Why Is it Profitable to Invest in Web3 Startups Before 2022 Ends?

This year, funding for Web3 space more than doubled to over $1 billion.

Investors' view of Web3 assets is often unfavorable as the markets experience volatility, with most investors feeling pessimistic about their capacity to withstand the crisis. For instance, people believed that Bitcoin was doing well since it had achieved an all-time high, even though the whole crypto market had decreased from $3 trillion in November 2021 to $1 trillion as we started the second half of 2022. But finally, Bitcoin followed the sad market trend downhill. The cost of bitcoin decreased by more than 70%. The fact that UST/Luna failed, Three Arrow Capital (3AC) went bankrupt, and Celsius stopped allowing withdrawals didn't help.

However, not everyone is giving up on their Web3 investments. Despite all the meltdowns, blockchain is thought to be the biggest victor since it still exhibits transparency. Traditional finance will never be able to give the market the kind of useful information that this on-chain openness does. Anyone interested in Web3 assets must carefully consider their alternatives in light of these.

Sometimes, during bull markets, there is undue optimism, and during bad markets, there is unjustified anxiety and skepticism. Before investing in a Web3 start-up, consider the following five factors:

The team

A Web3 company idea is simple to launch, but maintaining, expanding, and running it is an entirely different challenge. Putting money into a company without capable management and a unified membership makes no sense. Possessing a reliable advisory board is also beneficial. This organization may offer helpful direction when it comes to organizing and carrying out development goals, hiring and maintaining staff, creating a positive corporate culture, and locating investors.

The marketplace and potential

Another important consideration is the market. A firm can continue to run normally—or even thrive—during economic downturns, especially if there is a sizable market and a high demand for the good or service in question. However, it might be challenging to locate one in the Web3 industry. Finding a company that stands out for providing a market that is unlikely to fail among the hundreds or thousands of others seeking capital might be challenging. Given the high rate of internet adoption in places outside the "developed world," the decentralized web's commercial niches are still mostly limited. Even in a developed country like the United States, there is still significant room for improvement in terms of the expertise and understanding of modern technology that underpins the product offerings of Web3 businesses. Many individuals still have misconceptions about or disdain for cryptocurrencies, NFTs, and other blockchain-based goods. Selecting an investment that has a good possibility of outperforming the existing market conditions as well as the presumptions and prejudices held by users, consumers, regulators, and the media is vital.

The technique or product

Similar to traditional investment, it is wise to seek businesses that provide essential services for daily life. FinTech businesses that focus on cutting-edge payment and other financial services are a smart place to start. There are times when businesses offer goods or services that are not viewed as necessities. Nevertheless, they could present a ground-breaking or highly inventive solution that can challenge accepted wisdom, develop brand-new market niches, or cater to institutional clients.

Choosing a company that can safeguard its technology or product is essential. It should have patents so that others cannot just copy what they provide. If industry titans can copy their business model or even outsmart it legally and technically, they cannot be successful. In addition, for startups without a technical founder or CTO, it might be necessary to consider hiring a CTO when a company's technical requirements are pressing, a significant technology upgrade is necessary, and the startup needs decisive and experienced technical leadership, such as when making tech purchases and corresponding with clients and business partners who are technically astute. Investments shouldn't be made in companies that can't show they have the necessary technical expertise and leadership.

The client or clients

A lucrative venture has the potential to develop further, and it can only be profitable if it already has clients. Never put money into a Web3 company that hasn't put its product or business plan to the test. You may determine whether a company strategy is successful and has room for expansion by identifying and researching your current clients. If a company hasn't even started providing services to actual clients yet, there are no market emotions to gauge. Rarely does it make sense to take a chance on a cutting-edge product or company concept? If you have the fortitude to take the risks, you must thoroughly research the market and possible client reactions.

The relationships and joint ventures

Additionally, it's critical to consider a Web3 company's strategic alliances or ties. Investigate the organizations or trade groups, business associates, authorities, and well-known corporate players the firm is associated with. Consider whether these ties do help the company succeed. Make sure it is a reasonable, long-term strategic alliance and not just a passing acquaintance or short-term affiliation. When a partner or strategic investor can persuade customers to utilize a product or service, that product becomes more acceptable.

Calculate the score for each criterion, takes careful consideration, intuition, and in-depth investigation to evaluate each component. There are undoubtedly numerous factors that might serve as a basis for choosing between Web3 investments. A sound business concept alone cannot constitute a solid investment choice. Additionally, it must be supported by a strong team, in line with market dynamics and potential, clearly acceptable to a sizeable client base, and has strategic alliances with key companies or authorities in the sector.

Always consider how you can help the project. if the endeavor sparks your interest, knowledge, or enthusiasm. Engage in community activities, enquire about issues, and look for methods to help. It is a wonderful opportunity to get to know the group.

SM Promotion: As the markets become more volatile, investors frequently have a negative opinion of Web3 assets and are generally skeptical about their ability to weather the crisis. For instance, because Bitcoin had reached a record high, many thought it was performing well. Depending on whether your investment satisfies 5 expert-backed requirements will determine if it is profitable to invest in web3 start-ups.

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