I chat with entrepreneurs all day, everyday. They range from founders of companies my old firm invested millions in, to tiny angel investments of mine, to random internet strangers looking for feedback.
Over the last few months the most common conversation I’ve had with each of the aforementioned founder types has been around the web3 craze and whether or not they should be adding web3 into their pitch to improve their chances of fundraising.
I don’t blame them. If you’re in the startup world, you would have to be wildly oblivious to not wonder what this movement’s impact on your company is.
When you see investors like my good friend Julia Lipton of Awesome People Ventures 100% shift their investment strategy to web3 it’s hard to ignore.
Btw - this is not a struggling investor deciding to hard pivot to save her career. Julia switching to web3 would be like a baseball player who already batted .370 right-handed switching to batting lefty because she *knew* she’d do better. For you non-baseball fans out there, it meant she was already great and chose to change to be even greater.
That is the kind of hype you have to pay attention to. And so do I think it’s an important wave? Yes, I do.
That said, I treat this question the same way I treat any other question that asks “should I do X to increase my chances of fundraising?”
To that, my answer is “no.”
No, you shouldn’t make your company a web3 company to improve your fundraising chances.
No, you shouldn’t find a co-founder to eliminate doubts about being a solo founder during fundraising.
No, you shouldn’t first build a prototype or run an MVP test just to entice investors.
No, you shouldn’t close your first sale to enhance the outcome of your fundraise.
Good thought. Here’s the catch:
Fundraising is not a process completely disjointed from your company. As I’ve shared in the past, I believe Fundraising is just the process of helping investors discover you’re a great company.
When you think about fundraising through this lens, then you realize you should never do anything with the sole purpose of improving fundraising. But that doesn’t mean you shouldn’t do any of the actions I listed above. They’re just things you would do to improve your company.
For example, being a solo founder is extremely difficult and not for everyone. The renowned startup accelerator YC rarely accepts solo founders. Being a solo founder can raise doubts within investors’ minds. But that is not the reason you should find a co-founder. Find a co-founder if you believe it will improve your company’s chance of success. Think deeply about why and how finding a co-founder could improve your company and use that as the rubric. The impact on fundraising will follow from there.
I would say something very similar to the rest of the hypothetical questions. There are very strong reasons to run an MVP, to close revenue quickly, or even to transition your company to web3 and the results may make you more attractive to some investors…but not across the board and not for every company.
Web3 is a fascinating frontier of development that much of the investing community has started leaning into. That on its own is NOT a good reason to change your company. As I’ve told every founder who I’ve discussed this with (even the ones who I did suggest consider a web3 angle for their company), you first have to deeply believe that is the right path for the company. Web3 is in its infancy and I believe sustained growth for most startups in the space is years off. Choosing it by no means guarantees success.
Without the tools and infrastructure built for web2, developing for web3 will require more time and effort; it will be expensive. That means founders embarking on a web3 startup will in some ways require even more passion and excitement than other founders to stay the course.
So if you’re thinking about web3, read a ton. Immerse yourself in the space. Talk to experts. Develop points of view and ask people in web3 to challenge them. If after all that you’re still excited, then think about the move to web3. If you’re truly making a decision to build the best company you can, then it will be great for fundraising. If you’re doing it superficially to chase the hype, it will be terrible for your company and your fundraise.