The Ultimate Guide to Investing in Web3 Businesses

This post was originally published on February 6th, 2023, and updated on March 6th, 2025.

Web3 businesses operate on decentralized blockchain networks like Ethereum, leveraging smart contracts to facilitate trustless transactions, permissionless applications (dApps), and tokenized ecosystems. These innovations underpin decentralized finance (DeFi), non-fungible tokens (NFTs), and emerging on-chain business models that challenge traditional centralized structures.

For investors looking to acquire or invest in Web3 businesses, understanding the technological, financial, and regulatory landscape is critical. This guide will provide an in-depth look at the Web3 ecosystem and outline key considerations for making informed investment decisions.

Key Takeaways

• Decentralized Business Models: Web3 businesses leverage blockchain technology to create dApps, DeFi protocols, and tokenized economies that operate without intermediaries.
• Investment Exposure: Investors can gain exposure to Web3 through equity in blockchain startups, governance tokens, liquidity provision in DeFi, and digital asset acquisitions.
• Risk & Due Diligence: The Web3 market is highly volatile, with evolving regulatory frameworks and technological risks. Conducting thorough due diligence on tokenomics, protocol security, and market adoption is essential before committing capital.

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What is Web3?

Web3 envisions the internet's next evolution, focusing on decentralization, user ownership, and blockchain-based applications. Unlike Web2, where centralized companies control user data, Web3 enables peer-to-peer interactions, smart contracts, and tokenized economies. Web3 businesses can also be centralized and offer infrastructure services such as CEXes (centralized exchanges), on/off ramps, and crypto wallets.

To further understand how it works, here are some examples of Web3 businesses and projects:

Decentralized Applications (dApps)

DApps are blockchain-based applications that function without central servers. They provide services across finance, gaming, and social media. dApps operate using smart contracts, which are agreements that execute automatically and process transactions using coded instructions when they meet the conditions. Examples include Uniswap for decentralized trading and Axie Infinity for blockchain gaming.

Decentralized Finance (DeFi)

DeFi eliminates traditional financial intermediaries by enabling direct lending, borrowing, and trading on blockchain networks. Platforms like Aave and Curve Finance offer financial services through smart contracts.

Crypto Platforms

Crypto platforms facilitate buying, selling, and exchanging digital assets. Some of the most popular platforms include Binance and Coinbase. These platforms are essential to Web3, giving users easy access to digital assets.

Blockchain Networks

Blockchain networks form the backbone of Web3. Ethereum is the most widely used smart contract blockchain, while Polygon provides scalability solutions for Ethereum transactions. Chainlink plays a crucial role by enabling smart contracts to interact with real-world data.

In blockchain projects, community-driven decision-making becomes possible by governance tokens. To provide a decentralized and transparent governance architecture, token holders can vote on project improvements. AAVE and COMP tokens for DeFi protocols are two examples.

DeFi Projects

Decentralized finance platforms allow users to engage in financial transactions without intermediaries. Uniswap is a leading decentralized exchange (DEX) that enables permissionless token swaps. Aave is a lending and borrowing protocol offering users access to liquidity pools. Curve Finance specializes in stablecoin trading and yield farming.

Web3 Gaming and Metaverse

The Web3 gaming and metaverse sector integrates blockchain technology into virtual experiences. Axie Infinity is a play-to-earn game where players collect and battle digital creatures. Decentraland is a virtual world where users buy and sell digital real estate using blockchain technology. The Sandbox enables users to create, own, and monetize gaming experiences within its decentralized ecosystem.

Why Invest in Web3 Businesses?

Investing in Web3 offers early access to transformative technologies shaping the future of digital ownership, finance, and online interactions. As blockchain adoption grows, Web3 businesses present new opportunities in decentralized applications, tokenized assets, and blockchain infrastructure.

Unlike investing in stocks, Web3 investments are more accessible since they don't usually require brokers or intermediaries. It isn't surprising that more people are choosing to invest in Web3 businesses than traditional investment opportunities.

According to Grand View Research, the global blockchain technology market may grow at a compound annual growth rate (CAGR) of 87.7% from 2022 to 2030, highlighting the expanding role of Web3.

Understanding the Web3 Industry

Before we begin, it is important to note that investing in Web3 businesses can be a high-risk, high-reward endeavor.

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.

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?

Ways to Invest in Web3

Buying Web3 Cryptocurrencies

Many Web3 businesses operate using blockchain-based tokens. Investors can buy cryptocurrencies like Ethereum (ETH), Polkadot (DOT), and Solana (SOL), which support Web3 ecosystems. These tokens facilitate transactions, smart contracts, and decentralized applications.

How to Buy Web3 Cryptocurrencies

To help you get started with your Web3 crypto investment, follow these simple steps:

1. Choose an exchange: Binance, Coinbase, and Kraken offer Web3 tokens.
2. Create an account: Register, verify identity, and enable two-factor authentication.
3. Fund your account: Deposit fiat currency or stablecoins into your account.
4. Purchase tokens: Research the value and performance of the crypto before choosing which token to buy.
5. Secure holdings: Store assets in Web3 wallets like MetaMask or Ledger.
6. Monitor investments: Track market trends and project developments.
7. Maximize investments: There are several options to maximize your investment, and these include:

• HODL: Long-term investors buy and hold crypto indefinitely in a secure wallet and wait for potential appreciation in value.
• Trade: Active traders buy and sell cryptocurrencies on exchanges to capitalize on market fluctuations.
• Stake: Many cryptocurrencies offer staking rewards, where investors lock their tokens in a network to support blockchain security and earn passive income.

Investing in Web3 Businesses

Web3 startups lead the way in blockchain technology. Investors can gain exposure to the industry's growth by investing in early-stage Web3 businesses through venture capital funds, token sales, or equity crowdfunding. 

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.

If you plan to invest, you can explore potential Web3 acquisitions and startup opportunities on platforms like Acquire.fi’s Web3 Marketplace, which allows you to buy partial or full ownership of Web3 startups. 

Exploring DeFi Projects

Decentralized finance (DeFi) platforms enable users to lend, borrow, and earn interest without intermediaries. They would also allow users to earn interest on their assets through smart contracts, access liquidity, and trade directly on decentralized exchanges.

One of DeFi's benefits is the ability to lend and borrow cryptocurrencies. Individuals can deposit their assets into liquidity pools and earn interest from borrowers. Interest rates vary, though, depending on supply and demand dynamics. Some platforms offer fixed rates, while others adjust dynamically based on market conditions.

The types of cryptocurrencies that can be lent or borrowed depend on the platform. Popular options include Ethereum (ETH), Bitcoin (BTC), stablecoins like USDT and USDC, and DeFi-native tokens such as AAVE and COMP. 

Stablecoins are particularly popular for lending and borrowing since they offer lower volatility than other crypto assets. However, investors should know the lock-in periods, determining how long their funds must remain staked before withdrawal. Some protocols offer flexible lending with no lock-in, while others require users to commit their funds for a fixed time in exchange for higher returns. 

For example, the variable interest rate of borrowing USDC in Aave is 6.24% and the supply interest rate is 3.24%. In Notional, the supply annual percentage yield of USDC is 9.12% and the lending APY is 6.63%. 

How to Get Started in DeFi

If you are new to DeFi investment, follow the steps below to learn how to invest in decentralized finance markets. 

1. Select a DeFi platform: Choose a trusted DeFi protocol such as Aave, Compound, or MakerDAO. Research their interest rates, security audits, and track records before committing funds.
2. Connect a Web3 wallet: Use a compatible wallet like MetaMask or Trust Wallet to interact with DeFi platforms.
3. Deposit cryptocurrency: Transfer funds into the selected DeFi platform's lending pool to earn interest or collateralize assets for borrowing.
4. Understand lock-in periods and interest rates: Check whether the platform enforces lock-in periods and how the interest rates fluctuate based on market demand.
5. Monitor investments and risks: Keep track of yield rates, liquidation risks, and market trends to maximize returns while minimizing exposure to volatility.

Participating in DAOs

DAOs (Decentralized Autonomous Organizations) are blockchain-based communities with governance tokens that allow members to vote on project decisions. Investors can participate in DAOs to influence Web3 activities and receive contribution-based incentives. According to DeepDAO, DAO treasuries have over $23 billion worth of assets, reflecting their expanding significance in decentralized governance.

How to Participate in DAOs

Before entering the world of decentralized autonomous organizations, check out these steps to help you start with this type of investment.

1. Find a DAO: Do research on platforms like DeepDAO and Aragon to find a DAO that aligns with your interests.
2. Buy governance tokens: Purchase tokens such as MKR (MakerDAO) or UNI (Uniswap) to gain voting rights.
3. Join the community: Engage with the DAO's community via forums, Discord, or Telegram to understand governance proposals.
4. Vote on proposals: Participate in governance by voting for money distributions, project development, and strategic decisions.
5. Contribute actively: Some DAOs reward contributors with additional tokens for active participation and valuable input.

Investing in Web3 Stocks and ETFs

Publicly traded companies supporting Web3 infrastructure, such as Block, Coinbase, and Robinhood, provide traditional stock market exposure to Web3 technology. Additionally, blockchain and crypto-focused ETFs allow investors to diversify their portfolios with exposure to Bitcoin, Ethereum, and other digital assets. 

How to Invest in Web3 Stocks and ETFs

Buying Web3 stocks and ETFs need not be difficult if you have a checklist of things to do and consider before investing.

1. Choose a brokerage: Platforms like Fidelity, Charles Schwab, and eToro offer access to Web3-related stocks and ETFs.
2. Select an investment option: Investors can buy individual stocks of Web3-focused companies or choose ETFs that track multiple blockchain projects.
3. Understand fees: ETF expense ratios vary, typically from 0.5% to 1.5%. Brokerage trading fees may also apply.
4. Invest in diversified Web3 ETFs: Some of the options include Bitwise Crypto Industry Innovators ETF (BITQ), Amplify Transformational Data Sharing ETF (BLOK), and Grayscale Bitcoin Trust (GBTC).
5. Monitor and adjust your portfolio: Keep track of market trends, earnings reports, and regulatory developments to optimize investments.

Risks When Investing in Web3 Businesses

Web3 can grow rapidly, but there are risks involved. 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 investing.

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.

Can You Invest in Web3 Businesses Safely?

Yes, but careful research and security measures are necessary. Before investing in a Web3 business, you should confirm the project's legitimacy, use reliable exchanges, and keep your digital assets in a safe Web3 wallet. Awareness of the dangers associated with smart contracts and compliance with regulations can also help reduce losses. 

If you need guidance in Web3 investments, Acquire.Fi is here to help. 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!