Navigating the Web3 startup landscape with limited funds

The following is a guest post by Nischal Shetty, co-founder and President at Shardeum.

The bull market has shown signs of its arrival as the ecosystem looks forward to a market revival, which has been awaited for two years. In Web3, bear markets are generally considered the best time to build so that the products can withstand all adverse conditions and still learn to thrive and scale. However, sentiment plays an important role in crypto, meaning builders/consumers are far more optimistic about products when the market is up.

New builders will be more encouraged to build something from scratch amidst the larger optimism to reach an equally enthusiastic lot of consumers. So those who have spent the last two years understanding the market dynamics and studying the token movements closely might have a tougher time creating something as the funding landscape has become less generous in the past year. With several projects collapsing and others unable to live up to their initial hype, investors have tightened their pockets. 

According to Crunchbase data, In the first two quarters of 2023, funding dipped by 78% and 76%, respectively, compared to the same period in 2022. The Block further reported that in 2023, VCs injected $10.7 billion into crypto startups, a 68% decrease from the $33.3 billion in 2022.

Funding for Web3 startups has become scarcer, and venture capitalists have grown increasingly cautious. New BUIDLers must adapt their strategies to build and scale their startups with minimal seed funding.

Leveraging Open Source Tools and Communities

Utilizing open-source tools and building communities is at the core of building a Web3 startup with limited funds. Platforms like Ethereum, Polkadot, and Cosmos offer decentralized infrastructure and protocols, although their gas fees are somewhat concerning and not as friendly for beginners. Engaging with the open-source community fosters collaboration, learning, and contribution.

People with various expertise can come together, and if they are truly passionate about building something from scratch, they can reach into their pockets and pool in funds to help the initiative take off before revenues come in. Additionally, starting as a DAO right from the start will provide more autonomy to the community, where each individual can claim a stake in a certain number of tokens in exchange for contributing to the project. They can reap the benefits of the staked tokens later when they rise in value. 

This could be a great start to developing a Minimal Viable Product (MVP) and avoid unnecessary expenses. By identifying the essential features that address the immediate needs of the target audience, startups can prioritize development efforts and obtain valuable user feedback. This iterative approach allows for continuous improvement without significant financial outlay.

Creating Sustainable Growth Strategies

Scaling a Web3 startup on a shoestring budget requires a shift towards sustainable growth strategies. Rather than relying on costly marketing campaigns, startups should focus on organic growth through community-building and word-of-mouth referrals. Engaging with potential users on social media platforms and attending industry events can generate traction without hefty financial investments.

Organizing meet-ups in different cities with interested communities who can also grow the ecosystem can help raise awareness and enable different members to help scale new projects. Exploring grant programs and hackathons tailored for Web3 startups can provide a much-needed lifeline. Many organizations offer funding opportunities for innovative projects, while hackathons offer exposure and potential funding for standout ideas. =

These initiatives enable startups to showcase their skills and ideas to potential investors while mitigating financial constraints. Creating strategic alliances with existing and well-established startups can amplify resources and overcome limitations. By collaborating with complementary ventures, startups can share costs, pool resources, and leverage each other’s expertise. This collective approach fosters innovation and problem-solving and expands market reach without substantial financial investments.

Additionally, seeking mentorship from industry leaders who have built bootstrapped products can be a great way to tap into practical experiences and real-time feedback on the industry pulse.

Embracing the ethos of bootstrapping and iteration is crucial for Web3 startups with minimal funds. Instead of solely relying on external funding, startups can self-fund or use revenue generated from early adopters to fuel growth. Continuously iterating on the product based on user feedback ensures progress toward the vision while conserving financial resources.

In conclusion, while securing substantial funding may pose challenges for Web3 startups, it is not an insurmountable barrier. By leveraging open-source tools, developing a lean MVP, prioritizing sustainable growth, tapping into grant programs and hackathons, fostering collaborations, and embracing bootstrapping and iteration, entrepreneurs can navigate the Web3 landscape with limited funds. With resilience, adaptability, and strategic planning, success in the Web3 space is within reach, even with modest resources.

Mentioned in this article