Why are there so many Web3 startups?
This week, Pitchbook published their latest Emerging Tech Indicator (ETI) report which tracks early stage investment activity amongst the world’s most successful venture capital firms to “gauge which areas of tech are grabbing VCs’ attention”. In Q3, the sector that received the largest amount of VC dollars according to the ETI report was Web3 with nearly $900 million. That’s more than fintech, biotech, security, ecommerce, gaming, and dozens of other mainstream industries.And Q3 wasn’t the first time that Web3 topped the ETI report. In fact, Web3 has led the ETI rankings for 5 consecutive quarters now. Over the past 12 months, there has been over $6.5 billion of ETI capital invested into Web3, which is more than double that of the next highest category of fintech at $2.7 billion.Even with all the ongoing challenges across cryptocurrency, which has seen its combined market capitalization decline by 2/3 since last November, investment interest in the sector remains stronger than other industries. Why? Because entrepreneurs still want to start Web3 companies.Building a good Web3 startup is hard. Explaining what makes a startup Web3 in the first place is even harder. Here are a few attempts. Leading Web3 investor A16Z describes Web3 as “the internet owned by the builders and users, orchestrated with tokens”. Ethereum co-founder Gavin Wood, who coined the term Web3, describes it as “an alternative vision of the web, where the services that we use are purely algorithmic things hosted by everybody”. Web3 has also been called “the hyperfinancialization of all human existence” and where “every product is simultaneously an investment opportunity”. Pretty confusing right?
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