Web3 Builders Need Better Funding Programs, Not Just Funds

Perhaps the most important sign of resilience in Web3 is the fact that builders remain unfazed by current market conditions. After the recent hype fizzled out and the illusion of infinite money evaporated, most developers have stayed around, proving there are important, real-life use cases to build, regardless. What they need now is more than just money. They need guidance and support.

Developer engagement has grown 297% across all ecosystems since the previous crypto boom in 2018. Even after a recent 70% fall in crypto prices since last year, there’s still an 8% year-over-year growth in full-time developers who are involved with the space. The question now is, what are the best ways to help all these projects succeed despite the market downturn?

Magdalena Oleksy is the ecosystem lead of Aleph Zero, a layer 1 privacy-enhancing blockchain that ensures scalability, low transaction fees and maximum security guarantees for developers. This article is part of CoinDesk’s BUIDL Week.

Better funding programs = better chances of success

The short answer is better funding programs.

“Most startups fail” is a popular Web2 mantra, but it’s not necessary for Web3 to replay these conditions. One of the reasons why this has been the case is that many funding models follow a “just throw money at it” logic. We saw an echo of this when initial coin offerings became popular.

However, successful Web2 incubator programs improve the odds of their projects by taking a different approach. Besides being very selective, they offer teams an integrated support system that goes beyond an initial investment. They help these projects become the best version of themselves, so to speak.

The right funding for BUIDLers

This hands-on kind of funding model is even better suited to an inherently more collaborative environment like the one that exists in Web3. The projects that need funding now usually work on open-source codebases, are composable with other projects and often rely on their own users to be investors at the same time.

“Most startups fail” is a popular Web2 mantra, but it’s not necessary for Web3 to replay these conditions

Proper coaching and support is more necessary than ever precisely because of the experimental, interconnected and fast-paced nature of the space. Builders need as much help as they can get when it comes to the how-to knowledge and network effects needed to get a project off the ground.

This is especially true in an industry where timing makes all the difference and not all challenges are solvable by just adding more funds to a project's treasury.

What should a Web3 funding program look like?

Ideally, we should be equipping builders with the right tools that will help them jump through the hoops faster as they work on their projects. Setting the right context is also crucial.

Web3 funding programs should make sure their candidates are set up for success by supporting them on a number of different ends besides funding. Some of these would be:

Compliance

Regulations for cryptocurrencies and Web3 services in general are still evolving. This makes it hard for new projects to navigate the legal implications of what their products and services might offer.

Funding programs can ensure that builders are setting up their operations in ways that are compliant with regulations and avoid any setbacks in the future. They can host legal and operational workshops with partner firms to ensure that projects start and stay on the right side of the law.

Auditing

Security and robustness are of special importance in Web3. A simple mistake in smart contract code can represent the loss of millions in user funds, as has been the case many times in the past.

Assisting development teams with professional code auditing services saves them a lot of time (and funds, potentially). Funding programs could provide builders with a holistic approach to cybersecurity that guides them through all stages of their development process.

Technical decisions

Some technical details – such as working in the right ecosystem, for example – can determine the course of a project's development. Teams can either fail or succeed depending on the network they choose to build on, the frameworks they use, the collaboration tools they rely on, and the functionalities that they’ll find therein.

Deciding what the right stack is for their project is often the first order of business because it determines the tools that they have at their disposal. For some projects this means looking for web assembly (WASM)-compatibility, for others, maybe it’s about having privacy enhancements built into the ecosystem. These are all choices where funding programs can provide much needed guidance.

Infrastructure support

Likewise, Web3 doesn’t exist in a vacuum. We still rely on existing infrastructure that, in many cases, goes beyond the choice of a blockchain network. Projects often need help with the costs of hosting their front ends on Web2 service providers, connecting their dapps to existing fiat on-ramps and payment services, or even negotiating their business relationships with key partners.

Final thoughts

These are not the only ways in which funding programs can improve the odds of success for builders in their ecosystems beyond funding. There are other important ways in which they can provide support including marketing services, community support and product management.

But overall, Web3 funding programs should guarantee that projects can count on the leverage that ecosystem funding programs have in terms of industry knowledge, networking, and technical expertise. By taking this integrative approach we can ensure that the right ideas play their role in the success of the whole ecosystem.