Janice R. Andrews
Decentralisation is an important part of Web3, but it might be stopping the rise of venture capital (VC) in the crypto area without meaning to. In Web2, venture capital thrived in centralised hubs like Silicon Valley. But because Web3 is decentralised, the best makers are spread out all over the world. This global spread encourages innovation in many areas, but it has also made it harder for blockchain-based startups to get the resources they need to build, launch, and grow.
Why the Bay Area is a great place for Web2
Silicon Valley (the Bay Area) became the centre of startup finance and new ideas during the Web2 era, especially with new technologies like artificial intelligence (AI). Founders from all over the world came to the Bay Area because they knew it was the best place to get funding, find top talent, and connect with other great businesses and incubators like Y Combinator.
It was easier for owners to deal with problems and build great businesses because there were so many venture investors, startup centres, and talented people in one place. But this centralisation also had some bad effects. Getting U.S. visas, dealing with the sky-high cost of living, and starting from scratch with their networks were just some of the problems that foreign founders had to deal with when they moved to the Bay Area. Even so, the benefits of being in the right place with the right people often trumped these problems, and many businesses were successful despite them.
The Problem with Decentralisation in Web3
Instead of having a single hub, Web3 doesn’t have one. Because blockchain technology is no longer centralised, the best makers are spread out all over the world, from Ghana to Argentina to Vietnam and more. Blockchain technology can be useful in these places, especially in places that don’t have a lot of standard banking infrastructure or where people are more open to using new technologies.
The fact that Web3 is decentralised encourages new ideas, but it also makes things very hard for these makers. Without a central point like Silicon Valley, it’s much harder to get startup cash and other resources. Founders in places like South America, Africa, and South-east Asia often have trouble scaling their projects. It’s not that they aren’t creative; it’s just that they don’t have the networks and relationships they need to get funds and help their businesses grow.
What Venture Capital Does for Innovation Hubs
Venture cash is a very important part of encouraging new ideas. Venture capitalists (VCs) have the money to help startups grow, taking them from good ideas to fully formed businesses. But because Web3 is decentralised, there is a gap between the best builders and the startup investors who could give them money.
Many entrepreneurs can’t get startup cash, even if they have great ideas that will change the world. This makes it harder for them to grow and come up with new products. In this situation, some centralisation can actually help growth, especially in places where new ideas are born. VCs can quickly find and fund good projects in concentrated hubs because they make it easy for creators to get the resources they need to succeed.
Should we change the way we look at the problem?
Locked A lot of people on Twitter think that nothing exciting is happening in the space and that there aren’t enough consumer apps to bring people on-chain. Some people think this is because venture investors only want to back building companies and aren’t interested in projects that will benefit consumers.
But is this really true? Or are we missing the chance that some of the most creative makers, especially in the Global South, don’t have the tools they need to get their ideas off the ground? It’s not helpful to complain about the lack of new ideas if this is true. Instead, we should work on connecting venture investors with these skilled makers.
New Centres of Innovation in Web3
If you want venture funding to be fairly spread around the world, that’s not going to happen. However, some places are starting to become innovation hubs for Web3. Cities like New York, Lisbon, Dubai, Singapore, and Buenos Aires are becoming popular places for creators to live because they are easier to do business in and have lower costs of living.
The communities in these hubs are still growing, and it will take some time for them to be as strong as Silicon Valley. But there are already a lot of online and offline programmes around the world that are trying to get makers to join. Pop-up cities and network states like Edge Esmeralda and Zuzalu are becoming more famous because they offer unique places for tech creation. Also, Developer DAO and BuilderGuild are trying to teach and bring more builders into the Web3 environment.
What’s Being Done to Fill the Venture Capital Gap
Hackathons put together by ETHGlobal, ETH Accra, and other events bring together builders from all over the world to work on cool projects. Another programme that helps new people get started in Web3 is the Ethereum Foundation’s Devcon Scholars Programme, which pays for people from all over the world to go to workshops.
These projects show that startup cash can be used in smarter ways. VCs can make the world a better place for creation by putting money into projects that bring makers together, hire new people, and deal with the real problems that come up when you try to scale Web3.
What Will Happen to Venture Capital in Web3?
Decentralisation in Web3 does bring some problems, but they are not impossible to solve. Smart people will figure out ways to connect people who have resources with people who need them as the environment grows. It will be important to give money to the builders who are working on the ground to solve the industry’s biggest problems.
Venture capitalists who want to make a difference need to rethink the usual ways of doing things. Instead of spending a lot of money on fancy workshops and events for networking, they should put their money directly into the projects and makers that are moving the industry forward.
In this way, VCs can help speed up uptake and make sure that Web3 innovation doesn’t just happen in a few places, but all over the world.
