Introduction
Starting a new business is always challenging because of the harsh economic realities that many countries face today. It is not surprising to note that many small startups fail to make it beyond the first year of existence. A lot could go wrong between when a new business idea is launched to the next few months or years.
Entrepreneurs thus need to access all the tools they need in order to sustain a business startup beyond few months or years. Web3 which has been disrupting many industries for over a decade now is one powerful tool for business development. If startup teams could leverage the opportunity to implement web3 features in their business, they could grow their businesses faster and with far lesser resources.
Consider some of the many ways startups could leverage web3 to either overcome challenges or boost the growth of the new business.
Web3 for startup growth
Here are challenges of startups and web3 solutions for innovative growth. Take a look at each use-case:
Challenge 1: Raising capital
One of the biggest challenge every startup has to come to terms with, is how to source the initial capital needed to kickoff the new venture. An entrepreneur or small team night have an amazing business idea, make great pitches or even have a flattering business mission statement. But all these would would never create any value of generate revenue if there was no capital to implement them.
Even for small businesses that successful executed the launch face, securing the capital to keep the business going, to handle day-to-day business expenditure could be challenging. Traditional finance sources like the banks make it almost impossible to secure funding from them. Most times, a startup will not qualify for a loan from them because of challenges like collateral and high interest rates among others.
While considering options to raise capital for their business idea, startup teams need to consider the numerous opportunities that web3 affords.
Solution: Web3 financing opportunities for startups
Web3 revolutionizes how money is owned, controlled and accessed. When it comes to raising capital for a small business, web3 offers the best solutions with little hurdles. There are many ways a startup could raise capital through web3. It includes:
- Defi products: Defi opens up a door of unlimited opportunities for a startup to access funds to launch their business. One of the defi product a small team could consider is collateralized loan. This type of loan is so easy to obtain. Unlike bank loans, they do not require extensive documentation or your credit history. They also do not require expensive assets as collateral.
Defi loans accept crypto as collateral, making it easy for anyone to apply. Such loans are tied to a smart contract, removing the need for any background checks such as credit history. Defi loans are instantly accessible once the user fulfills the agreement terms. Small startups would find it very easy to obtain this kind of loans as the terms and conditions are not as difficult as those of banks and other institutions.
Staking and liquidity pools are two other options for a small startup although they does require some long-term approach. These two could be a kind of continues revenue generators probably after the business is up and running. Startup owners could stake some funds and earn crypto rewards off the capital. Or they could also provide liquidity with a stable coin and earn from the trading fees paid. Through these means, they could raise some funds to use as startup or operating capital.
- ICO/IEO: Initial Coin offering and Initial Exchange Offering are two other opportunities that web3 offers to project founders for raising capital to fund the business. Either of the two involves attracting investors to help raise the money needed to kickoff a project. It involves designing a good value proposition for the business, a concrete roadmap and convincing investors that the project is viable and worth their investment.
The next important aspect of a coin offering is to create the tokens. The services of a blockchain developer could be useful for this. The tokens are created and then issued to the public. Capital is raised through token offerings by having the public purchase these tokens and pay with an established cryptocurrency - always preferably a stable coin. The team could then use the funds raised from the token sales to kickoff the project.
Token offering represents one of the best way to get the crowds to fund a project. For it to be successful, the project needs to have a strong value they project. Then a robust technical team behind the project will earn trust for it. If the crowds and investors do not see something unique about the new business or a problem that it is ready to solve, they will likely not be moved to invest in it.
The above represent some effective ways a startup could easily raise funds to kickoff and sustain the new business. Lets look at another challenge that web3 could solve for small businesses
Challenge 2: High Operating cost
Another big challenge that could make a startup really struggle after launch is the high cost of running the business. Inflation is really biting on most economies and rising costs of everything makes businesses struggle.
Startups that are not able to cope with operating costs might face the ugly reality of closing down not too long after launch. So how can web3 assist startups to really continue in business amid terribly rising inflation? Consider the following solutions.
Solution: Web3 business automation for startups
One thing a new business wants to do is to ensure that their services are quick. Its really a fast-paced world and customers want services done in less time. One aspect of web3 that will help increase speed of service is the use of smart contracts to automate some of the repetitive processes in their business.
Smart contracts could be used to setup recurring transactions such as month subscription fees for some services. Instead of having a human agent process such transactions which would be slower and more resource-intensive, a smart contract would execute such transactions in less time and very fast. In this way, a small business could achieve automation which is fast and efficient.
Another use of smart contract for automation is in payment processing. A smart contract could be set up to help users checkout each time they make a purchase. Again, this would be fast. The smart contract will check the items in the shopping cart and run down the totals. Then, it would accept
and confirm payment before issuing receipts to the customer.
A startup could also use smart contracts in its HR department. When the team recruits staff, it could make them sign the agreement encoded in a smart contract. By so doing, the terms and conditions of each staff would be automatically implemented once they fulfill the terms of the contract. By so doing, staff salaries, wages or other benefits are paid in time. The automation using blockchain smart contracts will ensure both speed of business processes, save costs and also remove intermediaries.
Conclusion
Web3 has a lot of tools and infrastructure to help small startups solve glaring challenges. Founders of different projects need to be aware of these solutions such as the ones listed above and see ways to leverage them for growth. If they do, the new venture could experience faster and more sustained growth during and after launch.