On-chain capital is the future of startup funding

TechCrunch | Parker McCurley | Jan 25, 2022

onchain capital - On-chain capital is the future of startup fundingWeb3 is owned by the VCs, Jack Dorsey says. Well, I’d argue that web3 is whatever we make it – and the VCs only own it if we allow them to. We are building web3 right now and we have the power to control where it goes and how it is funded on the way there.

If we take decentralization and autonomy seriously, there is no good reason we must follow outmoded venture capital standards. Other means exist, such as smart contract-controlled, on-chain funding, which is more intuitive for projects to utilize, more equitable, completely transparent, and more adaptable for investors and developers alike.

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This is why I consider entirely on-chain methods to be the future (or at least the next great evolution) of fundraising.

Conscientious creation:  the future is ours to write

How exactly does this disruption occur? The starting point is entirely on-chain. The majority of developers currently building the protocols and DApps of web3 are a new generation of creators who come to their work with a philosophical bone to pick.

Blockchain technology already provides us with open source, immutable ledgers that we can use to facilitate all our funding needs in a way that directly aligns with the ethos that has driven web3 from its inception. Utilizing self-executing smart contracts, we can control the open and closing points of a raise and make every investment and their terms open and verifiable to everyone.

On-chain funding models also offer a more equitable approach to developers, allowing them to circumvent certain socio-economic barriers like education, employment, credit, connections, etc. These models let developers get their projects off the ground even if all they have is the project they are building. The entire framework offers a more meritocratic way of functioning, where all that matters is the project and its potential.

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Smaller projects can save resources and time by eliminating the need for building a pitch deck, opening a bank account, and actively seeking out investors in the traditional sense.

On-chain raises are not meant to kill the traditional VC model altogether, because after all, working with sophisticated investors offers builders valuable perspectives. VCs are experts at analyzing business and financial models, planning for scaling, and evaluating execution risk and where companies stand in a market. VCs who prioritize these traits will remain as valuable as they are today. Every project wants and needs people who have a proven track record of helping companies grow and succeed.

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