Thread by @shaunhengcj

0/ Why Venture Building is unusually suited for #Web3

A look at crypto ecosystems and why Venture Building is likely to be a successful strategy in the Web3 space

Intern notes below. Link to full article in the last thread👇🏻

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1/ TLDR

The scarcity of resources, the dominance of large players, and the nascent state of Web3 are primed for venture building to be used as a competitive strategy.

Expect top exchanges and venture funds to build venture-building teams to compete and value-add in Web3.

2/ What is Venture Building?

Venture builders are organizations that build start-ups, putting in their own ideas and resources to help them.

The degree of involvement of these organizations is varied, reflecting a wide range of venture-building models available currently.

3/ Looking at specific venture building models and some famous examples:

- Lifecycle/Long-term/VC-as-a-Co-Founder: Rocket Internet

- Early-Stage/Short-term/VC-as-a-Co-Founder: Super Layer, Advanced Blockchain

- Early-Stage/Short-term/Supporting: Antler Global, EF

4/ Starting from the top, companies like @RocketBerlin have seen great success building up from scratch and subsequently selling billion-dollar companies such as e-commerce giant, Lazada.

These funds tend to end up owning a large portion of equity in their portfolio companies.

5/ On the other hand, venture builders like @superlayerio and @BlockchainAG collaborate with founders on promising ideas and provide initial seed capital, with the key team members of the team under the employment of the venture builder.

6/ Such firms will continue to invest in later funding rounds and end up owning large but not necessarily significant majorities in their portfolio companies, and with less equity than earlier funds like Rocket Internet.

7/ Further down the line, companies like @AntlerGlobal and @join_ef operate similarly, albeit on a shorter-term basis.

They work with individual founders, help them to network and connect with potential co-founders and provide them with initial seed/pre-seed capital.

8/ However, unlike their previous counterparts, these companies take on more of a support role rather than a co-founder role, letting their portfolio companies flourish on their own.

Instead, they use this systematic model to hunt for and fund potentially dozens of start-ups!

9/ From a Web3 perspective, the VC-as-a-Co-Founder approach is likely to be the most successful model as it is able to balance founder incentives and the ability to capture opportunities reliably for crypto organizations.

10/ This is especially true, given the wider range of needs of Web3 companies which can include tokenomic design, liquidity and multi-chain support, among others.

11/ But why Venture Building?

Venture building tends to be successful in environments with high levels of industry bottlenecks and where certain parties hold a disproportionate level of resources compared to others.

These resources can include capital, information and talent.

12/ In the Web2 world, the scarce resource in question tends to be capital or talent.

Rocket Internet had access to talents and capital, which worked well, especially in regions like Africa, South Asia and LATAM where it was difficult to find both.

13/ Similarly, Antler and EF specialized in gathering talents and helped individual founders with their search for co-founders in their start-ups.

14/ In the Web3 context, venture builders have an even greater edge.

Due to how fast the Web3 landscape shifts, access to information as to which direction to take or what projects to build can be key to success.

15/ Moreover, the capital that venture builders bring can provide much-needed liquidity to portfolio projects, which are critical to success.

16/ On the talent side, more experienced talent attracts good talent.

Strong venture builders with competent technical talent will be able to attract other talents on board who could support or join the operations of their portfolio projects.

17/ Lastly, venture builders can assist with distribution, which is key in an environment where projects are easily forked and copied.

Deploying fast could give projects the first-mover advantage and the edge over their competitors.

18/ On top of that, due to the open-sourced nature of the Web3 space, successful founders can decentralise their work on the project or leave it to the community without hindering its growth.

@SushiSwap is an example that succeeded despite the departure of @0xMaki.

19/ Specifically, protocols have the greatest reason to venture build, with a more hands-on approach, to create a strong ecosystem.

This is usually done through creating interesting #dApps and use-cases to increase utilization of the protocol.

20/ A prime example would be the #Terra ecosystem, where the team behind $LUNA, Terraform Labs, created
Chai Payments, a payment network utilizing the ecosystem’s native stablecoin, $UST.

21/ Many other protocols such as @anchor_protocol, a ‘crypto bank’ and money market protocol, and @mirror_protocol, a synthetics protocol, were also built by Terraform Labs to increase usage of the protocol and form part of Terra's bustling ecosystem today.

22/ @Solana has also been on a similar move with the recent launch of Solana Pay, a product that allowed payments to merchants facilitated by the Solana network.

This strategically taps on Solana’s low gas and instant settlement while increasing the adoption of its ecosystem.

23/ On the #Ethereum front, high-profile venture building is much less common although incubations and grants do happen.

It is noted though @VitalikButerin pushed some novel ideas which inspired highly successful projects such as AMMs leading to the development of @Uniswap.

24/ In the future, we can expect to see more protocol core teams setting aside resources for dedicated venture building teams, to create value through specialized dApp venture building within the ecosystem.

Link to article: bit.ly/3hMl9Mi by @chiajy2000