Seizing the Opportunity: Why NOW is the Best Time to Invest in Fresh Web3 Companies
Sometimes the boring and fearful bear market can make you rich even faster than the prominent bull
Key takeaways if you don’t have time to read the full article:
- In the world of venture capital, most investments happen when the market is booming. However, many investors face disappointment when, by the time their tokens are available, the market has already turned bearish, making their investments nearly worthless.
- Not everyone understands that the bear market is actually an opportunity to carefully select the best project to invest in. You have more time to make better-weighted decisions and bet on the right horse.
- By sticking with a “diamond hands” strategy, and holding onto selected project tokens beyond TGE, investors can benefit significantly. Exercising patience allows them to receive a substantial portion of tokens, which, when the market turns bullish again, can lead to substantial profits.
Venture Capital investing in the world of Web3 is like a rollercoaster ride with its highs and lows. For years, the prevailing wisdom has been to invest during bull markets, but this approach often leads to disappointment as tokens lose their value once the market turns bearish — leaving investors’ money trapped. However, a shift in strategy is gaining traction among savvy investors — allocating capital to the hidden-gem projects during the bear market or market reversal. This article explores why now is the best time to invest in fresh Web3 companies from a VC perspective.
The Bull and Bear Market Conundrum
In traditional investing, bull markets are seen as the ideal time to invest, characterized by rising asset prices and investor optimism. However, this conventional wisdom doesn’t always translate well in the Web3 space. When VCs pour money into projects during a bull run, they often find themselves in a precarious situation. By the time their tokens are vested, the market sentiment may have shifted dramatically, causing the value of their investments to plummet. This unfortunate scenario has led to significant losses for many VC firms.
"Reflecting on missed chances, the echoes of lost opportunities resonate. The elusive 1000x ventures slipped through our grasp, and now, amidst the bear market, regret lingers. Time waits for none; the whispers of what could have been haunt our choices. 🐻💭 #LostOpportunities #MarketReflections" — Ihor Kubalskyi, CEO at Qbein.net
The Bear Market Strategy
To avoid the pitfalls of investing in the midst of a bull market, some VCs are turning to a contrarian approach — investing during the bear market or at the point of market reversal. Here’s why this strategy is gaining momentum:
1. Lower Valuations: During a bear market, asset prices are often at their lowest point, presenting an opportunity for VCs to acquire tokens and equity in Web3 companies at a fraction of their peak prices. This can lead to a more favorable risk-reward profile for investors.
2. Potential for Significant Returns: When investing during a bear market, VCs are positioning themselves for potential exponential gains during the subsequent bull run. As the market recovers, the value of their holdings can skyrocket, resulting in substantial returns on investment.
3. Longer Vesting Periods: On the bear market Web3 projects typically have longer token vesting periods compared to the bull market. This means that when VCs invest during crypto winter, they have more time to see their investments mature and appreciate in value, without the pressure of an immediate market exit.
4. Selectivity and Due Diligence: A bear market strategy encourages VCs to be more selective and diligent in their investment choices. This approach can lead to more thoughtful investments in projects with strong fundamentals and potential for long-term success.
5. Mitigating Risk: By investing in projects that have already weathered the storm of a bear market and demonstrated resilience, VCs can reduce the inherent risks associated with early-stage Web3 ventures.
In the ever-evolving landscape of Web3, timing is crucial for VC investors. While investing during bull markets might seem like the logical choice, the volatile nature of the market can lead to disappointment and significant losses. The emerging bear market strategy, on the other hand, offers an alternative approach that prioritizes value, resilience, and long-term growth.
Carefully selected projects that can perform well during the crypto winter have much higher chances of capitalizing in the next summer and beyond. They will emerge with working products, validated product-market fits, and huge user tractions.
The current market conditions, characterized by lower valuations and the potential for significant returns, make NOW the best time for VCs to invest in fresh Web3 companies. By carefully selecting projects, conducting thorough due diligence, and taking advantage of extended vesting periods, VCs can position themselves for success.
🧬🏆 Venture Vault has vetted more than 200 promising Web3 companies. Feel free to reach out to us through the form available on our official website and we will share our deal flow with your VC for free.