How to diligence a Web3 Angel Investing?

Utkarsh Rai
Coinmonks

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Why Angel Investing?

Over the last few years, we have seen the exponential advancement in technology which was mainly fueled by remote work and the breakneck pace of globalization. Blockchain technologies have started emerging through these processes and have aided in globalization and further advancements.

This whole process has started to take a shape as an ecosystem of digital functions, acquiring talent beyond the normal horizon and aiding in the process of reaching a larger audience through different distributed channels.

This whole ecosystem creates an opportunity channel through which individuals and/or an entity can discover new, innovative and utility based ventures, get involved through angel investing in search of desirable return on investment and help in the advancement to Web3.

How to join an AngelList syndicate?

Usually Venture Capital(VP) are more focused towards specific industries and business models. Many people don’t have the required time to understand the whole process, they just need their returns. They can be an aggregator of the investors and project parties. They provide high liquidity in the pool on the same level as everyone else.

To join an AngelList syndicate, you need to go to AngelList and apply to become an investor. The process would require your current financial standings, and your desired result from the startups. After the team at AngelList reviews your application, you would be able to study and understand the companies entering the Web3 space and invest accordingly.

Criteria to diligence a Web3 Angel Investing

  • Team and project exploration

The most important criteria in Web3 space is the team. Are the team members credible? Do they have the required experience to back up their claim? Try to arrange meetings with the founders or the team members to validate such details. Explore the projects in the domain which has a high growth rate.

  • Valuation and Size

Projects in the Web3 space undergo rapid developments and lead to high saturations. Calculations need to be done to understand whether the current cost is appropriate or not. Market cap, the dividends through native tokens, and the fulfillment level can help in the valuation determination and reveal if the project is investable or not compared to the competition in the same market space.

  • Metrics and risk factors

In Web3 space, the data about the project is highly transparent. Using metrics based platforms one can analyze the monthly growth percentage that can lead to indication of project profitability and also show the space for internal growth. Taking into account the risk factors also play an important role as one has to weigh each and every risk factor.

  • Assessment of what and how

We have to ask some questions to improve our investment judgment. What important problem does the project solve? What is the utility of the project? How attractive can the project’s utility be for stakeholders? How will the team keep in check the deadlines?

  • Decision-making based on experience and review

It is logical to think that at some point, a similar kind of project was attempted, but not all gain traction and become successful. It would really help to make decisions based on the critical point of failure and matching it. Review from the community through twitter and discord could really help in understanding the quality and sentiment of people towards the project.

Top 3 questions for above said criteria

  • Profitability of the project

Is the project profitable based on the above points? Is there a possibility of growth of the project?

Deep-analysis of the project and the uniqueness in the market space that can’t be easily replicated and/or beaten creates an advantage and increases profitability.

  • Return on investment

How much return is one expecting? What are the generalized returns being yielded by the project?

This question depends highly on market competition and positioning. The data retrieved through survey and the progress will determine the returns.

  • Positioning

How do you want to position your investment? What strategy do you want to implement?

Will it be High-risk and High-reward or Low-risk and Low-reward?

Positioning your investment could help in minimizing risks.

Conclusion

The above criteria can be implemented in a smart way to minimize the risk in the investment of new projects. With time and experience one can easily analyze a project and make rational decisions based on their experience. The powerful and rapidly growing system of Web3 can reveal potential opportunities.

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Utkarsh Rai
Coinmonks

TryHackMe [0xC GURU] | Cybersecurity enthusiast | Computer Science Student | Writer, Thinker, Coder