How to raise capital in Web3

I've seen over 1000+ Web3 pitch decks and 99% suck.

Here is how to raise capital for a Web3 product.

Raising a Web3 VC round is a psychological game, a battle of product market fit, and a testament to community.

I would say that those three pillars are arguably what's most important for raising a successful round. Remember, it's not about the money you raise but who you raise it from.

Founders often get greedy and disregard ethics when accepting capital. I've heard countless horror stories of the "smallest investor with the smallest check" always being the loudest.

Web3 brands need a cap table that will work alongside them to achieve their goals YET and recognize when they are overstepping the boundary. Entrepreneurship in Web3 is like a painting... obviously, Da Vinci had a plethora of fabricators, but at the end of the day, the masterpiece was HIS direction, creativity, and vision.

I'm convinced that refining the process of selecting venture funds will ultimately determine your ability to raise them due to the ethos of your conversation and the way you present the product.

EX: Founders who don't value their cap table often don't value their product, and that translates to the "underground" of Web3 VCs all understanding that this founder is playing the game for the wrong reasons.

Remember to be a capitalist.

In Web3, founders often feel like they have been changing the world since they were young, and they disguise their capitalistic intent with the perception of charity.

"Oh, we are truly changing the world." "Our product will better humanity."

VCs don't care. They want to make money for themselves, and companies like Tesla, SpaceX, and others have achieved some of the most significant philanthropic missions.

TLDR: Just because you think your product is a game changer doesn't mean it will make money. It needs to make money.

Community is your best friend.

At the forefront of every good Web3 company is the community that backs it. Community drives liquidity, and in this day and age, it's essential to have a community that reflects your brand's mission and longs for its success.

Nothing is more powerful than a group of intimately converted individuals who are truly immersed in a product ecosystem and will stop at nothing to see it succeed.

VCs love to see that your product has truly been engrained into the minds of avid consumers, as it showcases product market fit.

Don't let the cat out of the bag.

A product launch is irreversible.

Use the hype of a pre-product marketing campaign to your advantage.

When the facet of a "live product" is introduced, there are so many tangibles, and the speculation of immense returns for your investors is removed.

Even if your product does well (in your eyes), there is typically a difference in the depiction of success in the eyes of VCs looking for 50-100x's.

Stand out.

This is a bit redundant, but the contrarian always wins.

I've heard so many pitches, and it's almost like the founder is trying to tell me what they think I want to hear, yet the most enticing pitches are the ones that go against the grain and genuinely make an impact.

Unless your product is truly revolutionary and you are a genius, nine times our of 10, you are just optimizing or slightly altering something thats pre-existing in the market place.

Apple does this, and they have quite literally never been first. But they are always the best. VCs understand this and aren't always looking for a new game-changing brand.

Focus for the now.

The majority of pitches I've listened to are all "promising" things. And they come to the call with no tangible value or material.

It's all "will" statements of what the teams will do in the future.

Predicting and building for the future is good, but when pitching to a VC the focus should be on the NOW. What tangible things have been released, who is the current team, what is the stage of the product, do a demo, etc?

I yawn when I hear, " Oh, we have XYZ coming," and I glamour at the founders who show me a demo.

Urgency, Scarcity, and Exclusivity.

Reaching out to the VCs is always a bad idea, as you immediately forfeit your leverage and put the ball in their court.

There needs to always be a sense of urgency around VC rounds, which limits the time they have to decide.

If everyone has access, then the round is as good as dead. Exclusivity plays a massive psychological role in the minds of VCs when they ultimately make a decision.

It's also important to mention that typically, the best rounds (from a logistics standpoint) have the fewest investors, so keep it small.

SUMMARY:

Raising capital for a Web3 product hinges on three key pillars: product-market fit, community, and investor psychology. Success isn't just about the amount of money raised but also the quality of the investors involved. Founders should carefully select investors who align with their vision and avoid compromising ethics for quick capital. A strong, engaged community is crucial as it drives liquidity and demonstrates product-market fit to VCs.

When pitching, focus on current achievements and tangible progress rather than future promises. Stand out by being contrarian and offering something unique. Maintaining exclusivity and urgency in VC rounds is vital for preserving leverage, and keeping the number of investors small can lead to more successful funding rounds. Ultimately, the goal is to balance vision with practicality, ensuring the product is both innovative and financially viable.