In mid-2022, venture capital firms like Andreessen Horowitz (a16z) and Binance Labs invested $4.5 billion and $500 million, respectively. However, bear market conditions are making many venture capitalists nervous, with total investments plummeting 66% to $4.98 billion in the third quarter of 2022. This represents an opportunity to recapture the core philosophy of the industry. of blockchain/cryptocurrencies: decentralized investments supported by the community and collective ownership.

A bear market is ideal for separating greedy communities from value-oriented communities that will contribute to building innovative technology solutions. A strong and united investor community can support Web3 projects even in the midst of volatile market conditions. Initial DEX Offerings (IDO) are just one of many methods of finding suitable investors for a Web3 project. IDOs, combined with on-chain analytics tools and investment redemption options, provide a safe investment space for investors and startups alike.

In 2013, the Web3 investment began its evolutionary journey with Initial Coin Offerings (ICOs). And while ICOs raised more than $22.4 billion during 2017 and 2018, they were plagued with problems. The most unfortunate problem was that more than 80% of ICOs were scams, so they fell short of investor protection. Also, ICOs were centralized, and previous mining unfairly favored project teams over investors.

To address these shortcomings, the Raven protocol conducted its first IDO in June 2019. IDOs allow Web3 projects to pool funds from retail investors by launching project tokens on a decentralized exchange. Because there are no centralized brokers involved, this investment strategy can offer instant access to liquidity and faster trading opportunities. New companies also do not have to pay fees to any intermediaries for facilitating investments.

Since Web3 projects no longer need permission to list their tokens, there is no unnecessary waiting time. Without centralized approval procedures, the community takes the lead in vetting projects and tokens. Thus, a new project organically expands its scope without the need for formal advertising and marketing support. The community is responsible for making sure you get genuine project tokens.

However, this poses a challenge for project founders. The management team must find suitable investors to provide long-term support to the projects. Indiscriminate buying and selling of project tokens on DEXs for quick profit will have detrimental consequences. Therefore, startups need screening procedures to find trustworthy investor communities that will constantly finance them during the development stages.

On-chain analysis: the reflector to find investor communities

Leveraging the immutable data storage facilities of blockchain technology, on-chain analytics provides startup founders with the tools they need to find suitable investors. Project teams can then gauge investor sentiment to understand their interest in funding specific projects over the long term. For example, if investors “HODL” an NFT collectible, that means they are bullish on NFTs and might support new NFT projects. Therefore, analyzing on-chain investor activity helps projects allocate token supplies during public sale rounds.

On-chain activity-based public sales have emerged as a popular investment strategy for building personalized investor communities compatible with a project vision. Web3 startups can design their own criteria and parameters to evaluate applications from investors with a demonstrable investment history. For example, your requirements might mean working as a liquidity provider on DEXs or holding $5,000 worth of cryptocurrency for six months. This helps new companies identify a community with a common interest in a product before onboarding.

On-chain analysis incorporates high-quality retail investors, helping projects find and seed suitable investor communities. However, investors must also have safety nets to protect them from participating in dubious projects. A refund option is a way to ensure that malicious projects and uncompromising management teams do not mislead investors. After all, nobody wants a repeat of the ICO fiasco of 2017/2018.

Suppose a project is successful and maintains interest in the token for a predetermined period of time. The community can quantify success or failure in terms of percentage changes in asset price since the day of the initial sale. If the project token maintains the desired price for the period of time, investors cannot take advantage of the redemption option. However, if the asset price falls sharply, the project will have to repay investors.

Fine art photographer Dave Krugman once compared NFT communities to the mycelium of the fungal web, which thrives on symbiotic nutrition. In many ways, the Web3 investment space is similar to a mycelium web. Investors and project founders have a reciprocal and mutually beneficial relationship. Therefore, finding the right investment community for the sustained growth and development of the entire Web3 ecosystem is vital.

In addition to funding opportunities, investment communities will also provide a space for brainstorming and create exciting opportunities for collaboration. These communities could disrupt the industry, forming a feedback loop to strengthen each other. In this long crypto winter, a strong community of investors will help create a powerful sense of ownership and affinity for a project. This will lead to organic growth, paving the way for an eventual revival of the crypto market.

Hassan (Hatu) Sheikh is Director of Marketing and Strategy at DAO Maker.