Future

Hybrid

Web3 entrepreneurs sat down for a round table conference at San Francisco Techweek in an event hosted by Orbis86 and Virtualness.io, to talk about Web3 building and shed light on how to make it accessible to all. The event was sponsored by HederaHashgraph and ServiceNow, whose 4-member panel included— Kirthiga Reddy, Charles Kanavel, Alan Chiu and Asad Awan. 
Kirthiga Reddy is the CEO and co-founder of Virtualness.io, a mobile-based platform for Web3, helping creators and brands conveniently create, mint and sell their digital collectibles with the use of generative AI. She was the first employee of Facebook India, working as an MD for India and the South Asian region. 
Charles Kanavel is the founder and CEO of an IT firm The Kanavel Group, and the founder and CEO of NFCO.io, a blockchain real-estate company. A seasoned entrepreneur from Wall Street, he has invested in several successful enterprises in tech as well as finance. 
Alan Chiu is the co-founder and CEO of Enya Labs, an AI-based SDK platform for developing decentralized applications and hybrid computational solutions for blockchain. They also launched the Boba Network, a Hybrid computing-based multi-chain Layer-2 scaling solution. Their focus is enhancing scalability and interoperability of blockchains. 
Asad Awan is the co-founder and CEO of Potrero Labs, a Web3 social media company. Before starting his own business, he was a product VP at Facebook for 10 years, at the same time as Reddy. 
<h2 class="wp-block-heading" id="strong-fundraising-insights-for-web3-entrepreneurs-strong">Fundraising Insights for Web3 Entrepreneurs</h2> 
The speakers shared their insights on making successful seed rounds and other fundraising for Web3 startups by shedding light on their own experiences. 
Alan started the discussion about getting early enthusiasts to build momentum— “We started with identifying individual investors who were really excited about what we were doing. They’re already in the circle, following our journey. And it didn’t really matter how much capital they were putting in… They were committed and willing to put in their time and effort. And we pulled off these numbers before we actually started fundraising. 
Having momentum going into a round is extremely important. You don’t want your round to drag out. Your deal is either hot or not. There’s no in-between. And once you sense a critical lack of interest, that’s when you close it. Don’t let it drag out.” 
Reddy agreed, having a similar experience, wherein the creators who also happened to be the potential consumers for Virtualness, turned into investors as they were highly impressed with the platform. She said, “My first six months of just testing the concept, several creators said, if you start this company, we want to invest. So that was the first sign that this is valuable enough that people are not only giving us input, but also willing to put in a check. 
My first pitch deck to my fifth pitch deck was so night and day different. By the time I actually started fundraising formally, I already knew where our target raise of five million was going to come from. 
And we have creators like Marina Mogilko– the Silicon Valley Girl, Randi Zuckerberg… We were also very thoughtful in terms of the composition of having a very strong mix of <a href="https://www.thecoinrepublic.com/2023/08/06/some-secure-ways-to-enhance-the-protection-while-using-web3/" target="_blank" rel="noopener noreferrer nofollow">Web3 creators</a>. Blockchange led the round along with investors like Polygon, and also working out the right mix of Web2 creators, and then people like F7 (Ventures) and Oceans Ventures came in.” 
She adds a very important point about the role of diversity and inclusion— “Diversity is a key element, and a diverse cap table leads to stronger results. And it’s diversity across a bunch of dimensions, like gender diversity, diversity of thought, diversity of experiences, age groups…” 
Awan shared his journey of building Potrero— “At Facebook, I was meeting a lot of creators. And I built a lot of the products which had already paid out a few billion dollars. When I decided to leave Facebook, I connected with the few people who were in the space, which kickstarted the whole journey.” 
He also agrees with Reddy’s point of diversity in cap table— “We wanted a good mix of builders in Web2 and Web3. We have folks like Balaji (Srinivasan), Mysten Labs from the Web3 side, a16z, a top one for crypto, and then folks like Fidgi Simo, who have actually built big products (on Web2 platforms) like Facebook and Instagram.” 
Kanavel raises a unique point for Web3 startups going to fundraisers— “As you’re going on this fundraising journey, do not talk about Web3. Because I think a lot of people don’t know what Web3 is… And I always say VCs are not the end-all-be-all.” 
Sometimes, VCs may underestimate the true potential of a startup. In that case, according to Kanavel, instead of wasting time and energy in fundraising, a better option would be to build an MVP (Minimum Viable Product), and put it out in the market for real testimony. 
He also talks about the possibility of realizing another aspect of one’s business that generates more value than the one they’re trying to invest most of their money in. He says, “A lot of you, when you’re looking at building what you’re building, you may realize, as you look at your journey, that you may not have to put that part of it to money. You can save to build towards whatever your actual value proposition is.” 
<h2 class="wp-block-heading" id="strong-benefits-of-saft-strong">Benefits of SAFT</h2> 
Notably, Kanavel and Alan raised capital for their companies via SAFT (Simple Agreement for Future Tokens). SAFT is a contractual investment agreement that involves investors of a crypto project getting equity of the company along with the tokens at high discounts upon release. They are also referred to as token warrants. It’s a way of raising money through tokenomics. 
Interestingly, SAFT isn’t a typical part of the traditional venture capital. So, Alan goes on to explain the benefits of adopting SAFT— “The token round was done for the whole network, which has its own governance foundation. And the fundraiser was done through a token round. 
The token, in addition to being the governance token, is a gas fee token. It was also used for enabling a core piece of technology called hybrid compute, which allows smart contracts to make any object API calls automatically within a <a href="https://www.thecoinrepublic.com/2023/08/06/some-secure-ways-to-enhance-the-protection-while-using-web3/" target="_blank" rel="noopener noreferrer nofollow">smart contract transaction</a>.” 
Kanavel extended how the token warrant helps entrepreneurs and investors alike— “One of the biggest things about token-economics is adoptibility. You’re creating a token, how do other ecosystem partners use it? So I use that token to activate my early fundraising rounds with friends, family, angels, because it provides them liquidity faster and safer. The ability to get out is more attractive, (whereas in official fundraising,) they’re locked in for 5-7 years.” 
Kanavel stresses upon the huge advantage for investors in terms of time difference of return yielding between traditional fundraising versus SAFT— “If you have a SAFT, you’re looking at potentially 18-36 months to get that off the ground, knowing that there’s also a big treasury behind it— other partners who are going to adopt it. 
You might have tokens that started at a dollar and go to 4, 5, 6, because those tokenomics are only yours; as opposed to when you get a year around, sometimes the valuation of company is completely out of your hand… those investors (can) either convert it to equity like a token warrant, or dump it into an exchange.” 
Fundraising for innovative technology takes an innovative approach. Raising money through tokenomics and token warrants like SAFT are an effective, yet under-utilized strategy to win the trust of the investors. Diversity and inclusion are the best bets for creativity and innovation. Entrepreneurs should always be flexible and willing to pivot from their original idea, as there is always a scope when one could discover an alternative value proposition for their startup. 
The VC game is all about putting forth a steadfast vision. In the words of Alan Chiu, “Don’t go into these conversations with the mindset of fundraising, but just try getting their conviction in your vision.” 
Disclaimer: The article is a transcription of the interview conducted by RJ Soniya Ahuja. No statement or comment in the article is a direct or indirect portrayal of the writer’s views or opinions. The interview does not intend to promote, demote or demean any organization or community. It also does not intend to give the readers any financial or investment advice.

Web3 Fundraising: Creative Approach with Kirthiga Reddy, Charles Kanavel, Alan Chiu and Asad Awan

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