Thousands of new projects join the crypto-ecosystem every month, but a select few of them make it past their grass-roots stage. This is mainly due to the project not having enough funding to maintain its marketing, developers, and other team members until it gains traction. However, gaining investment in the crypto world is not as daunting as it seems, so here at Lunar Strategy, we’ve put together a full checklist to raise funds for Web3 projects.
Before we show you the full checklist, it’s essential to understand what the incentivize is to potential investors. In the Web3 world, you can incentivize investors by offering pre-sale tokens or early insights into the project. However, at the end of the day, investors are looking to make a return, so a pre-sale round where tokens are sold cheaply is the most common incentivize you can give to crypto VCs (Venture Capitalists). Ensuring you understand your incentivize means:
Pre-sales in crypto are successful for the same reason they are in TradFi. They allow those with money to invest in the potential to hedge their bets against a particular narrative. If you’re a perpetual exchange, for example, investors may believe that is the future of DeFi, and investing in pre-sale tokens is a great risk/reward ratio for them. Pre-sale tokens are also cheap enough that they allow venture capitalists to have a low strike rate and still be profitable.
However, pre-sales with large token incentives can be looked down upon by the crypto community, so it’s important to manage expectations and understand what will happen if you sell too many! There are plenty of other ways to raise funds in Web3.
Another piece of the puzzle is understanding what investors are looking for. There is a multitude of answers to this, but here are the main three:
Let’s face it; investors are mostly looking to maximize their Return-on-Investment (ROI) whether that be in the short or long term. Making sure you’re aware of this and are letting the investor know exactly what the potential upside looks like is incredibly important. If someone asked you to invest in something, one of the first things you would probably ask is; what’s in it for me? Use that mindset when approaching investors.
Investors' potential ROI is based on your current valuation and what portion of equity you’re willing to give away for capital. The higher the valuation, the less potential return of investors.
Building on our previous point, it’s also important to consider whether the investors you’re pitching to are active or passive. Active investors are essentially part of the team, playing an integral role as an advisor in your decision-making, whilst passive investors are purely providing capital. Each provides its own pros and cons, but a necessary decision to make.
Other than maximizing an investor's ROI, you can provide them value by compounding their current partnerships or business. Ask yourself, how can I provide value to my potential investors without having to let go of more of my projects tokens? This could include finding synergies between your project and another partnership they may have or by providing early information to a group that they run.
So without further ado, here are key points to consider and a full checklist to raise funds in Web3.
Your project pitch deck should be professional, straight to the point, and engaging. Investors are looking at hundreds of different pitch decks, so if yours doesn’t catch their attention immediately, the rest of the deck doesn’t matter!
Key points it should cover are:
Although pitch decks are often seen as a crossover with TradFi, they are equally important in Web3 alongside whitepapers. Elementary to any successful crypto project is their whitepaper which explains exactly what they’re doing and why. On the other hand, your pitch deck is suited more towards what investors want to see, such as potential return on investment, why your project's token will increase in value, and what the catalysts are for that to happen.
As we mentioned above, venture capitalist investments are a great option for raising capital in Web3. However, you must find ones that resonate with the problem you’re trying to solve. Not only will they be more likely to invest in your project, but they are also less likely to dump a large portion of their tokens once their tokens unlock.
To find said VCs, you should be networking with like-minded individuals and projects which have experience in fundraising and understand what to look for. Also, VCs that resonate with your project is more likely to accept a longer vesting schedule, which will reduce overall selling pressure which benefits you and your community.
Luckily enough, our experts at Lunar Strategy have created a full Web3 investment funds list which includes some of the top VCs currently investing in the Web3 space. Despite our thorough list, not all your Web3 investment has to come from top VCs, especially if you’re a smaller project. Instead, you could choose to go down the fair launch route through a launchpad, which gives investors an equal opportunity to help you raise funds.
As seen via the infographic above, Web3 investment growth outpaced all other sectors by a mile, showing us that they are interested; you just need to get their attention.
Launchpads are fundraising platforms that give everyone, not just VCs a chance to invest in early projects before they’re publicly listed. Launchpads offer the ability to be an entirely fair launch, meaning first come first serve, or whitelist your applications beforehand.
In crypto, the amount of investment you receive is often down to the number of eyes that see your project before it launches. You can have the best project in the world but receive no investment because the platform you’re using isn’t popular. When looking to do a pre or public sale, consider looking at the most popular launchpads. Not only are they often decentralized, but they also garner a lot of attention from large VCs and smaller retailers, which maximizes reach in both sectors.
With all this knowledge in the bank, you might be asking yourself, how do I approach investors in the first place? Well, now that major business is now done online, not all meetings need to be done in person.
With the expansion of Web3, individuals are leveraging social media platforms not traditionally done for businesses to find potential investors for their projects. Platforms like Twitter or Linkedin are hotbeds for investors as the Web3 business culture is much more informal than traditional methods. However, do not discount physical events, such as Web3 conferences, as a great way to network and meet potential investors face-to-face. After all, it’s much easier to make a good impression in person than online.
With your strategy in place and your platform decided, it’s now for the last step to raising funds in Web3; perfecting your pitch! Taking all the advice mentioned above, it’s important to create a concise pitch to investors that shows your model and why it will benefit them. Remember, you must appease investors' interests if you want them to give you any money to begin with. That start’s with telling them what you will use their funds for and ends with how they will see a return on their investment.
Pitching can be a nerve-wracking experience, so practice makes perfect. Make sure you know the ins and outs of our project before walking into any fundraising event so you can answer any questions asked by potential investors.
At the end of the day, there is no one size fits all guide to raising funds in Web3, but following this checklist will ensure you’re as ready as you can be! You should take confidence in the fact that hundreds of top companies are already using Web3 technology to their advantage. The infographic below shows the likes of Tesla, Meta, and Instagram, amongst many others, willing to take steps into the Web3 world.
So do you think you’re ready to start raising funds in Web3? If you still have more questions, join us on Telegram, Twitter, or Discord and ask away; we would be happy to help! Alternatively, we hope you got value from our full checklist to raise funds in Web3 and even more value from our aticle on The Complete Web3 VC Investment Funds List.