The VC financing model fails web projects

Risk capital financing is the most sought -after form of support among the founders seeking capital to initiate operations, offering a percentage of capital in return. The problem is that, despite some funds of funds such as Sigma Capital, The financing of VC Web3 is the most difficult to obtain in the early stages of the founding trip. Despite a slight increase in financing in the first quarter of 2024, the support of VC for new web3 companies continues to decrease, falling 82% year after year.

This exclusivity of the opportunity continues to set aside many potential taxpayers and limits the diversity of ideas that receive funds. It is a long -standing problem in the starting ecosystem that has persisted in the web3 space, despite the promise of decentralization of blockchain.

Why the traditional VC model web fault

Web3 projects often fight within the limitations of the traditional financing of VC due to the fundamental mismatch of incentives. VC tend to prioritize profits and short -term growth, which often do not align with nature promoted by experimentation and collaboration of web3 projects with the aim of creating the public good and building for social impact. Good public projects also lack the incentive of lucrative exits associated with profit companies.

Another factor that goes against the principles that guide the founders of web3 is decision making. The most popular VC funds centralize their decision -making process when it comes to financing decisions, leaving the fate of the new web3 companies in the hands of a few selected. This structure is in direct opposition to the spirit of decentralization and decision making directed by the community encouraged in the web3 ecosystem.

In addition, VC financing flows mainly to organizations that launch a token, than infrastructure tools and L2 are more likely to make compared to applications. That means that applications are much less likely to receive funds, even though they are, if no more important, to obtain user adoption.

The real question that ecosystem players should be done is, can new companies survive with the current reduction decrease? And what role can we play to change this trajectory?

Blockchain financing models

Blockchain technology presents a new kingdom of financing opportunities in the web3 space, particularly for those that build ambitious public goods projects, such as open source software.

Retroactive public financing, or RETROPGF, offers a great alternative to traditional financing by rewarding projects based on its impact proven instead of its speculative potential. In this context, output incentives are reinvented as rewards for creators who offer measurable results to ecosystems or society in general. A recent success story for RETROPGF is optimism, which has generated more than $ 2 billion in impact -based funds. RETROPGF groups financed by DAOS or ecosystem taxpayers create a consistent approach to finance public goods.

Another successful financing mechanism option for the construction of founders on web3 is fractional investment through NTFS. They can tokenize the value of their public projects, such as government rights, and allow a broader group of followers to contribute through micro-investments. This creates a diverse group of passionate investors who believe in the mission and the project growth trajectory.

A vc of the town

Quadratic financing, a mathematical formula for the distribution of financing based on the number of donors, has gained tensile on web3 thanks to its ability to take advantage of community support, amplifying smaller contributions from a large followers base as they match these funds With a bigger group. This guarantees that projects with generalized base support receive the greatest amount of funds, the night outside the playing field in a way that traditional financing models prioritize large investments of some players can never.

An example of how powerful can be a financing option is Cash. Projects such as Tornado Cash for those that investors may not gravitate, but users AMAN have received significant funds through quadratic funds.

By focusing on collective intelligence, this model encourages innovation in areas such as decentralized finances, social impact DAO and nft ecosystems that traditional VCs could overlook.

Chain property

In the heart of this new wave of capital allocation is in the property of the chain. Blockchain allows creators and builders to token their work, providing novel ways of monetizing and interacting with followers. An example of this are the Creator tokens, which allows subscription -based models through which fans pay a recurring rate to access the premium content. Mechanisms such as those that create more stable and recurring income flows in a space that thrives with volatility.

The additional benefit of transactions in the chain is that they make the flows of funds visible and auditable, reducing fraud and promoting trust, and by eliminating intermediaries, creators can build direct relationships with their audiences, ensuring that the value flows to those who believed in them the beginning.

New capital allocation category

This new capital allocation layer consisting of financing mechanisms such as community subsidies and quadratic financing has the potential to replace or complement the traditional risk capital in the Web3 ecosystem, which increases the probability of launching the next web3 unicorn.

Adopt and spread the availability of these financing options are important first steps on the way to ensure that the promise of web decentralization and equity becomes a reality, not just a vision.