Raising funds for a Web3 startup: green and red flags
Epic Web3 Weekly Newsletter
Hey there, Web3 builders 👋
This is the Epic Web3 Newsletter — a weekly dose of best practices & insights from the top industry experts to help you boost Web3 products.
🎉 Last week was full of growth, did you miss something?
We hosted insightful events on exciting topics — how to onboard non-crypto users and raise funds for a Web3 startup. Both were a huge success and we decided to bring you the main insights right here.
First things first. Let’s talk about money.
Raising funds for a Web3 startup can be even harder than building it. When you pitch to potential investors, selling yourself short, or overvaluing your business can play a cruel joke on you. So how to find investors to get off the ground?
To find solutions, we invited Sam Simmons, Web3 investor & advisor, and Josh Cross, Founder at DeFi Now, to cover all the do's and don'ts for raising capital in Web3.
When it comes to the “do’s”, it’s important to know what investors pay attention to when they are assessing a potential investment. According to Sam, this varies depending on the fundraising stage but for early-stage (pre-seed to seed) they look at the below as the highest priority:
1️⃣ Team: entrepreneurial experience, industry track record, intangibles;
2️⃣ Business Model: does the model make sense and what is the upside;
3️⃣ Valuation: what are the terms and what does it take to 10x+ investment;
4️⃣ Investors: who else is investing and how are they strategically aligned;
Already got it covered? Then think of what could kill your investor pitch. Sam says there are three main “dont’s” or mistakes, namely:
1️⃣ Overcomplicating the pitch: taking too long to explain the business instead of keeping it simple.
2️⃣ Overvaluing your business: valuing your business beyond what matches the market, may raise the wrong money but won’t attract smart investors.
3️⃣ Selling yourself short: not advertising founding team sufficiently, when at early stage it’s a big bet on the jockey rather than the horse.
These are just some of the highlights Sam and Josh covered but we’d like you to go and watch the full video to know:
— How to define a stage your company is at after getting PMF and preparing for growth?
— What are the downfalls of launching tokens too soon?
— How to decide whether you need funding and actually find good investors?
🧑💻 User onboarding in DeFi is cruel. Community Insights on how to do it right and make your users stay.
Onboarding users isn’t easy — especially when it comes to complex DeFi products.
If it may not scare a crypto-minded user, and you may not only onboard but also turn them into a loyal customer – with a non-crypto user it might not work. Normies may already flake at the step of connecting the wallet.
But here we have Abishek Dharshan, Product & Community Lead at Zerion, the smart & social Web3 wallet with over 220k monthly active users and over $1B in trading volume. We asked him main questions on how to build the onboarding right:
Q: Do products need to explain the DeFi terminology for their audience?
Of course. However, it’s super valuable for community leaders, product managers, and designers building retail and user-facing Web3 apps to not just explain the terminology but also ensure there are accessible guidelines wherever it’s possible (for both degens and normies).
You can use the ELI5 framework where you explain concepts like you’re explaining to a 5 year old (like what gas fees, liquidity pools, DeFi indexes, and other derivative concepts are).
What’s also important is localization. So try to involve the community and user generated content in the language and references that really align with your users’ needs.
Q: What are the top user fears? Why do they fall off during the onboarding?
There are three main red flags that generally cause a Web3 user to churn or not, especially for wallets and other non-custodial platforms:
— Security and privacy
People are worried about things to be operated in a decentralized and safe environment. Your users may tend to ask questions like “is this smart contract audited?” or “can this platform cross-associate my adresses?”. So, what you need to do here is to ensure a transparent and safe data storage in a detailed way to introduce trust at every step.
— Complex onboarding
Many newcomers to the world of Web3 can be overwhelmed by a complex interface. For example, when the number of steps in the onboarding process is unclear, users are more likely to churn. Explain what they need to do, as you guide them through your product.
— User experience
“What kind of chain does this platform support?”, “Do they have payment on-ramps and off-ramps?”, etc. — if user can’t find answers for such questions, they’re also more likely to fall off the onboarding.
Q: How to reduce barriers in payments transactions for non-crypto users?
There are two things you can think of:
— Use the best payment mechanism that users are most comfortable and familiar with. You can pick all the existing off-ramps and on-ramps and put them in a single API, thus giving your users options of payments they want to use. As an example, look at how MELD does it.
Editor’s note: MELD is a non-custodial DeFi protocol for lending and borrowing both fiat and cryptocurrencies.
— Be honest and transparent about how the off-ramps work. By doing that, you’ll essentially reduce the red flags that users get when they're evaluating your product over others.
These are some of the highlights Abishek shared during our virtual meetup — if you’re eager to get even more useful insights, watch the full video with the Epic Web3 subscription.
No need to say that everything in Web3 is fast-changing — you know it for sure. But yup, we can’t leave you without up-to-date news:
🍏Apple allows NFT sales on its app store — but there’s a catch. The tech giant applies its existing Web2 monetization structure and doesn’t allow crypto in transactions.
📱Telegram launches a new P2P crypto exchange. It’ll let users buy & sell crypto from each other directly through the Telegram app.
🤝 Bitwise launches a new Web3 ETF that invests in up to 40 Web3 companies. The top holdings include Coinbase, Roblox, Facebook, Unity Software, and more.
👩 Kim Kardashian's short crypto stint cost her $1.2M. The lady was fined for not disclosing how much she made shilling EMAX last June on her Instagram stories.
And that’s a wrap! Hope you found this week’s dose helpful 👋
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Sending growth your way,
Epic Web3