Web 2.0 Investors Aren’t Cut Out for the Web3 World

Unfortunately, most LPs aren’t set up to handle tokens—they don’t know what a crypto wallet is, nor do they want to go through the trouble of figuring it out.

A $30 million seed valuation is quite high for a Web 2.0 company. You might even call it expensive. In Web3, anywhere from $10 million to $70 million is reasonable for a seed round. Most investors are willing to swallow such big numbers because of the much shorter timeline for listing on a crypto exchange compared to going public on a stock exchang... See more

There are no pro rata rights.

Crypto founders don’t want to show their faces or even use their real names.

Where Web 2.0 companies would have a board of directors, decentralized autonomous organizations allow anyone with a stake in the company to have a vote in its decision-making, weighted based on the size of the stake.

Most venture funds require at least 10% equity ownership in their portfolio companies, but Web3 founders don’t want any single investor to own more than 5%. 

Investing in Web3 projects can be legally trickyVenture capital firms can only invest up to 20% of the fund in liquid assets—more than that, and the U.S. Securities and Exchange Commission says you have to become a registered investment adviser.

Solana has turned out to be one of my most successful investments, generating a 4,000X return. And yet things I now find normal—dealing with pseudonyms, betting on founders halfway across the world who don’t want to give investors any control—are still baffling to my colleagues who came up during the Web 2.0 boom.