Balancer Labs today announced a $ 5 million investment round led by DeFi mainstays Three Arrows Capital and DeFiance Capital. The two VCs are now investing together with Pantera Capital and Alameda Research, bringing Balancer’s Series A round to a total of 12 million US dollars.
The investment might surprise some as Arthur of DeFiance Capital recently reviewed a podcast balancer as an automated market maker (AMM) as less than positive compared to his peers:
“It’s definitely one of the bigger puzzles in DeFi why Balancer, despite having similar features, is behind Uniswap or even SushiSwap in terms of number of users or even volume,” he said. “[…] A common reason is the UI and user experience which are not as good as Uni and Sushi, and the gas costs are higher. “
“I like Balancer as a product, the innovation and the features, but the fact is, it’s not as popular as Uni and Sushi for a number of reasons,” he concluded.
Balancer’s upcoming V2 seems in many ways geared towards addressing these concerns. The V2 will significantly reduce gas costs, enable gas-less arbitration deals, and further improve pool customizability by allowing users to set pool curvature parameters.
In an interview with Cointelegraph, Balancer co-founder and CEO Fernando Martinelli said Arthur’s comments were both welcome and useful.
“Arthur and Su Zhu reviewed all of the DeFi logs in this episode of UCC and spoke openly and harshly about Balancers. It was important constructive feedback. “
That kind of feedback and input is what makes VC investments just as valuable, says Martinelli. While some projects choose to forego traditional VC elevations instead of being more committed to the community, other companies are actively participating in the governance and growth of a protocol.
“Different investors help in different ways: some help with connections, some with more technical expertise, and others just help with strategy and brainstorming sessions,” Martinelli said.
This dynamic will become increasingly important as 2021 progresses as VCs, unlike more traditional business units, increasingly need to interact with DAOs. Rather than just passively investing in cheap rounds, VCs need to bring real value to the table.
“We increasingly expect VCs and investors to be active in our forums, discord channels, and the community in general. This is important as we move to a fully community-driven protocol over time. “