Opinions expressed by australiabusinessblog.com contributors are their own.
If you’re reading this, chances are you’ll agree: starting a Web3 business feels daunting and confusing. At least that’s how I felt when I first started funding my business with Web3 early stage crowdfunding solutions. The learning curve felt almost out of reach. However, my perspective changed after sitting with my friend Metta World Peace – yes, the former Lakers legend who took home an NBA championship in 2010. He coached me on how his $1 billion Tru focused venture capital fund evaluates its portfolio investments.
“There are two types of founders,” Metta told me, the ones who “have the experience and education and then there are the founders who are the visionaries who know exactly where they want to be.” The founders he wants to invest in, he says, take calculated risks. “You want to take it one step at a time, make sure you build a good product, test it out before you spend too much money building the wrong engineering architecture, and be careful not to waste your investment money because I’ve seen so much people lose so much money so quickly.”
A calculated approach is more than necessary in the current volatile market. Despite the recent bankruptcy filing by crypto exchange FTX, entrepreneurs in the sector are building and innovating – and why shouldn’t they? The global blockchain market is still expected to be valued at around $67 billion by 2026, according to recent Cornell University Research. Even if Bitcoin falls, the total cryptocurrency Market capitalization stands at around $900 billion, and hundreds of Web3 projects have raised billions in funding. Despite the uncertain economic times, Metta still sees opportunities in this growing and emerging market, which is why he is investing in blockchain technology projects today.
However, not everyone sees it that way – venture capital investments do halved. That is why many entrepreneurs are turning to alternative financing options in addition to raising venture capital.
1. Raise funds and find investors
Have you ever invested in a traditional startup or even a crypto startup? Investing in new cryptocurrency projects is very accessible. Too easy, some might say, so you have to be very careful when using these products. There are a lot of fraudulent new projects in this industry so be sure to do your own research before losing money trying to make it.
On the other hand, it can be easier to raise money for yourself using crowdfunding tools than in a traditional financial setting. “Using crowdfunding tools is a new way for founders to raise money that appeals to founders who don’t have connections to investors, angels or venture capitalists,” explains Metta. In Silicon Valley, for example, it can be challenging to raise money through unsolicited emails and often a relationship with an investor is required to get a foot in the door. When you think about the hurdles and hurdles you must overcome in order to meet investors without an existing network, in addition to the legal paperwork that comes in the term sheets, navigating the world of venture capital can be a hassle. So many founders look to crowdfunding as an alternative to venture capital or as a complement to it.
Metta World Peace understands how important crowd-sourcing startups are to Web2’s future as it enters Web3. Since his unofficial retirement in 2017, Metta has shifted his focus to the entrepreneurial and tech industries, where he is both an investor and spokesperson for several startups and small businesses.
For example, Orbiit Technology is a company in Metta’s investment portfolio where he was an early investor. The company launched a virtual contest called “The Pitch”, which officially started at the end of October 2022 and ends on November 28, 2022. The contest aims to find the next up and coming founder of a unicorn startup. Metta enters the competition as a startup judge.
Think Shark Tank – but online. Startups compete for capital and in-kind awards to help them grow their businesses without losing equity. Metta will judge the competition along with Orbiiit founder Nader Navabi. Together they will evaluate the top 10 finalists, who will be selected through a public online voting process. The first place winner will receive $25,000 in cash and a one-on-one Zoom mentoring session with Metta and the investment committee.
However, not everyone can raise money or participate in “The Pitch”, for that matter – which is why saving and investing could be the way to go.
2. Saving and investing
Many new entrepreneurs start after saving, investing and then getting to work when their nest egg is ready to hatch. To get ahead, Metta says “you want to get an income stream as early as possible.” Being strategic about the job or side hustle you choose can also put you on the right track to achieving your entrepreneurial goals.
“Say you are building a coffee business. Join Starbucks to learn their systems so you can also earn some money from a day job. If you want to start a FinTech app, get a job with a VC, start in the mailroom. Do what you need to do to learn something that can meaningfully impact your own business,” he said. “Do this while also gradually saving money to self-finance your business, because the more you start your business, the more equity you can maintain and improve your business,” he continued.
To survive, says Metta, you always need extra money. Selling digital goods is a way to earn passive income to fund your startup, let’s say you sell original IP for example or you take advantage of secondary sales by buying low and selling high. “You can also save on payroll by paying your employees in equity, tokens or even NFTs in addition to cash.” Finally, if you’re on digital assets, you can put your money to work by locking them into decentralized finance platforms to earn yield – but remember to be very careful about the platforms you choose, as this option is very risky.
3. Build connections
“Building connections helps founders raise money,” says Metta. “If you don’t have connections, it’s going to be hard for you to get the seed money you need. Web3 gives platforms the ability to decentralize the way the money is raised.”
We live in a very social world. With so many opportunities, it can be easy to make the right connections if you stay active and make an effort to learn more. The most common way founders raise money when they don’t have connections with investors is by attracting seed investors and advisors who do. For example, in an insular community like Silicon Valley, it’s less about how many people you know and more about who you know. You can only know a few people, but if you know the right people in venture capital, those relationships can go a long way. Engaging an advisor who can create vetted introductions is a common way to plan pitch meetings. Give the advisor a small block of shares and he will work hard and long hours to open up his network and secure valuable pitch meetings.
Even if the investor succeeds, you can always ask the investor if he or she would like to make an introduction to another investor friend who he or she thinks would be a better fit. Always research the investor’s portfolio of startups to understand common themes, sectors and investment stage fit into that investor’s existing portfolio and what motivates them to invest. Also remember to keep the dollar value range within their typical check size because if it is outside their typical range they are more likely to succeed.
It’s still early. Good ideas come to the surface. If you have innovative concepts in mind, but don’t know how to integrate them into the traditional market, it might be time to get started as an australiabusinessblog.com. Who knows if Metta World Peace invests in your company?