Disclosure: The ideas and opinions expressed here are only for the author and do not represent the ideas and ideas of the editorial of Crypto.
Venture Capital Funding is the most demanded form among founders in search of capital to bootstrap its operation, which in turn provides the percentage of equity. The problem is that despite some exceptions to money Sigma Capital, The web3 VC funding is the most difficult to get in the early stages of the founder trip. Despite a slight increase in funding in Q1 of 2024, VC banking continues to decline for web 3 startups, 82% Year after year.
This uniqueness of the opportunity bypasses many potential contributors and limits the diversity of ideas that receive funding. This startup is a long -standing issue in ecosystem that has remained in the web 3 space despite the promise of blockchain decentralization.
Why the traditional VC model web3 fails
Web 3 projects often struggle within the obstacles of traditional VC funding due to the fundamental mismatch of encouragement. VCs prefer benefits and short-term growth, which often do not align with web 3 projects using and cooperative nature, which is aimed at creating public good and building for social effects. Public good projects also lack the encouragement of attractive exit related to profit-profit businesses.
Another factor that goes against the principles directing the web 3 founders is to decide. The most popular VC funds centralize their decision-making process, when it comes to funding decisions, the web 3 in the hands of a few people leaves the destiny of start-up. The structure is directly opposed to the ethos of decentralization and community -leading decision -making decisions encouraged in the web3 ecosystem.
In addition, VC funding mostly flows for organizations that launch a token, which is more likely to do than the infrastructure tools and L2S apps. This means that the apps are very less likely to get funding, even if they are not more important to adopt the user.
Real questions should be asked by the players of the ecosystem, can startups live with the current decline of funding? And what role can we play in transferring this trajectory?
Blockchain operated money model
Blockchain Technology Web 3 introduces a new scope of opportunities for funding in Space, especially for the manufacture of those ambitious public goods projects such as open-sources software.
Retroactive public good funding, or retropGF, offers a great option for traditional funding by rewarding projects based on their proven effect rather than their speculative capacity. In this context, exit incentives are re -prepared as prizes for large -scale ecosystems or creators giving measuring results to society. A recent success story for retropGF is optimism, which has generated more than $ 2 billion in influence-based funding. The DAOS or ecosystem make a consistent approach to the funding of the retropGF pools funded by the contributors of the ecosystem.
The web3 has a partial investment through another successful funding mechanism option NTFs for the construction of founders. They can tokens the value of their public good projects, such as the rights of governance, and a broad pool of supporters to contribute through micro investment. It creates a diverse pool of passionate investors that believe in the mission and development trajectory of the project.
A People’s VC
A mathematical formula for funding distribution based on donor numbers, quadrilateral funding traction in web 3 for the ability to tap in community support, extending small contributions from the widespread base of supporters by matching these funds with a large pool. Has received This ensures that projects receive the most funding with broad grassroots support, in the evening, the evening can never prioritize larger investments from some players from the traditional funding model to the playground in the evening.
An example of how powerful such funding options can be is tornado cache. Projects such as tornado cash that cannot move towards investor, but the love of users has received significant funds through quagged money.
By focusing on collective intelligence, this model promotes innovation in areas such as decentralized finance, social impact DAOS, and NFT ecosystems that can ignore traditional VCs.
Chain ownership
This new wave of capital allocation is owned by the center. Blockchain allows creators and builders to tokens their work, which provides novel methods for mudification and attachment with supporters. The point has a case manufacturer token, which enables membership-based model to pay a recurring fee to reach the premium content. The mechanisms like them welcome more stable, recurring revenue currents at one place that thrive on instability.
The additional advantage of on-chain transactions is that they make funding flow visible and audible, reduce fraud and increase confidence, and by eliminating the mediators, manufacturers can make direct connections with their audiences, ensure that While doing that the value flows back to those who believed in them. beginning.
New capital allocation category
This new capital allocation layer, containing funding mechanisms such as community grants and quadratic financing, has the ability to change or complement traditional enterprise capital in the web 3 ecosystem, increasing the chances of launching the next web 3 unicorn.
Adopting and promoting the availability of these funding options is important on the route to ensure that the promise of decentralization and equity of the web3 becomes a reality, not just a vision.
