Why high entry barriers to private rounds are holding back your investment potential

In recent years, interest in Web3 projects has grown at a rapid pace, and the market itself has become increasingly diversified. Many investors are exploring the new opportunities this sector offers, from tokenizing real-world assets to the rise of decentralized finance (DeFi) and the NFT industry. Yet despite its immense potential, the market presents a significant challenge: high entry barriers to private rounds — those early stages of funding for promising projects. These hurdles can severely limit your investment potential and curb your ability to diversify.

This article will examine why high entry barriers to private rounds pose a problem for a broad range of investors, the consequences for shaping investment strategies, and real-world cases and data from Web3 market reports.

Understanding High Entry Barriers: What Are They and Why Do They Exist?

Private funding rounds are early-stage capital raises before a startup hits public markets. At this stage, founders can offer more favorable conditions and lower valuations. However, gaining access to these deals often proves challenging:

1. Large Minimum Investment Check:
   Private rounds frequently require a minimum investment of tens or even hundreds of thousands of dollars. According to a 2022 PitchBook analysis, the average minimum investment check for Series A participation in U.S.-based blockchain startups exceeded $250,000. This automatically excludes smaller private investors who lack such substantial capital.
2. Accredited Investor Status:
   Many jurisdictions — especially in the U.S. and parts of Europe — mandate that investors meet certain income or net worth thresholds to qualify for private deals. According to the U.S. Securities and Exchange Commission (SEC), only about 10% of the U.S. population qualifies as accredited investors. This dramatically narrows the pool of individuals who can invest early in high-growth opportunities.
3. Lack of Transparent Infrastructure:
   The traditional venture market remains a largely closed community. Without the right connections, investors struggle to gain access to quality deals. A 2023 CB Insights report indicates that over 70% of successful venture deals in the blockchain sector occur within closed networks and through personal contacts.

The Consequences of High Entry Barriers for Investors

1. Missed Growth Opportunities:
   Private rounds often represent the most advantageous point of entry into a startup. When a project eventually goes public, its valuation may multiply several times over. Investors barred from early entry miss out on the highest growth phase.
2. Case in point: Early Ethereum investors were able to purchase ETH at mere cents during its presale in 2014. Those who lacked access at that stage faced significantly higher prices just a few years later. CoinDesk data shows that ETH’s price grew by more than 100x within its first three years.
3. Limited Diversification:
   If your capital is modest or you’re not an accredited investor, you’re often relegated to public markets, where prices have typically been “baked in” by early entrants. This inherently reduces your options for diversification and potential returns.
4. According to Messari, in 2023, the average token price growth after a Token Generation Event (TGE) was two to three times lower for public investors compared to those who participated in private sales.
5. Market Shift in Favor of Large Players:
   High entry barriers concentrate capital in the hands of large funds and institutional players who shape the market to their advantage, capturing a disproportionately large share of profits.
6. Data from The Block Research shows that the share of large funds participating in early-stage Web3 investments increased by 30% from 2021 to 2023, strengthening their dominance and marginalizing smaller participants.

Potential Solutions and Emerging Trends

1. Tokenization and Decentralized Platforms:
   New platforms now allow for the tokenization of project shares and their division into fractional units. Tools like Marsbase enable investors with smaller amounts of capital to acquire a portion of a private round. This democratizes access, lowering minimum checks to more approachable levels.
2. Utilizing DeFi and Asset-Backed Lending:
   Certain DeFi protocols let you use your existing assets as collateral to obtain liquidity for participating in private rounds. According to Chainalysis, the volume of token-backed lending grew by 40% in 2022, offering investors a way to leverage their holdings for early-stage opportunities.
3. Regulatory Reforms:
   Some countries are considering easing accredited investor requirements or implementing knowledge-based tests instead of purely capital-based criteria. Over time, such reforms could broaden the pool of individuals allowed into early investments.
4. Secondary Markets for Private Rounds:
   The growth of secondary markets — where investors can trade private round shares before a TGE or public listing — also lowers entry barriers. According to a 2023 Security Token Market (STM) report, secondary-market turnover of tokenized assets grew by 25%. Marsbase OTC provides a platform for trading tokenized rounds, offering more liquidity and entry/exit flexibility for smaller investors.

Conclusion

High entry barriers to private rounds limit opportunities for small and medium-sized investors, cutting them off from the most promising stages of a project’s growth. However, the rise of tokenization, DeFi, secondary markets, and progressive regulatory changes is paving the way toward lowering these barriers.

If you are interested in investing in top-tier startups — selected by AI — through tokenized private rounds with a lower entry threshold, get in touch. We’ll help you unlock your investment potential in the Web3 landscape.

Contact us to discuss your options — Marsbase Manager

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