Globally, investors put $94 billion into Web3 projects between 2021 and 2023. The rise of Web3 could no longer be disputed in 2021 and early 2022. There were several reasons for this capital influx. Web3 succeeded Web2, which millions used, so alternative investors’ and venture capitalists’ appetites were enormous.
Another reason was the use and democratization of blockchain technology beyond the world of crypto, as Web3 runs on decentralized architecture. Private equity firms and venture capitalists competed to invest in these new projects. The race resulted in a lack of detailed project reviews in some cases and overvaluation of businesses in others.
An almost unlimited financing period started in 2021, but the landscape changed dramatically the following year. Inflation and soaring interest rates transformed the economic environment. Crypto winter and the collapse of FTX followed, and Web3 growth slowed down.
According to a CrunchBase report, Web3 project funding dropped by 78% in the first part of 2023 compared to 2021. Web3 platforms raised about $16 billion at the beginning of 2022 but only $3.6 billion in 2023.
The new reality of Web3 funding
Times have changed, and insufficient funding is no longer the main issue. As of February 2025, there are 16,631 Web3 companies with total funding of $111 billion.
The number of unicorns among them is 104. The figures may be impressive, but fundraising objectives tend to be harder to meet in the startup world. Fund managers are being more careful and seeking more mature investments, not early-stage firms.
In addition to these challenges, there are issues with centralized fundraising, such as the additional support needed, fees, and unpredictable results. Permissionless fundraising possibilities, such as Thena’s Liquidity Bootstrapping Pools (LBPs), have many benefits.
Securing funding in Web3 requires the effective articulation of a value proposition. Convincing traditional investors demands a strategic approach, and Web3 projects need to explore community funding mechanisms, innovative revenue models, and sustainable tokenomics to ensure viability.
Tokenomics is a crucial aspect of Web3 startups, and building a sustainable token model that aligns incentives and facilitates community participation requires careful consideration.
The veTHE token of Thena, the BNB Chain’s liquidity layer, symbolizes such a model and facilitates an open marketplace for liquidity, allowing protocols to execute customized liquidity management strategies via voting incentives. The unique approach guarantees protocols can scale, bootstrap, and maintain adequate liquidity.
Protocols deposit voting incentives to solve the initial liquidity cold-start, then adjust their liquidity levels by changing the weekly incentives deposit. The ve33 tokenomics structure brings liquidity to the most productive pools based on fees and trading volumes, ensuring efficient ecosystem-wide liquidity use.
Thena’s liquidity marketplace is designed to be both efficient and flexible, allowing protocol users to benefit from a reliable and adaptive trading environment. The liquidity pools are tailored to different strategies and asset pairs. There are advanced pools that combine dynamic fee structures with concentrated liquidity AMMs to improve user experience.Â
The issues with centralized funding: High fees and no help
Web3 projects need well-defined legal entities to navigate securities laws and anti-money laundering (AML) regulations. Jurisdictional approvals and adherence to financial regulations, such as KYC (Know Your Customer) and AML policies, are critical for institutional fundraising.
Traditional investors may not be familiar with the platform’s guidelines on token issuance or with niche concepts such as lockup periods.
Centralized entities often owe fees when funding Web3 projects, depending on the fundraising method and middlemen involved.
There are listing, fiat on-ramp, fundraising, custody, and legal fees, among others. Web3 projects pay fees to get listed on centralized exchanges or launchpads. If a centralized entity funds a Web3 project using fiat, it might incur fees from payment processors or banking partners.
Centralized platforms can take up to 10% of the total funds raised. VCs funding Web3 projects often incur legal fees for contracts, due diligence, and regulatory compliance.
Web3 projects also owe fees when receiving funding from centralized platforms. Some exchanges require projects to provide initial liquidity or commit to market-making agreements, incurring additional costs.
If a project intends to list its token on a centralized exchange post-funding, it will owe listing fees, which are quite hefty. Depending on the jurisdiction, projects may owe corporate or capital gains taxes on received funds.
The outcome can be unpredictable
The outcome of receiving centralized funding can be unexpected and not particularly pleasant. Let’s say a viable Web3 project raises millions from a well-known VC firm. The VC receives a portion of the total token supply at a discounted rate as part of the deal, and tokens are subject to a lockup period before the VC can sell them.
However, the firm decides to dump the tokens after the period ends. This triggers a sharp price drop as retail investors rush to sell, thinking the project is failing. The sudden selloff depletes available buy orders, leading to liquidity issues.
The project’s community loses trust, with early backers feeling betrayed because the project apparently prioritized centralized investors over long-term sustainability. In the worst case, authorities may suspect market manipulation and start investigating.
Web3 projects try to manage investor expectations but can’t control how centralized entities will act after providing funding. VC firms and institutional investors often have different incentives, leading to governance conflicts, unexpected dumping, or centralization risks that disrupt project growth. All of these risks underscore the need for decentralized funding.
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