From theblock by Yogita Khatri

The rise of community-focused fundraising platforms seems to be creating friction with some VCs. Echo, an angel investing platform founded by popular crypto trader Jordan Fish, also known as Cobie, has alleged that certain VCs are pushing back on Echo's success by pressuring crypto projects not to offer lower prices to Echo investors or by discouraging community sales altogether, except for late-stage, high-valuation rounds.

The concerns raised by Echo aren't isolated. Matt O'Connor, co-founder of Legion, the Delphi Labs-incubated ICO platform, told me while Legion hasn’t seen much outright hostility, some VCs push projects to avoid public sales due to regulatory risks and recommend against discounted valuations and shorter vesting periods. "To me, the vesting part is particularly ironic because if the team airdrops tokens as unlocked, VCs don't complain, but when teams sell a smaller portion unlocked, it's somehow a problem," O'Connor said.

Some VC-backed projects have had successful community launches such as MegaLabs and Initia. O'Connor said crypto-AI project Almanak also recently conducted a sale on Legion at a 10% discount to its VC round. However, other teams, especially those that raised from VCs more than 3–6 months ago, have said that their investors didn't support similar discounts, he added.

Cobie and O'Connor declined to name the VCs they say are resisting their platforms. However, Cobie told me, "The general thing we see is that Echo secures some allocation in some round, and then we get ghosted, and then the same project says their VC recommended 3-5x higher valuation for Echo. Then we typically just tell them to f**k off."

He went on to say that some VCs try to "block" an already agreed Echo round price if the price is below the price they paid. "Anyway, they seem pretty unhappy about it," he said.

Shuyao Kong, co-founder of MegaETH developer MegaLabs, which raised $10 million in 3 minutes on Echo last month in the platform's largest sale to date, told me she has also heard of projects getting pushback from VCs on discounted valuations for Echo investors.

Do tensions run deep?

Despite these allegations, several VCs downplayed the extent of the tension. Rob Hadick, general partner at Dragonfly, told me the idea of conflict between VCs and platforms like Echo is largely "overblown." He said these platforms complement VC funding, helping projects build stronger communities while maintaining partnerships with investors.

However, he added that lower-quality VCs — those that don't provide real value — may feel threatened by the rise of these platforms. "And for those VCs that do feel tension, they will adapt or die," he said.

Hadick also said that "tension will likely continue to escalate as part of public discourse on Twitter" but argued that it will be "a primarily fabricated story" by traders or angel investors with their own incentives and not something that will affect VCs or founders.

Anil Lulla, co-founder and CEO of Delphi Digital, which also operates a VC unit, shares a similar perspective. He described Echo's claims as "a game of telephone," suggesting that misunderstandings or isolated complaints have been exaggerated. Lulla said most reputable VCs encourage their portfolio companies to use platforms like Echo and Legion, as such fundraises help projects with distribution and typically account for only a small portion of raised capital.

Jack Platts, founder of Hypersphere Ventures, emphasized that community sales have historically been critical to crypto's success. "Any VC opposing ICOs "doesn't understand crypto" and is short-sighted, Platts said.

Finding balance

For founders, navigating the balance between community engagement and strategic VC partnerships is key. Hadick of Dragonfly said VCs will continue to be the primary way for helping entrepreneurs innovate and crowdfunding can and will be a "value additive part of that story."

Michael Bucella, co-founder of Neoclassic Capital, a former Goldman Sachs and BlockTower Capital veteran, sees platforms like Echo as providing distribution and syndication at scale, though he noted they currently offer "not much else." While Neoclassic doesn't proactively recommend these platforms, Bucella said, "As we grow more comfortable with these platforms, we are likely more inclined to include them in our syndication of co-investors on deals we lead." He emphasized that the advisory of VCs remains critical for founders, particularly in top-tier projects.

Erick Zhang, managing partner at Nomad Capital and founder of the newly launched ICO platform BuidlPad, encourages projects to combine both models. He advises founders to raise from VCs who provide strategic value, such as connections and expertise, while using platforms like BuidlPad, Echo and Legion to engage their communities and angel investors.