Web3’s Best Projects Are Becoming the Industry’s Biggest Investors

Web3 projects raised $1.9 billion during Q1, with funding flowing into the coffers of over 300 ventures, among them DeFi and GameFi apps, launchpads, infrastructure projects and RWA protocols.

While deep-pocketed VCs like A16z, Pantera Capital and Galaxy Ventures are responsible for the lion’s share of investments, successful projects are themselves writing checks to fuel innovation in various areas.

Web3 Players Invest in Innovation

Whether it’s in the form of grant programs, hackathons or traditional equity-based deals, Web3 protocols are taking a proactive approach by allocating a percentage of their resources to bootstrapping promising concepts and talented founders.

Take crypto bank Xend Finance, which is backed by both Binance and Google Launchpad. The platform, whose raison d’etre is Real-World Assets, launched its $RWA Hackathon on July 31, an initiative that seeks to reward projects building on its native Asset Chain. While $3 million worth of investment is on the table, Xend is also offering an assortment of cash prizes for developers. The Hackathon will run until October 3.

And then there’s the Uniswap Foundation, the nonprofit organization behind leading decentralized exchange (DEX) Uniswap. In Q1, the Foundation committed $4.34 million in new grants and disbursed $2.79 million in previously committed grants, from a sizable treasury of $41.41 million.

According to the Foundation, its grants program is designed “to create a long-lasting ecosystem made up of developers, researchers, and governance contributors,” with the ultimate goal of defining “the future of DeFi’s most important protocol.”

Layer-3 blockchain project Orbs is another that is doubling as both a platform in its own right and a serial investor. Orbs, which brings CeFi-level execution to DeFi platforms to deliver a superior onchain trading experience, has made numerous investments – particularly in projects leveraging one of its four core products.

These include Liquidity Hub, a decentralized optimization layer for DEXs, Perpetual Hub, a suite of services for intent-based onchain perpetual futures trading, and dTWAP and dLIMIT, protocols that let DEXs execute advanced CeFi-level orders.

Several projects integrating one or more of the above have received strategic investment from Orbs, among them Fenix Finance, a DEX built on the Blast network, and BNB Chain-based exchange Thena, both of which have integrated Liquidity Hub to access deeper cross-chain liquidity.

The L3 project has also invested $1 million in SYMMIO, a derivatives settlement layer that helped Orbs develop Perpetual Hub alongside IntentX. Interestingly, IntentX – a decentralized onchain OTC derivatives exchange – itself received funding from Orbs last year.

It’s easy to see why Orbs is making strategic investments in projects that are helping to popularize its technology, and this activity has plenty of precedent in Web3. We only need to look at the big blockchains, many of which have their own dedicated foundations and treasuries expressly created to convince developers to build on their network.

The Ethereum Support Program, to take one example, provides both financial and non-financial support to projects and entities (particularly those which are open-source) within the greater Ethereum community, with the goal of accelerating ecosystem growth. Last year, it bootstrapped just under 500 projects to the tune of over $61 million!

With the Web3 space attracting increased attention from institutional investors in light of regulatory breakthroughs like the Bitcoin spot ETFs, it will be fascinating to see what the fundraising curve looks like in 12 months’ time. Whatever happens, a healthy portion of investment will surely continue to come from within.