The vast majority of startup investing as it exists today is an insider’s game. Early adopters and believers don’t have access to venture capital markets, so they don’t share in the financial upside of their favorite startup’s growth. Web2 investing is insular and exclusive, leaving out the very communities that make up a product: its early adopters.
But with Web3, the way companies raise capital and interact with their communities is changing. By tokenizing equity, we’re democratizing access to ownership in high growth startups.
Here’s why Web2 fundraising will evolve in the future:
Founders have to spend time on fundraising when they could be focused on building.
Traditional fundraising rounds for a startup are methodical. Each one requires tons of preparation, building decks and documents and demos. It usually requires the founder’s nearly undivided focus, and often other key team members are pulled in, too.
The same technologies that power cryptocurrencies provide the infrastructure for new tools that empower founders to grant equity in exchange for capital or time their community contributes, eliminating the need for the delay and distraction of traditional fundraising rounds. This allows them to raise money to fund their business from the people most passionate about it, creating an ecosystem that’s literally invested in their company’s success.
Investors don’t have much time to make a decision.
In the typical structure, rounds are only open for a short time, giving investors a small window to determine if an innovative new company is a rocket ship or a bust. Web3 is different.
Decentralized finance, or DeFi ,— the movement that aims to create direct-to-consumer finance products that remove expensive middlemen like banks, exchanges, and brokerages — has created ways for founders to raise money on a rolling basis. If an eagle-eyed user sees the enormous potential of a company, they can be among the first to invest. And more risk-averse investors don’t have to rush to make a decision until they see a product’s community already investing in it.
Equity grants are unavailable to community members
Traditional equity grants have been a critical part of startup compensation packages — but only for full time employees, and often only for full time employees in senior roles. These stock grants were clunky, confusing and illiquid, but still provided the benefit of ownership in the company they were helping to build.
Other community members, meanwhile, were left out in the cold. Equity is generally not available to those providing huge value alongside employees, such as early users and adopters. Stock grants should be available to any community member, employee or not, who provide tangible value to the company.
Fundraising doesn’t have to be a rigid and opaque system. It can be flexible and transparent, inclusive of all the communities that power a product — not just VCs. DeFi gives startups freedom to break free from traditional fundraising rounds and focus on building their product.
We’re passionate about creating a system that uplifts the entire community around a successful company, and doesn’t just reserve the riches for a select few wealthy insiders. We’re excited to share more about everything we’ve been working so hard to build for the last 2+ years.
Learn more at our website: www.fairmint.com.
