A Message to the DFG Family
First, we would like to give you a bit of insight into what we are looking at in the market. As you may well know, the current macro situation in terms of global inflation, asset value decrease, supply chain issues, geopolitical conflict in certain regions, and the ongoing pandemic situation is set to have great effects on the market. We expect to see high downside volatility at least until the end of 2022, with a high probability that 2023 will be similar at least until the 1st half.
We are likely looking at a situation similar or worse to the 2008 Great Financial Crisis in terms of global market value destruction (2008 -19% vs 2022 -14% to date).
Our Outlook for Founders
Those that have already closed rounds previous to this debacle are looking at a situation where funding will need to be stretched for a longer period of time than the one planned for, meaning, if a company raised funds in H2 2021 and planned to have a repeat at a higher valuation in 2H 2022 the current situation will require a period of hard truths and restrategizing.
Teams will probably need to extend their runway of cash for 18–24 months instead of 12 months and reevaluate the valuation for the next round, it is likely that the same or lower valuations will be in play.
For those that are currently looking to raise capital, we highly recommend sitting down with already secured investors and potential investors to share your outlook for this volatile moment in the market in order to close fundraising rounds as soon as possible.
The DFG Strategy
There are 3 important points that we would like to reaffirm to our partners and followers.
- We will continue our unwavering support for the Polkadot ecosystem. After 4 years of working closely with dozens of teams, we maintain our stance that scalability and interoperability will be game-changers and Polkadot is set to be a leader in these two factors, therefore, we expect to be a staunch Polkadot ecosystem investor and supporter for at least another 4 years.
This will allow us to reap the fruits of all the amazing projects that are already part of the DFG family and those that are yet to join.
- In this time of need, we understand that our partner companies will be in need of any bit of assistance and resources we can provide and as a result, we plan to focus on a continuance of deal flow and capital allocation to support the current DFG family members and new projects that plan to raise funds in the next 6–12 months within this ecosystem.
Moreover, we plan to participate in a higher percentage of Polkadot-related funding rounds and we expect to be the leading investor in a larger number of them, changing our general strategy from being among the top investors in most funding rounds to being the top investor.
- Our strategy is to continue working closely, but not limited to, specific sectors within Polkadot and alternate ecosystems — Infrastructure, that will set the foundations for future development, layer 1 blockchains on Polkadot that will enable the growth of a healthy ecosystem through the creation of new spaces for teams to deploy their products and solutions, and dApps that bring innovative solutions to the space built on top of these Layer 1 parachains.
Overall, the idea is to focus on these specific sectors but also keep an eye out for anything that is set to be disruptive and innovative in the industry which could come from different sectors besides the ones aforementioned.
Our long-term view of the Polkadot ecosystem has not changed and we expect to be working tirelessly in this ecosystem, be it in a bull or bear market, to empower paradigm-shifting Web3 and blockchain solutions that are yet to be built.
Some will say this bear market is no different than others and others will assure that the context for this industry is not the same as it was in previous markets, making the industry stronger and more capable to withstand what could possibly happen in the worst-case scenario.
We believe the technological innovations being created at the moment for the eventual takeover of Web3 and blockchain are undeniable and work must be continued with a clear vision and focus on what it is we seek to achieve.