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Introduction to early Web3 startup financing

2022-06-24 04:08:03Chainlink Oracle

Whether it's Web2 still Web3 startup , Financing is one of the most difficult and important challenges . However ,Web3 Ecology and Web2 The difference is that , Entrepreneurs can raise money in an unprecedented decentralized way . 

For those who are in the early stage of entrepreneurship Web3 The company is , The best way is like Web2 Start up companies get a start-up fund first . But in the subsequent financing round ,Web2 and Web3 Startups will start on different paths .

This article will explore the following topics and Web3 How startups respond :

  • Early entrepreneurial stage

  • Start up funds and pre-seed Round of financing channels

  • How to get financing from professional investors

  • Web3 The unique seed round financing channel in the field

Early entrepreneurial stage

“ Seed stage ” It usually refers to the first financing of a startup company . However , Some investors think the seed stage is more like some kind of “ gradient ” Not a phase . Early investors Parul Singh For the seed stage, the following “ Gradient division ”:

At present Web3 The early financing scale of the project is expanding , Already exceeded Singh stay 2018 The scale of the seed stage gradient proposed in

According to the 2021 An article in Forbes magazine in ,2020 The average financing amount of the seed stage in is 150 Thousands of dollars , and 2021 In, it increased to 330 Thousands of dollars . some Web3 The company is even pre-seed The wheel has melted into 300 Thousands of dollars . 

Although the capital market is right Web3 Very interested in , but Web3 Startups still face multiple challenges in the process of financing , And its financing channels are different from those of traditional start-ups . 

To understand these differences , It is necessary to carry out specific research on the early financing stage .

Web3 Start up company pre-seed Financing channels

stay pre-seed In financing round , Most founders are still in the stage of creative presentation and prototype development . Many people regard this stage as “ Project start-up phase ”, Not the real financing stage .

In order to enable their own start-ups to start smoothly , Entrepreneurs often need to use some special financing channels , Obtain funds without transferring the company's equity , For example, apply for bonus or loan . besides , Founders can also invest out of their own pockets , Or if they are lucky, they can find an angel investor who is willing to provide them with early venture capital .

However , Most entrepreneurs can't rely on their own contacts to get money at first . Therefore, entrepreneurship bonus is a key channel to obtain free startup funds , This is in Web3 Especially popular in ecology .  

Entrepreneurial bonuses from traditional institutions

Many traditional institutions from the public and private sectors are looking for opportunities to enter Web3 field , Provide entrepreneurial bonuses for potential startups , To stimulate innovation . 

Here are some examples :

  • Of the European Commission “ Horizon plan ” stay “ Horizon 2020” Value distributed in the plan 1.8 Billion euros of rewards and bonuses . 

  • Launched by Santander bank “ Santander global blockchain challenge ” Pay entrepreneurial bonuses to blockchain startups , The total amount of the bonus pool is 12 Thousands of euros .

  • The venture capital fund of UNICEF provides up to... For startups with the potential to benefit human society 10 Million dollars of non equity investment .

Considerations

This kind of bonus usually requires that the startup company must come from a certain region or industry . The government's bonus incentive plan particularly encourages the use of blockchain technology to create value for society .

in addition , Many traditional bonus or subsidy schemes require founders to bear a certain proportion of the cost . such as , These bonuses will subsidize 70% Prototype development costs , meanwhile , The founder or team needs to take on the rest 30% Cost of .

come from Web3 Start up bonus in the industry

stay Web3 In the industry , There are also big companies that want to inspire startups to use their technology , To expand its ecological scale . Especially those in The etheric fang 、Cardano or Solana Enterprises developing ecology on the blockchain . However , The bonuses of these large companies or project teams are usually very popular , Therefore, entrepreneurs can also consider some bonus plans released by emerging blockchain networks . Once the product concept is validated on a certain chain , It will be easier to raise money , Extend to other chains .

A bonus plan focused on a blockchain :

  • Ethereal  “ Ecosystem support program ”

  • Polkadot Of Web3 The foundation

  • Avalanche Of Multiverse Incentive plan

  • NEAR Agreed bonus plan

  • Celo The foundation's bonus plan

  • Harmony Ecosystem fund

  • Bonus plan of cross chain foundation

Complete list of bonus plans , Please visit :

blockchaingrants.org

besides , Some more Web3 The bonus plan of the organization is not limited to a certain blockchain , For example, blockchain infrastructure companies and cryptocurrency trading platform .

Not limited to the bonus plan of a certain blockchain :

  • Chainlink The community incentive program provides bonuses to the development team , Motivate them to Chainlink Eco development tools or integrations Chainlink technology .

  • Filecoin Release the developer bonus plan , Designed for new products 、 Business and tools to provide financial support , enhance Filecoin The function of .

  • Kraken Launch a developer bonus program , Support new projects in mature blockchain ecology such as bitcoin and Ethereum .

  • Coinbase Launch a developer bonus program , Support developers to develop and maintain crypto ecology .

Considerations

Such bonus schemes are usually very popular , Soon the quota was full . Therefore, Google Alerts must be specially set up , In order to be notified as soon as possible .

in addition , The purpose of this kind of bonus is often to encourage developers to participate in a certain technology ecology , Therefore, you must use a certain technology or focus on a certain application scenario to pass the application , But this may not match the actual situation of startups .

Like other bonuses , The amount of such bonuses is only enough to develop product prototypes , But after that, we still need to find funding channels immediately , To support subsequent product development . 

Web3 The incubator 、 Accelerator and founder community

Although business incubators and accelerators may not provide financing channels , But they can provide training for early start-ups 、 Guidance and workplace . 

The business incubation program aims to help entrepreneurs from the very beginning , Let them learn the business skills they need , And prepare for the subsequent financing round . For blockchain startups , The follow-up financing round will not necessarily adopt the traditional financing method , So you have to choose one that focuses on Web3 Business incubators in the field .

Web3 Business incubators and founder communities :

  • Startup with Chainlink plan yes Chainlink Labs Designed for founders Web3 Business plan , It can access the global founder network for early blockchain projects , And provide them with the guidance they need , Successfully released blockchain project .

  • Klaytn The business incubation plan focuses on DeFi、 Meta universe 、GameFi And startups in the creator's economy .

  • R3 Our risk development program is specifically developed for the use of distributed ledger technology B2B Solutions for startups to provide financing , from pre-seed It goes on until A Round of funding .

  • dlab INCUBATE By SOSV and EMURGO( notes :Cardano Investors ) Initiated incubator , For founders around the world pre-seed Financing and abundant resources , Help them develop and test blockchain products and services .

  • Orange DAO yes Y Combinator A community created by alumni , Designed for early Web3 Start up companies to finance .

Web3 Accelerator :

  • Alliance DAO yes Web3 Accelerator and founder community .

  • Outlier Ventures Of Base Camp yes Open Metaverse Entrepreneurial accelerator .

  • Tachyon It is aimed at early blockchains and Web3 An accelerator for startups .

Y Combinator、Techstars and Antler And other traditional accelerators are also investing in blockchain startups . 

incubator list and F6S And other financing platforms for founders have also released a complete list of global entrepreneurship plans , Some of them are specifically targeted at blockchain startups . 

Although incubators are not the main financing channels , But it is still very suitable for founders who lack entrepreneurial experience or do not know how to communicate with investors . They will provide the founders with the necessary guidance , Teach them how to write a business plan for Web3 The industry develops specific market entry strategies .

Web3 Crowd-funding

Crowdfunding has been popular for a long time , But because of Web3 Blockchain technology is adopted , Therefore, its crowdfunding model is slightly different . such as ,Juicebox Known as the “ decentralized Kickstarter”, It is based on the open smart contract on Ethereum , It is a very popular crowdfunding platform at present .Juicebox For the purpose of DAO The project from Web3 Raise money in the community .Kickstarter stay 2021 year 12 The announcement released in May said that it plans to launch a new Web3 platform , by Celo Innovative projects on the blockchain initiate crowdfunding .Gitcoin Provide decentralized bonuses for new projects and start-ups focusing on open source development . And Gitcoin equally ,DoraHacks It also continuously releases financing 、 Bonus 、 Bounties and hacking activities , The only difference is that it focuses more on the Asian market .

Although these financing channels can be the icing on the cake for the start of the project , But the amount is not enough to support long-term product development . Founders still need to raise more funds to carry out subsequent product development .

Web3 Seed rounds and subsequent financing rounds of start-ups

At this stage , The company will sell its equity to an institutional or professional investor for financing , Professional investors may be entrepreneurial accelerators or angel investors , It may also be an early venture capital institution . 

then , Financial capital will be converted into productive capital , That is, by acquiring hardware 、 Net worth from technology and human resources . about Web3 Come on , Human capital refers to hiring new employees or signing community contributors through a developer program .

No matter where the money comes from , All start-ups must meet some basic requirements before starting seed round financing . First , They must understand the criteria investors use to assess the potential of startups ; secondly , Founders must know what kind of investors they need . The second point is for Web3 Especially important for founders , Because many investors may be right Web3 The potential of start-ups is very promising , But they may not be able to provide guidance for their development .

Understand what investors think about Web3 Expectations of startups

Traditional VCs browse thousands of investment projects every year , And a decision-making mechanism will be established , A quick round of screening before a formal assessment . Generally speaking , Venture capital pair Web3 The screening criteria for start-ups are similar , But there are still some differences .

The following figure is a typical VC transaction evaluation process , Including how to search for opportunities and what criteria to use for screening at each evaluation stage . 

This decision-making mechanism will filter out at the beginning 83% Investment opportunities , Only 17% The project will move to the next stage

Many of these are basic standards , about Web3 The same applies to enterprises . such as , Founder's previous entrepreneurial record and product or market entry (GTM) Strategy , These evaluation criteria are important for Web2 and Web3 It is equally important for enterprises . However ,Web3 The moat and trading structure of Web2 Somewhat different .

about Web3 Come on , The moat emphasizes “ Conversion cost ” and “ Network effect ”

Web3 The essence of is decentralization , So usually Web3 Projects are open source , And maintained by a decentralized network of contributors . in other words , Any project may branch or derive new projects . such as , At the end of this article ,Defi Llama Currently listed on the 254 individual Uniswap Bifurcated items ,Uniswap It's a lot of Decentralized trading platform (DEX) Innovative protocols used . However , Although there are many competitors in Ethereum , such as SushiSwap, but Uniswap Still TVL( notes : Total lock up ) The highest decentralized trading platform . This fully shows that in Web3 field , Time and community are more important moats , Not the code itself . therefore , VCs like products that build strong communities , And introduce unique functions to improve user stickiness and switching costs , Prevent users from being robbed by subsequent forked projects .

Web3 The transaction structure has different considerations in terms of equity dilution

about Web2 For startups , The negotiation of the transaction structure focuses on how to divide the equity ratio between current and future investors and the founding team . Once the startup enters ABC Round of funding , The founders' and early investors' equity will be diluted . therefore , Many venture capital agreements take this risk into account , And set provisions to avoid dilution of equity . 

However , about Web3 For startups , Private equity usually does not exceed A round . Once the start-up company forms a certain momentum in its target market , It will adopt decentralized financing mechanism , Instead of raising money through private placement . Although equity dilution is still a problem , But many Web3 Startups will only face this problem in the early stages of financing , Instead of repeatedly encountering this problem in multiple rounds of private placement .

Web3 Founders must know what kind of investors they need

Though some Web3 Project selection is financed entirely through the community , But for most Web3 For startups , A better choice is to find a major investor , And continuously get guidance in the market fluctuations . This is essentially a long-term relationship . although Web3 Project comparison Web2 The growth rate is even faster , But this kind of high-speed growth and the whole crypto The market cycle is closely related , Therefore, the volatility is also very large . 

And experienced investors will look at the longer term , And will not pursue short-term returns . therefore , The relationship between investors and founders is often compared to marriage , Both sides need to know what their expectations are . We have already talked about the investor's expectations in the above , Now let's take a look at what the founders should expect .

Find someone who understands Web3 Investors

2021 year , A large number of investors have entered Web3 field , Many of them are still in the exploratory stage . Although they are right Web3 Very interested , But they are not able to give sufficient guidance to the invested enterprises , Help them expand their business and community .

However , majority Web3 The demand of start-ups for investors is more than financial support , Expect a range of added value :

  • Guidance on equity distribution

  • Guidance on how to create an open source community

  • Join a larger network of resources

  • Gain business and operational expertise

The founder must make due adjustments to the venture capital firm's current portfolio , Find out whether these invested enterprises have received the necessary support from venture capital . Because founders and VCs usually have different expectations about the specific form of support .Forward Partners Published a piece called 《More Than Money》 The report of , Mentioned 3/5 The founder of VCs felt that he did not get the support that VCs initially promised . 

The rise of decentralized investment

DAO( notes : Decentralized autonomous organization ) It is also a unique financing channel . Joint investment (investor syndicates) It's not a new concept ,AngelList And other platforms also have many traditional joint investors . however DAO about Web3 The charm of the founders lies in their decentralization of financing , No venture capital approval is required . 

such as , Investors can be in Syndicate DAO Establish decentralized “ Investment club ”, Jointly invest in projects in the form of capital pool .Stacker Ventures Also a DAO, Invest exclusively in early-stage start-ups , The goal is “ Coordinate and unify the economic incentives of community investors and the founding team ”. 

Web3 Transforming the financing process , But founders still need to focus on fundamentals

Web3 Startups can raise money in many ways , Including access to start-up funds 、 Entrepreneurship bonus and participation in incubation program .Web3 The field has greatly innovated financing channels , Created a decentralized crowdfunding mechanism . Although many people believe that these innovations will change the way VCs invest in Web3 How the field works , But the founders must remember one thing , That is, no matter what form of financing, the project must have certain fundamentals , This is no different from traditional venture capital . Basic bread includes sound technology 、 Clear business plan 、 Pragmatic product roadmap and reliable leadership team .

For all that , Many founders still lack skills 、 Networking and operational expertise , Unable to win the favor of senior investors . therefore , In the early Web3 Items can be added specifically for Web3 An entrepreneur's incubation program or entrepreneur community , And take a key step on the financing path . 

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