Startups and New-Type Web3 Communities
Startups in their early phases are particularly fragile ventures that require efficient investments and significant professional support for rapid development. However, traditional investment systems often fail to support startups that aim to achieve social and community goals. This situation could change significantly with the rise of Web3 communities.
Previously, innovative startups could only rely on the capital of professional or risk investors, but today, there are increasingly more opportunities for alternative capital fundraising. The success of traditional crowdfunding solutions has laid the foundation for alternative financing for several years, but Web3 has elevated the possibilities for startups to a new level.
The new-type communities are almost unlimited by any boundaries, borders, or political will, giving members practically complete freedom to participate in supporting talented idea creators and promising projects, even without investment knowledge. These initiatives are generally created to support specific goals but are also excellently suited for achieving social and community goals.
Crowdfunding 2.0
Rethinking community financing can be approached in several ways. The simplest might be to replace traditional currencies with cryptocurrencies. This solution fundamentally remains the same; the relationship between supporters and supporters remains the same, and these sites differ only in the mode of payment.
“In the evolving landscape of fundraising, the emergence of cryptocurrency crowdfunding marks the beginning of a novel phase of financial assistance, liberated from conventional limitations and accessible to a worldwide audience. This advancement is led by platforms that have harnessed the potential of digital currencies, allowing individuals across the globe to initiate or support projects with remarkable simplicity and effectiveness. This approach not only streamlines the process of raising funds but also presents a new method of connecting with a technology-oriented audience keen to contribute positively, free from the encumbrance of fees.” — read on the Airfunding blog, which itself offers this new type of community financing on its website.*
The largest crowdfunding sites have also moved towards crypto payments, with platforms like GoFundMe and Seedrs introducing this new support format but leaving the traditional frameworks intact.
Such community solutions have benefited startups and innovative ideas over the past years. Sites like Indiegogo, Kickstarter, and similar platforms have channeled millions of dollars into their projects in the traditional manner and under traditional terms. However, Web3 has completely changed the game’s rules, offering more open and free opportunities for financiers and projects compared to previous solutions. DAOs and tokenized capital funds now represent the foundations of complex and completely decentralized financing.
DAO: common goals, collective decisions, no intermediaries
DAOs (Decentralized Autonomous Organizations) are organizations that make investment decisions, project financing, and other decisions based on the votes of their members. DAOs enable members to directly influence investment decisions and share in the organization’s success.
Let’s see how the DAO model is defined by Ethereum.org: “A DAO is a collectively-owned organization working towards a shared mission. DAOs allow us to work with like-minded folks around the globe without trusting a benevolent leader to manage the funds or operations. There is no CEO who can spend funds on a whim or a CFO who can manipulate the books. Instead, blockchain-based rules baked into the code define how the organization works and how funds are spent. They have built-in treasuries that no one has the authority to access without the group’s approval. Decisions are governed by proposals and voting to ensure everyone in the organization has a voice, and everything happens transparently on-chain.”**
Thus, a DAO is a financial and intellectual community of interest that can support various goals. For instance, startups have been a prime target for investment DAOs’ support from the beginning.
Such DAOs can respond quickly to the needs of startups, ensuring that the investment process is not prolonged. The startup’s introductory material is uploaded to the DAO’s website, and if the DAO members like it, the project can receive financing from the members, regardless of where they live.
“Community Voting allows for a much more democratic and participatory investment process than is possible with traditional investment firms. Members’ voting rights and voting power are usually represented by a governance token.”***
This is a much more democratic process, as anyone with a good idea can obtain financing, regardless of their residence, network, or social status. Meanwhile, DAO members can invest in early-stage companies they otherwise could not access.
NFT-based Communities and Crowd-Investment
The emergence of DAOs has accelerated the transformation of community financing. There arose a need to tokenize values. Whether we are building the financial foundations for a world-saving idea, an action to protect our environment, or the next biotech startup, we must find the most effective support for it. Tokenization offers such an opportunity, providing a financially capable community for projects.
“NFT-based solutions could quickly become the new arena for venture capital, crowdfunding, and financial services. They provide a secure and transparent way to represent ownership and open exciting opportunities for funding startups, blockchain, crypto, and other projects.” This was written a year ago on the Galaxis blog.*****
In NFT-based community systems, user identifiability and authorization levels are entirely resolved. The membership card-like operation can be supported by numerous extra services, depending on the community’s goals. The basis of financing can even be formed by its token. This token can be tied to incentives, activity-enhancing actions, or gamification solutions. Decision-making mechanisms can be democratized by communities with the help of this token, transforming individual subjective mechanisms into community decisions.
The Benefits of Creating Support Communities with Web3
Intermediary organizations have had to be used to create supportive communities, providing the conditions necessary for successful campaigns. However, traditional community sites are mostly suitable for communication, accessing information, and maintaining relationships.
Web3 has changed the concept of a community, and crowdfunding has gone through an upgrade, becoming an entirely new instrument. By utilizing this system, project owners can bypass various restrictions and traditional limitations, ultimately bringing their innovative ideas and startup projects to an international audience and providing the potential for unparalleled growth and impact. The introduction of Web3 technology in community financing opens up new opportunities that can radically transform how support communities are organized and operate.
Let‘s summarize below the main benefits of establishing such communities:
Transparency: Blockchain technology ensures that every transaction and financial movement is fully trackable and verifiable. This enhances the transparency of processes and builds trust among participants.
Security: The decentralized infrastructure reduces the risk of phishing and fraud. There is no central point where data can be manipulated, making the system more resistant to attacks.
Global Access: Web3 solutions allow anyone with an internet connection and a digital wallet to participate in community financing. This expands the potential circle of supporters and project initiators, increasing the accessibility of campaigns on a global scale.
Tokenization: Project financing is possible through issuing tokens, which can provide various rights and benefits to their owners. The versatile use of tokens allows for fine-tuning participation and reward systems, which can increase community activity and commitment.
Creating Web3-based support communities is an essential step towards more efficient, secure, and inclusive community financing systems. These communities expand financing opportunities and enable new types of economic and social interactions that would not be feasible under traditional circumstances.
The advantages of transparency, security, global access, and tokenization are critically important in responding to the challenges of the modern era. Thus, the application of Web3 solutions can significantly contribute to the success and sustainability of support communities.
Sources:
* Top3 alternatives to Gofundme for cryptocurrency-crowdfunding
https://blog.airfunding.net/airfunding-info-collections/top-3-alternatives-to-gofundme-for-cryptocurrency-crowdfunding/
** DAO
https://ethereum.org/en/dao/
*** The Complete Guide of Investment DAO-s
https://www.upside.gg/the-ledger/the-complete-guide-to-investment-daos
****Actively Investing DAOs
https://news.cryptorank.io/actively-investing-daos/
***** Will the future of Venture capital be decentralised communities
https://galaxisxyz.medium.com/will-the-future-of-venture-capital-be-decentralised-communities-fe653d14452a
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