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In mid-2022, venture capital firms such as Andreessen Horowitz (a16z) and Binance Labs have invested $4.5 billion and $500 million respectively. However, the bear market conditions are making many VCs nervous as total investments plunged 66% to his $4.98 billion in Q3 2022.
A bear market is ideal for separating greedy communities from value-oriented communities that contribute to building innovative technical solutions. A strong and close-knit investor community allows him to support the Web3 project even in volatile market conditions. An Initial DEX Offering (IDO) is just one of many ways to find suitable investors for your Web3 project. Combined with on-chain analytics tools and investment refund options, IDO provides a secure investment space for both investors and startups.
In 2013, Web3’s investment began its evolutionary journey with an Initial Coin Offering (ICO). And the ICO, which he raised over $22.4 billion in 2017 and 2018, had a lot of problems. The most unfortunate issue is that more than 80% of those ICOs were scams and investor protection was severely lacking. Additionally, ICOs were centralized and pre-mining unfairly favored project teams over investors.
To address these shortcomings, the Raven Protocol conducted its first IDO in June 2019. IDO will enable Web3 projects to pool funds from individual investors by launching project tokens on a decentralized exchange. With no centralized intermediaries involved, this investment strategy can provide instant liquidity access and faster trading opportunities. Startups also don’t have to pay commissions to intermediaries to facilitate investment.
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Web3 projects no longer require permissions to list tokens, so there is no unnecessary wait. Without a centralized approval process, the community takes the initiative to review projects and tokens. Therefore, new projects grow their reach organically without the need for formal advertising or marketing support. The community is responsible for ensuring that genuine project tokens are registered.
However, this poses a challenge for the project founders. Management must find the right investors to provide long-term support for the project. He buys and sells project tokens indiscriminately on the DEX for immediate profit, with harmful consequences. Therefore, startups need a screening procedure to find a trustworthy investor community that will consistently fund their development stage.
On-Chain Analytics: A Searchlight For Finding Investor Communities
Leveraging the immutable data storage capabilities of blockchain technology, on-chain analytics gives startup founders the tools they need to find the right investors. Project teams can then assess investor sentiment to understand their interest in funding a particular project over the long term. For example, if an investor “HODLs” her NFT collectibles, it means they are bullish on her NFTs and may support new his NFT projects. Therefore, analyzing investor activity on-chain will help the project allocate token supply during public sale rounds.
On-chain, activity-based public selling has emerged as a popular investment strategy for building customized investor communities that fit a project’s vision. Web3 startups can design their own criteria and parameters for screening investor applications with verifiable investment records. For example, their requirement may mean acting as a liquidity provider on a DEX, or that he holds $5,000 worth of cryptocurrency for six months. This helps the startup identify communities with common interests in the product before onboarding.
On-chain analytics ensure high-quality individual investor participation and help projects find and seed the right investor community. However, investors should also have a safety net to protect against participating in questionable projects. The refund option is one of his ways to ensure that unscrupulous projects and dedicated management teams do not cheat investors. After all, no one wants a repeat of the 2017/2018 ICO debacle.
Suppose the project is successful and maintains interest in the token for a pre-determined period of time. The community can quantify success or failure by the percentage change in asset price from the date of first sale. No refund option is available to investors if the Project Tokens maintain their desired price within the time period. However, if the asset price falls significantly, the project will have to pay back the investors.
Art photographer Dave Krugman once compared NFT communities to the mycelium of fungal networks that thrive on symbiotic nutrition. In many ways, Web3’s investment space is similar to the Mycelium network. Investors and project founders have a mutually beneficial and mutually beneficial relationship. Finding the right investment community is therefore essential for the sustained growth and development of the Web3 ecosystem as a whole.
Apart from funding opportunities, the investment community provides a forum for ideas and creates exciting collaboration opportunities. These communities can disrupt the industry and form feedback loops to strengthen each other. In this long crypto winter, a strong investor community will help create a strong sense of belonging and affinity for the project. This will lead to organic growth and pave the way for an eventual crypto market resurgence.
Hassan (Hatu) Sheikh is Chief Marketing Officer and Strategy Officer at DAO Maker.
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