VCs are ghosting web3 🚨 How to survive the funding drought ?
VCs are ghosting web3 🚨 How to survive the funding drought ?
Today's Agenda...
Let’s take a step back on the current state of web3 funding 🧐
A web3 VC shares his tips for weathering the storm 🌪️
⏰ Reading Time: 4 min
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Crypto Fundraising Trend on the last 3 years
Since the last bull run, funding in the web3 space has been nearly cut in half in terms of numbers of transactions. In some cases, funding amounts have been slashed by 6 or 7 times compared to the most prolific months of the previous bull run. 😳 Venture capitalists, who were once eager to invest, have dramatically scaled back, almost halting their investments in the sector. This has created a challenging environment for web3 entrepreneurs looking to raise early-stage funds. 😬
But all is not lost! In the interview that follows, a web3 VC shares crucial tips on how to navigate this tough funding landscape and boost your chances of success. 🚀
How to succeed in web3 early-stage funding ?
Navigating the funding process in web3 space can be complex. Drawing insights from industry experts like Benjamin Lavergne, Investment Principal at Consensys, we can outline a roadmap to increase the likelihood of success in securing Web3 early-stage funding.
You can find the full interview with Benjamin in the next episode of the Behind The Chain podcast, due out in 3 days.
1. Build a strong, aligned team
The foundation of any successful startup, especially in the highly competitive Web3 space, is the team. As Benjamin emphasizes,
"The first thing I look at is the team and what makes them uniquely qualified for the product or service they are proposing. It’s crucial to mirror your past experience with what you are building now."
This highlights the importance of assembling a team whose skills and experiences align closely with the project’s goals. Investors are more likely to trust a team that demonstrates not only expertise but also a deep understanding of the market and technology they are working with.
2. Understand and leverage market timing
Market timing is another critical factor that can make or break a startup. Benjamin advises that entrepreneurs should be able to clearly answer the question, "Why now?" Understanding macro trends and the current state of the market is vital. Benjamin points out,
"What are the market trends and tailwinds that make our product necessary now and not in three years?"
Successful startups often emerge at the right moment when the market is ripe for disruption. Identifying and capitalizing on these trends can significantly boost the appeal of your startup to potential investors.
3. Demonstrate traction with concrete metrics
Even at an early stage, having some form of traction is essential. Investors want to see evidence that your startup is gaining momentum. Benjamin notes,
"Even at the Early Stage, traction metrics like growth numbers, acquisition costs, MRR, ARR, margin, and LTV are crucial."
These metrics demonstrate that the startup is not just a concept but is already resonating with users or customers. Showing that you have a clear understanding of your business’s key performance indicators (KPIs) and that these metrics are trending positively will greatly enhance your chances of securing funding.
4. Optimize your approach to fundraising
The process of raising funds can be daunting, but optimizing your approach can make a significant difference. One of Benjamin’s key pieces of advice is to focus on getting introductions rather than cold contacting venture capitalists (VCs). He states,
"Try to get as many intros as possible when reaching out to VCs instead of contacting them directly."
Warm introductions carry more weight and increase the likelihood of getting a meeting with a potential investor. Leveraging your network to secure these introductions can set you apart from the numerous other startups vying for the same funds.
5. Align with strategic investors
In the Web3 space, it’s not just about getting any investor on board but about finding the right strategic partners. Benjamin emphasizes the importance of strategic investments that align with the long-term vision of the startup.
"Strategic investments are essential to stay at the forefront of innovation,"
he says. Partnering with investors who not only provide capital but also bring industry expertise, connections, and additional resources can be a game-changer for early-stage Web3 startups.
Conclusion
Securing funding in the Web3 space requires a combination of the right team, market timing, demonstrable traction, and a strategic approach to investor relations. By following these guidelines and learning from seasoned professionals like Benjamin Lavergne, startups can enhance their chances of success in the dynamic and rapidly evolving world of Web3. The road may be challenging, but with careful planning and execution, the potential rewards are immense.
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Disclaimer : The goal of this newsletter is to inform and produce content related to management in the world of Web3. It is not investment advice. Investments in crypto-assets and NFTs are risky and can result in the loss of your entire capital. Always conduct your own research and exercise caution.