Web3 investors will need very strong nerves

What is Web3?  All you need to know
What is Web3?  All you need to know

Fred Wilson, co-founder of venture capital firm Union Square Ventures, warned investors about the serious potential risks of investing in projects related to the next generation Internet.

“While Web3 has compelling values, I’m not sure it’s safe to go back into the river just yet unless you have strong nerves and are focused on a very long time horizon,” Wilson wrote on his blog.

He added that the past year has been “painful for most and devastating for many”.

“The capital of our family has suffered greatly. The book value of assets managed by Union Square Ventures has halved this year, ”the entrepreneur emphasized.

The Web3 sector remains highly vulnerable compared to the broader technology sector, he says.

“There are insolvent structures that have not been restructured. There are funds that are so in loss that they can be liquidated. These activities will put constant pressure on Web3 tokens through at least the first quarter of 2023,” Wilson warned.

The investor expects problems and many traditional startups. In his opinion, the technology sector will return to the “new normal” of the 2015 model. At that time, the amounts raised in Series A rounds were in the range of $15-25 million.

However, next-generation internet-related startups with good tokenomics and a strong value proposition will attract the attention of investors, Wilson said.

“Personally, I am more optimistic about Ethereum, since it has the best economic model among all Web3 assets,” the entrepreneur shared his opinion.

Union Square Ventures (USV) has invested in established platforms like Twitter, Coinbase and Etsy.

In early 2021, USV announced its intention to invest about $75 million in cryptocurrency startups. Shortly after this announcement, the company led a funding round for Matter Labs, a startup developing an Ethereum layer-two solution zkSync.

In early 2022, Wilson’s firm raised $625 million into two funds focused on Web3 and technological solutions of the traditional market.

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