Venture Firms Investing in WEB 3 Sectors: WHY?

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 Top investment banking boutique firms in gurgaon Venture capital firms are now investing in the web 3 sectors as this sector is growing at a fast pace. There are many reasons, venture capitalists are investing in this sector:-


Outsized Return

The token money that supports many web 3 projects results in excessive returns as compared to web 2 investments. This is true in the current environment of soaring inflation, interest rate increases, startup Funding valuation reductions, and market instability.


Although the cryptocurrency market experienced some ups and downs in 2022, its entire market cap increased by around 200 percent in that year, with Bitcoin and Ethereum recovering roughly 60 and 400 percent, respectively. Avalanche, which increased by over 3,300%, and Solana, which increased by roughly 11,000%, were two more cryptocurrencies that saw notable gains.



Liquidity

Startup Fund Raising investments made using traditional stock are illiquid. In order to cash out themselves, investors will often have to wait for a liquidation event like an IPO or acquisition.


The private stock has a secondary market, and buyouts from private investors have been a thing for a while. However, because of how difficult this procedure is, it is not seen as a liquid investment.


Passive Income


Tokens give VC Funding a rare chance to earn passive income on their holdings rather than just making standard stock investments and hoping to profit from an exit.


This can be done through various procedures


  • Staking- Reserving assets to sustain the blockchain network

  • Yield Farming- Deposit tokens in the liquidity pool and earn interest

  • Liquidity Mining- In exchange for rewards, you can help a DeFi protocol with liquidity.


Capital Efficiency

Startups MSME IPO were able to take advantage of near-zero marginal cost solutions and unheard-of economies of scale through the internet and the advances that followed. This made pre-internet businesses appear extremely capital inefficient.
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