by Eloisa Marchesoni, of Tokenomics.Agency, LTD.

The Web3 landscape can be challenging due to the rapid pace of innovation and the ever-changing nature of the blockchain ecosystem. It is important that investors and entrepreneurs stay informed, have a strong network of contacts in the industry, and carefully assess the risks and rewards of different projects. Columbus’ voyages serve as a historical example of how to overcome challenges and seize opportunities through perseverance, courage and vision, but he wouldn’t have gotten very far alone: ​​to his rescue came Isabel of Aragón.

The cost of building the three caravels for Columbus’s voyages may have been around 60,000 gold ducats, which would be equivalent to about $14 million at current exchange rates. The value of “imported” goods from the Spanish colonies in the Americas during the 16th century was around 10 million gold ducats per year ($2.5 billion today).

Key Performance Indicators

Those were other times: today, good venture capital means investing in a company with a strong management team, a clear and feasible business plan, and a product that answers a major market need. It is also important for the company to have a competitive advantage and a scalable business model.

Other factors to consider in a good trade are the size of the market opportunity, the potential for significant returns on the investment, and the level of risk involved. Additionally, it may be wise to invest in a company that has a diversified customer base and a strong financial track record.

In the world of venture capital, it is crucial to be able to identify and invest in promising projects to increase the chances of success. For this, it is important to establish parameters to determine cases of success and failure.

There are many types of KPIs that organizations in the Web3 space can use to measure their performance and track progress toward specific goals.

• User adoption and retention
• Transaction volume
• network activity
• Income

Other KPIs could include metrics related to safety and profitability. Let us focus now on this first aspect:

Tokenized audits

I closed one of my recent essays with a fail on an off-the-cuff idea that occurred to me. As a venture capital firm, it’s important that funded projects are audited before investing, to make sure everything is in the right place; however, it sometimes happens that despite seemingly perfect audits, something goes wrong. If an audit is done and paid for, perhaps by a VC of all the people, wouldn’t it be appropriate to give them some responsibility as well? Let’s tokenize them!

One solution that could be implemented is a smart contract with payment lock-in clauses: the audit firm could receive 50% of their payment upon completion, and the remaining 50% could be locked in for a period of two years. If all goes well with the project, the auditing company would receive the remaining payment as planned: if something goes wrong and the audit is found not to be thorough or accurate, the company will be left with only half of the payment, which in some respects they could still be too much.

Another key aspect of tokenizing audits is that they could no longer disappear or be changed, as we have seen so many times in this turbulent 2022. This approach would provide an additional level of peace of mind for VC firms, as it incentivizes the audit firm to thoroughly and accurately assess the project in order to receive your full payment. It would also serve as a deterrent for auditing firms to cut corners or overlook potential issues in order to get paid faster.

10 key points

From an investor’s point of view, it is important to consider the following ten points when evaluating a Web3 project:

1. Bugs in the source code can indicate a lack of attention to detail and potentially point to future problems.
2. While partnerships and collaborations can be beneficial, be wary of investing in projects that rely heavily on nepotism or friendships rather than solid business ventures.
3. An unlimited maximum supply of tokens can be a turnoff, as it suggests a lack of scarcity that could devalue the token.
4. Celebrity endorsements can often backfire and attract negative attention.
5. Lack of reserves can be a significant risk for investors, who could be forced into unexpected outlays
6. An anonymous (or masked) team is a red flag, as it raises questions about the accountability and transparency of the project.
7. A poorly designed website and lack of a social media presence denotes that the project is not properly managed and advertised.
8. The lack of events can indicate a lack of commitment in building a strong community.
9. Lawsuits, whether against or involving the project, always bring trouble
10. A clear roadmap outlining the direction and goals of the project is important to understanding the long-term vision and growth potential.

No joy for rude VCs

Many years ago I had lunch with someone. Inside the restaurant my date was very rude and rude to the waitress. I felt uncomfortable with such behavior and she intervened telling him that she considered it inappropriate. My date replied that we were paying for the food, so the waitress was our “slave” and we had the right to treat her however we wished.

This experience made me realize that there are people who think that money gives them the power and the right to treat others badly.

It is always better to be polite and respectful in business negotiations than to act as if everything is owed to us.

This type of attitude is not good under any circumstances and can even be counterproductive.

Venture capitalist landscape

In 2021, VCs invested more than $33 billion in cryptocurrency and blockchain startups that year, which is more than all previous years combined: two-thirds went to fundraising rounds with deal sizes exceeding $100 million.

The same year, the trend of professionals and talent moving from the web2 space to the web3 space became apparent, as big tech companies began laying off workers in anticipation of an economic downturn.

Firms that offer to trade, invest, exchange, and serve investors in digital assets led the pack with over 41% equity, but startups that built on the NFT, Web3, DAO, and Metaverse sub-sectors ranked second with 17% of the capital allocation.

In 2022, $40 billion was invested in various startups and projects, including decentralized finance (DeFi), Web3, and non-fungible tokens (NFTs). Some of the companies that raised significant amounts of money through funding rounds:

• Haun Ventures, which raised $1.5bn for two investment funds focused on Web3
• Huobi Global, which launched a billion-dollar fund focused on DeFi and Web3 projects
• Dapper Labs, the creator of NBA Top Shot, has launched a $725 million fund to support the development of its “Flow” blockchain.
• Dragonfly Capital raised $650 million for DeFi, metaverse and blockchain gaming startups Fireblocks, a digital asset custody platform, has raised $550 million in a Series E funding round.

The future

The cryptocurrency market will continue to attract investment from venture capital firms in 2023 despite recent turmoil and volatility. The quality of upcoming projects and the potential for growth in a bear market make the industry worth the risk. Although venture capitalists are more profit-oriented compared to business angels, it should be important to focus on projects with real impact and a positive contribution to social change.

• The DeFi sector is expected to continue to grow and mature, with the emergence of new projects focused on interoperability and cross-chain communication, and we will see new forms of decentralized capital markets, investment funds, and credit rating agencies.
• The inescapable rise of central bank digital currencies and the increasing adoption of stablecoins will shape the market.
• Ethereum is expected to continue to be the most widely adopted and capitalized Layer 1 blockchain.
• Reputation is also expected to become a crucial and pervasive aspect of Web3, with decentralized identities, able to switch between platforms, and projects like “Intuition.”
• Decentralized Science, or DeSci, will become a major use case for Web3 as IP-NFTs (Intellectual Property NFTs), which is used to turn scientific research into a native Web3 asset class.
• There will be more focus on regulating cryptocurrencies, but this should be considered good news for venture capitalists, as it will lessen the possibility of startup scammers operating in the so-called “grey area.”
• Filecoin is the world’s largest decentralized storage network, with over 4,000 storage providers contributing approximately 16 exabytes of storage capacity and will launch smart contracts via the “Filecoin Virtual Machine”, becoming a Layer 1 protocol complete, which allows the development of new uses. cases in the Web3 space.
• ZK-Rollups – Zero-knowledge proofs have grown in popularity in recent years, and ZK-Rollups have become a dominant tool for scaling Ethereum. In 2023, a broader range of use cases will be unlocked through the adoption of SDKs that enable ZK smart contracts to be programmed in applications, run off-chain, and verified and settled back on-chain. .
• BioDAO and IP-NFT: Decentralized Science (DeSci) has the potential to become a major Web3 use case, and organizations like Molecule are incorporating IP from leading chain universities, funded and supported by decentralized biotech organizations like VitaDAO.