This year’s bear market trajectory should be seen as a favorable opportunity for Web3 founders to raise capital and create cutting-edge products. Some of the strongest companies today were created during market downturns, and founders now have a real opportunity to ensure they are creating products and services that meet real, real needs and go beyond oversized checks to find the most appropriate business partnership.
Determining the best methods to finance your product and your business is of paramount importance and not a decision to be made in haste. It is an action that requires due diligence and a keen understanding of how the partnership will work and, more importantly, thrive in the face of adverse markets. However, before a founder embarks on the adventure of attracting investment, it is important that he can communicate the effectiveness of his product in current and future markets.
Only 0.05% of startups manage to secure venture capital (VC), and as such, one of the fundamental requirements for attracting investment is that your project be able to demonstrate a product-market fit designed to succeed. Although this may not apply to all investment scenarios, demonstrating that your product is useful to your target audience is crucial in the process of securing capital. So what exactly does a strong product-market fit look like?
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Decentralized investment vs private investment
After working tirelessly to create the best possible product for the market, you may now be ready to explore the various avenues of raising capital available to you. Due to the decentralized nature of Web3, startups can raise capital through the non-traditional means that have emerged in recent years, such as decentralized autonomous investment organizations (DAOs). The availability of crowdfunding in Web3, in turn, has raised the question of the value proposition of traditional venture capital and whether it is still needed in the industry.
The reality is that the vast majority of Web3 startups are still looking for VC investment. We have seen over 16,000 companies receive capital support from venture capitalists globally. This is likely due to the understanding that VCs can deliver value well beyond simply providing capital. It is their business experience, network and additional services that make them such compelling potential partners.
Unlike non-traditional investment vehicles, venture capitalists are also more likely to support startups over their lifetime, helping prepare for future fundraising while retaining the capabilities and discretion to step in. if the startup’s operations encounter obstacles along its roadmap.
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VCs also add value to startups through their business acumen, often offering decades of experience building and scaling businesses that can be used to develop strategies for success at every stage. of the business life cycle. The brand awareness that accompanies the investments of certain players should also not be underestimated. Such associations for startups early in their lifecycle can be a valuable resource for many projects to cut through the noise and establish their place in the industry.
With extensive industry relationships, VCs can also leverage this to play an important role in securing qualified personnel for portfolio projects. Innovative strategies such as hosting hackathons and developer events have proven to be an effective way to attract such talent.
Mastering the coding language has traditionally been a major barrier for developers entering the Web3 industry. Many Layer 1s use less common coding languages, which makes it difficult to attract developers to build applications. VCs can invest in training and education programs to enable a new cohort of skilled developer talent to migrate into the industry and help projects find the right talent to better fit their business.
Redirect the focus
Changing market conditions have led to a greater focus on business fundamentals and ensuring that products and services are developed to a higher caliber by a competent team that meets a relevant market need. Startups should also use this period to focus on nurturing and growing their community, which will have a major impact on the company’s success and long-term prospects. Indeed, many of the current industry giants such as Solana, Coinbase, Chainalysis, and Uniswap were built during previous bear markets.
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Bull runs typically see startups and VCs loaded with cash, encouraging them to continue without proper product-market adjustment. In contrast, bear markets require teams to build meaningful product and service implementation and carefully experiment with strong propositions. It’s also a time for founders to listen to their community and implement feedback, allowing for a more robust long-term offering.
In many ways, the dynamic between a startup and a VC can be seen as similar to personal relationships – building trust and investing in the bond through careful thought and consideration can have far-reaching impacts on both parties and their parties. stakeholders. In life, no relationship is unique, so ultimately startups must remain patient until they find a partner who is ready and willing to build on their future together.
Marek Sandrik is a principal at RockawayX, a venture capital firm that backs the founders of Web3. He earned a Bachelor of Arts in Economics and Business from University College London before earning an MBA from London Business School.
This article is for general informational purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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