How to Invest in Web3 Businesses

Web3 businesses often operate on top of decentralized blockchain networks such as Ethereum. These networks use blockchain technology to facilitate peer-to-peer transactions and enable the creation of permissionless dApps resistant to censorship. Web3 businesses can also be centralized and offer infrastructure services such as CEXes (centralized exchanges), on/off ramps, and crypto wallets. So if you have never bought a Web3 business before — where to start?

Understanding the Industry

Before we begin, it is important to note that investing in web3 businesses can be a high-risk, high-reward endeavor. This article will provide an overview of the web3 ecosystem and offer tips for those looking to dip their toes into crypto M&A.

The first step in investing in web3 businesses is to familiarize yourself with the underlying blockchain networks. Ethereum, Polkadot, and Cosmos are just a few popular protocol development platforms, each with unique features and capabilities.

Ethereum is the largest and most well-known decentralized platform. It was the first platform to enable the creation of smart contracts, self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. Much of crypto’s TVL (total locked value) is on DeFi dApps built on Ethereum.

Researching Web3 Businesses

Once you understand the different blockchain platforms, you can start researching specific Web3 businesses. Usually, crypto natives will rely on their private networks for information on businesses for sale — a custom often referred to as ‘alpha’. However, Acquire.Fi is building the first Web3 M&A marketplace to put all the deal flow in one place and accessible to all.

When researching potential investments, it’s essential to consider the following factors:

• Team: Who is behind the project? Do they have relevant experience and a track record of success?
• Use case: Does the company solve a real-world problem or address a specific need? Is there a clear value proposition for users?
• Adoption: Is the service being used by a significant number of users? Are there strong network effects at play?
• Token economics: Does the protocol have a native token, and if so, what is its function, and how is it being used? Is the token necessary for the functioning of the business, or is it simply a speculative asset?

Making the Purchase

If you are interested in purchasing a stake in a web3 business but are not interested in buying tokens issued by the company, you can consider purchasing equity or even investing in a blockchain fund. To purchase equity, you will need to go through the appropriate channels, such as working with a broker or directly contacting the company. It’s important to carefully review the terms of the offering and the team behind the company before making a purchase, as well as considering the overall market environment.

Another option is to purchase the entire company. To do this, you can directly contact the company and negotiate a sale. This may involve working with the company’s leadership team and potentially bringing in legal or financial advisors to facilitate the transaction. Another option is to work with a broker or a mergers and acquisitions firm specializing in web3 businesses. These firms can help you identify potential acquisition targets, negotiate the terms of the sale, support due diligence, and other logistical considerations.

By carefully researching and evaluating web3 businesses, you can make informed decisions and increase your chances of success as an investor in the exciting and rapidly-evolving world of decentralized technology. No matter which option you choose, it’s essential to do your due diligence and fully understand the risks and rewards of the investment before making a purchase. This may include reviewing the team, use case, adoption, and token economics of the company, as well as considering the overall market environment.

Summary

It’s also worth considering the overall market environment when investing in web3 businesses. The cryptocurrency market can be volatile, and Web3 projects are still relatively new and untested. However, with the higher risk comes large potential rewards and unique opportunities less present in traditional markets. Acquire.Fi was founded by both crypto natives who have been in the game since 2012 and M&A experts to guide you through the process of buying your first crypto company. Connect with us to ask questions in our Telegram, Discord or email team@acquire.fi. And check out the Acquire.Fi Deal Flow Telegram Channel, where you see all the recent Web3 deal flow. Good luck on your investment journey in Web3!