The Silent Killers of 90% of Web3 Startups
What About Misplaced Intent and A Lack of Genuine Belief?
In the age of blockchain and decentralization, Web3 companies are popping up like mushrooms after it rains. This is not surprising, given what the potential Web3 holds, which is the very user-centric web and leveraging decentralized blockchain network.
But the sad truth is that as many as 90% of these new businesses fail. Even though it’s easy to blame a lack of market fit or money, the truth is often more complicated.
Web3 and Its Promise
Web3 is the next step in the evolution of the internet. It shifts from a centralized system (Web2) to one managed by and for the people. It uses underlining blockchain technology to make the digital environment more transparent, hard to censor, and empower users.
Web3 can help improve trust, security, and efficiency in various industries, from finance to logistics. But it will be challenging to make these claims come true without hurdles.
The Surprising Web3 Startup Failure Rate
Different analyses of the startup landscape show that 90% of Web3 startups fail. Most people think these mistakes are caused by not having enough money, problems with regulations or a poorly defined market fit. But when I look closer, I see that these failures are often also caused by structural problems and a need for more focus on important things like marketing and community building.
Source: Forbes > https://www.forbes.com/sites/forbestechcouncil/2023/04/10/revolutionizing-startups-with-web3-technology/?sh=1a82f23b6802
The Structural Deficiencies in Web3 Startups
The need for clearly outlined processes is one of the most common problems that Web3 startups face. A chaotic, unstructured method can delay decisions, cause communication to break down, and cause resources to be wasted.
For example, the Ethereum-based prediction market Augur faced many problems because its development and decision-making process weren’t well-defined.
In the same way, not having clear roles and responsibilities can lead to inefficiency, chaos, and wasted time. As shown by the fall of the DAO, a Web3 project built on Ethereum was attacked terribly because the team didn’t have clear roles, rules, and oversight among the team.
Source: https://www.coindesk.com/learn/understanding-the-dao-attack/
Without responsibility and accountability, team members have little reason to do their jobs to the best of their abilities. I have seen many promising projects fail because the team members didn’t feel responsible for their jobs and results.
Other important problems include a lack of communication among the team members and not enough incentives for them. A Web3 startup is a team effort; if the team doesn’t feel appreciated and valued or is kept in the dark, it can make them less motivated and committed.
For example, Basis, a stablecoin project that got $133 million in funding, had to shut down in the end because of problems with internal communication and incentives.
Many founders who start Web3 don’t make good and proper plans, so their projects don’t go anywhere and become directionless over a while. I have seen how a lack of strategic planning can bring down a profitable new business.
For example, Tezos, a blockchain startup that raised over $232 million, could have planned better, which led to legal fights and disagreements within the company.
Companies that don’t deliver on their promises can quickly lose trust and reputation. For example, BitConnect, a site for lending and exchanging cryptocurrency, made big promises about returns but turned out to be a Ponzi scheme, which caused it to fail and lead to lawsuits.
Source: https://www.justice.gov/opa/pr/bitconnect-founder-indicted-global-24-billion-cryptocurrency-scheme
The Neglected Marketing and Branding in Web3 Startups
Web3 startups need good marketing and branding to succeed like any other business. Yet, many founders miss this critical point because they are too focused on the product or technology.
The story of Siacoin, a decentralized cloud storage tool, is a great example of this. Even though they had a better product, they had trouble getting people to use it because they were not good at marketing or getting the word out.
Despite Sia’s fantastic product, it gave rivals like Filecoin the edge because they were better at marketing.
Source: https://filecoin.io/
Marketing and branding are important parts of a startup’s growth and should not be considered a secondary function, so keeping that in mind is essential. With the right marketing plan, a new business can build brand awareness, reach its target audience, and set itself apart from competitors.
The Missing Element of Community Building in Web3 Startups
In the Web3 space, building communities isn’t a choice; it’s a must. Because Web3 is open-source and democratic, a strong, involved group is a big part of what makes a project work. Take the case of Bitcoin, which grew and evolved because it had a strong and committed group behind it.
But because most Web3 owners come from tech-heavy backgrounds, they tend to forget how important is building communities. They do not fully understand that in Web3, the community is not just an audience, but also a part of the project that helps it grow and develop.
The Role of Intent in Web3 Startups
The ‘intent’ of a Web3 technology startup goes beyond its business plan. It is at the heart of the company’s purpose and values. A startup can fail if it has the wrong goals, like putting short-term profits ahead of long-term value creation.
During the cryptocurrency boom of 2017–2018, for example, many Initial Coin Offering (ICO) scams happened because their intent was to make money off of the hype, not to deliver real value.
Source: https://cointelegraph.com/news/new-study-says-80-percent-of-icos-conducted-in-2017-were-scams
The Importance of Genuine Belief in the Web3 Ecosystem
Believing in what we do keeps us motivated during difficult times.
Believing that Web3 technology has the power to change things is important for success. If the founders of a startup really believe in what Web3 can do, they are more likely to be able to overcome challenges, inspire their teams, and win over stakeholders. On the other hand, founders who lack genuine belief often try half-heartedly and make concessions, which can lead to failure.
The Effect of a Lack of Respect and Appreciation in the Team
A lack of respect and appreciation can lead to a disconnect among team members, hampering collaboration and productivity.
For example, in my time of advising Web3 startups, I have seen that when founders don’t recognize their team’s hard work, it often leads to low morale, high churn, and in the end, the failure of the project.
How to Cultivate Proper Intent, Belief, Structure, and Marketing and Community Focus?
The challenges that Web3 startups face are big, but they are not impossible to solve.
Founders can greatly increase their chances of success by making sure their goals are in line with their mission, making sure they really believe in Web3, setting up efficient processes, clearly defining roles and responsibilities, holding team members accountable, giving teams the right incentives at the right time, and keeping their promises.
A focus on early and strategic marketing and community building should also form part of this strategy.
To sum up, Web3 is a new frontier in the digital world that opens up a huge range of opportunities. However, the fact that so many Web3 startups fail makes it important to look inward. We can help build a robust and more successful Web3 ecosystem by fixing problems like wrong intentions, lack of real belief, structural flaws, poor marketing, and lack of community involvement.
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