Investments in Web3 initiatives were the hottest ticket for venture capitalists. Although the markets have shifted downward recently, the sector saw unprecedented investments of over $30 billion last year. Web3 Entrepreneurs are busy disrupting the current internet ecosystems with emerging blockchain applications. Raising funds to leverage decentralized technology has become critical when harnessing the imaginations of budding innovators.
However, speak to any founder across any industry and they will tell you that access to funding is now more scarce as investors become risk-averse. Founding teams should be prepared to pitch, work hard and iterate constantly.
A new approach to startup crowdfunding
How can we solve the headache of fundraising and provide founders with the space needed to create their visions for Web3? Laura Moreby, Head of Communications at Cloudfunding, a launchpad developed by Lena Instruments with Flare Network, explains the premise of the platform. Contributors are granted exclusive access to fully vetted crypto projects and other incentives in a unique way. The extra benefit is that they can still maintain custody of their original investments.
“CloudFunding is a hugely important development in the funding of crypto startups because it allows projects to raise funds and have access to a stable cash flow while lowering contributors’ risk as much as possible. The new launchpad also provides other support to projects such as community forums, smart contract audits, legal advice, and banking solutions through Lena Instruments’ experts.”
Founders in the World of Web3 are passionate and consider themselves to be contributing to the next version of the internet. However, it is common for founders to either surrender their position or get pushed out by investors.
For a nascent industry like Blockchain, this change in leadership is risky and potentially damaging long term as communities are often built around the initial vision of the founder or founding team. So how can projects hold onto the reigns of leadership and pay the bills?
“The stable cash flow received by the start-ups will allow them to pay bills, provide for their needs and work out their long-term financial plan while allowing their community to keep up to date with deliverables and milestones made possible by their contributions,” explains Moreby.
Advancing the evolution of launchpad investments
Blockchain companies and entrepreneurs have become familiar with the launchpad model of funding. To date, launchpads have provided an investor-friendly landscape that facilitates growth. They provide access to a pool of investors seeking to support the decentralized finance ecosystem. It is often used alongside the deep pockets of Venture Capitalist (VC) funds but as the VCs globally tighten their purse strings even further, a creative vision for the decentralized future of funding is timely.
Projects are beginning to scale after developing their products and services, this is a crucial time for the Web3 industry as a whole to be supported.
“CloudFunding offers unique, low-risk, and revolutionary investing solutions compared to other launchpads. It was designed for the purpose of lowering the risk on communities. CloudFunding contributions come from the rewards earned by users’ Flare or Songbird capital and not from the capital itself. Through this model, CloudFunding provides a secure and low-risk crowdfunding mechanism, as supporters can dedicate anything from 1% to 100% of the rewards their principal generates to fund the projects they believe in, all while retaining their original investment,” says Moreby.
Peer-to-peer project support
As the world of Web3 grows, founders are willing to reach out to established resources for financial help. They invite investors to sit at the decision-making table and often relinquish some control over the developments within the organization. It also places an extra layer of pressure on a market that is already pushing the limits of technology.
Web3 is all about community. To maintain this essential ingredient, peer-to-peer funding solutions, creative crowdfunding and the introduction of DAOs for early-stage support of projects will be key. CloudFunding provides a way for projects to get financial support and establish some industry foundations, without damaging the relationship between the founder and his/her community.
Unlike established industries, there are fewer business models to follow, fewer organizational cultures and fewer failures to help navigate the potholes along the way. Furthermore, the emotional attachment that comes with a founder’s new venture is now not only important for that particular venture but essential for the entire Web3 ecosystem.
“The community is at the heart of any blockchain venture, and it is common within the crypto space for community members to help raise funds and educate others. Due to the decentralized nature of blockchain technologies, communities play a huge part in driving progress. This enables projects to become a reality. Using the concept of crowdfunding to enable the community to support projects is really exciting. It will open up opportunities for startups that have never been available before,” explains Moreby.
Having access to funds for early-stage startups in Web3 is vital if the industry is to foster new talent and encourage further adoption.
What are the key ingredients for blockchain startups?
Seasoned investors will tell you that all teams need to have a key value proposition and roadmap. What other features are communities and investors looking for when they start to back the founders of the future?
For Moreby, honesty, meticulous planning, understanding the market opportunity and a dedicated team are crucial components of blockchain projects that are starting out today.
“Be honest and have a clear idea of what you are planning to achieve with your project. Know where you are in your project’s roadmap as meticulous planning usually leads to success.”
In addition to the above traits, a team needs to have a thorough understanding of the potential market opportunity. “It’s important to recognize your strengths and weaknesses compared to other solutions out there. Its important one doesn’t destroy the market by entering it. If your value proposition is to offer cheaper services at all costs, it will drive your competitors to offer cheaper services no matter what until there is no money to be made at all by you or them,” continues Moreby.
Last but not least, Moreby believes that all projects should build a strong, dedicated team but also offer incentives to hold onto them.
Lisa Gibbons is the Editorial Director at Grit Daily.
