to Dan Tapeiro, CEO of the cryptocurrency-focused venture capital firm 10T Holdings, too many cryptocurrency startups are pricing themselves out of venture capital by pursuing valuations far exceeding their revenues.
"For some reason, founders and CEOs think they should raise capital at 50 to 80 times revenue. So that makes it very difficult for us to generate profits for our liquidity providers," Tapeiro said during a discussion at the Consensus conference in Toronto on May 14.
"So we almost automatically skip over a lot of deals, even businesses that we really like, we won’t invest if the initial price isn’t reasonable."
Tapeiro noted that 10T Holdings has passed on more than 200 companies for similar reasons, including FTX, BlockFi, and Celsius, which are now bankrupt.
Tapeiro stated that 10T Holdings is looking for cryptocurrency projects with valuations in the range of $400 million to $500 million with revenue multiples of 10 times or lower.
Venture capitalists typically prefer lower valuations as they offer greater upside potential with less risk.