Web3 Funding Is Down, Not Out Startups such as Purple Pay, Striker, Cult & Rain, Recur, VIBRA and Nifty's ceased operations over the past year. Starbucks, Nike, and Tencent also closed their Web3 divisions
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The Web3 space is riding high, but figuring out the scaling journey, particularly funding is still a concern among the startups. Five months into 2024, the world saw the US approve Bitcoin ETF, Bitcoin touching an all-time high of USD 75,830, and the fourth halving event.
Hong Kong debuted its ETF in April while Australia plans to follow suit by year's end. Rohit Jain of CoinDCX Ventures feels we are currently in a bull cycle, at least till year-end.
"The pivot towards AI by venture capitalists, as observed, isn't necessarily a judgment on Web3's potential but a strategic move towards currently thriving sectors. The downturn in crypto in the past two years was also a dampener but the market is looking up now and is poised for a bull run," concurs Vikram Subburaj, CEO, Giottus.
According to Crunchbase data, Q1 2024 represents the first increase in Web3 venture funding since Q4 2021. In 2024, Avail; Zbyte; and Fetcch have raised funds so far.
India's Web3 adoption has been on the rise, clocking in 10 million traders and over 1000 startups. The country's share of the worldwide Web3 developer community has grown from 3 per cent in 2018 to 12 per cent in 2023.
But then why has there been a funding crunch in the space with several Web3 players shutting down shops? Startups such as Purple Pay, Striker, Cult & Rain, Recur, VIBRA and Nifty's ceased operations over the past year. Starbucks, Nike, and Tencent also closed their Web3 divisions.
So, what does it mean for potential startups and founders in the space? Should one not consider entering the space courtesy of lack of funds or public interest?
For Roshan Dharia, CEO, Paxful the ability to raise vast sums of capital at heavily inflated valuations with nothing more than a white paper has led many first-time founders to believe they were invincible. According to him, 95 per cent of the Web3 startups would fail.
"That's not an indictment on the industry or the founders, it's just inexperience in building cash-flow generating businesses. Web3 startups that have survived through the market tumult have been those with time-tested business models like lending, currency swaps, and money transmission that were simplified through this bleeding-edge technology," he shares.
Brinc so far have made investments in 46 Web3 startups. "I'm looking for companies who are not in the hype, that maybe nobody cares about, and users would never know about that can make money and can capture value. Sometimes a layer would not be able to make money, but it's capturing value. The roll-ups will never make money so they cannot capture value, but it's like the thing that everyone's going to invest in," shares Shounak Shetty, Head of Web3, Brinc Startup Accelerator.
Subburaj notes that a resilient culture and nimble teams are crucial for startups to thrive in the Web 3.0 ecosystem.
Nischal Shetty of WazirX feels that utilization of open-source tools and building communities are key to kickstarting one's Web3 startup journey in case of fund scarcity.
"Primarily, the goal of the fund is to grow the ecosystem in India. And that's how we've structured ourselves collaboratively as compared to the rest," adds Parth Chaturvedi, Coinswitch.
Apart from VC funds, founders can try their luck with programs offered by accelerators such as Graviton Web3 Accelerator, Outlier Ventures, Fujitsu, Antler, and Google Cloud.
The global Web 3.0 market is expected to experience significant growth. The market is expected to expand from USD 0.4 billion in 2023 to reach USD 5.5 billion by 2030.
