Building an Investable Product in Web3: A Comprehensive Guide

The advent of Web3 has ushered in a transformative era in our digital interactions, marked by blockchain infrastructure, decentralized applications (DApps), and the use of cryptocurrencies.

I believe we have reached a turning point where we are still iterating and improving the underlying blockchain infrastructure, but we are also starting to build blockchain technology based products tailored to a more widespread consumer audience (B2B and B2C). However, to do this successfully Web3 products need to become more user friendly.

This blog post is a guide for builders venturing into the Web3 space and delves into the essential steps for creating an investable product within the Web3 ecosystem, offering insights into the dynamic landscape of blockchain innovation.

1. Understand the Web3 Landscape:

Before embarking on product development, grasp the fundamentals of Web3. If you come from a Web2 background acquaint yourself with blockchain ideology, smart contracts, decentralized finance (DeFi), non-fungible tokens (NFTs), and related concepts. This knowledge forms the bedrock for informed decision-making and identifying opportunities for groundbreaking solutions and how to potentially disrubt existing industries.

2. Identify a REAL Problem to Solve:

Effective products address specific industry pain points. Conduct comprehensive market research to pinpoint challenges solvable through Web3 technology. Whether enhancing transparency, security, or efficiency, a clear understanding of the problem sets the stage for a product that resonates with users and investors.

3. Define the Solution Ensuring you have Product-Market-Fit with a Large Enough Market Size:

Your product should precisely address a pressing problem or need in the digital landscape. Beyond technological prowess, ensuring PMF entails a thorough understanding of the target market’s dynamics, user preferences, and pain points. Moreover, recognizing the scale of the market is indispensable — having a solution that resonates with a sufficiently large audience ensures not only viability but also attractiveness to potential investors.

In addition, ask yourself — would somebody use this product and more importantly pay for this product? If, how much? Does that make sense with my cost base? What is the business model? Can I think of more than one way to make money with this product?

Also check if you have your timing right — will anybody use this solution now?

4. Define Your Value Proposition and Evaluate Your Competitive Landscape:

Articulate a compelling value proposition highlighting how your product leverages Web3 to deliver unique benefits. Whether cutting transaction costs, enabling peer-to-peer transactions, or ensuring data integrity, a strong value proposition attracts both users and investors.

What are the user personas? Who are you building this product for? What is the job to be done and how does your product solve this in the best way possible?

Also be sure that you can explain to an investor how your product differentiates from competitors and how many/what kind of players are trying to enter the space now? Why are you going to be the winning team with the winning product?

To help think about your competitive landscape, go beyond only looking at those who do the same thing. Think about what alternatives are there that solve the same problem. Holding a digital picture of an ape was surely not the problem holders of famous NFT projects were solving for. They were solving for being part of a certain community.

Think about it this way:

Problem: Person wants to attend a meeting at another location.

Solution: A taxi.

Product: Uber.

Alternatives: Metro, Bus, Bicycle, or a ride-hailing app containing all of these options etc. — but also think a bit beyond, as also video conferencing e.g. Zoom is a competitor in this specific problem statement. The problem to solve for is how to be able to attend the meeting and the solutions can take a variety of different paths — think outside the box — is your product really the best solution for the problem you are solving? If you are convinced of this, make sure you can articulate why this is the case to investors clearly.

5. Build a Strong Team:

Success in the Web3 space hinges on a skilled and collaborative team. Assemble diverse talents in blockchain development, smart contract programming, UI/UX design, community building, marketing and leadership. A well-rounded team enhances the ability to navigate the complexities of Web3 and create a product meeting technical and user requirements. Make sure your team can work together for a long term on an interpersonal level as well.

6. Make Something Complex Simple:

The best products many of us know and use are all simple and powerful, think of Google, Notion, Medium. In Web3 there are not so many of those yet.

This is also because in Web3 decentralisation means that users can pick any path (e.g. wallet, bridge, DEX, etc.), so more competition, more user choice, lower costs, and slimmer MVPs.

Which also means that in Web3 UX you usually do not control the full user journey, therefore you should think about integrating different tools into one full experience, even if you are only building the last step of the user journey (example: you are building a game, but the user needs to get a wallet, on-ramp money, swap into tokens etc. all before they can even play your game or buy any in-game assets which are likely a big part of your revenue stream).

7. Focus on User Experience and Integrate Web3 Wallets by Abstracting away Complexity:

User experience is paramount. Design an intuitive, user-friendly interface ensuring accessibility for users of varying technical backgrounds. Consider onboarding processes, overall usability, and aesthetic appeal. You want to cater to everybody, not just current Web3 users.

Facilitate seamless transactions by integrating Web3 wallets but abstracting them away if possible. Simplifying the user’s ability to connect wallets enhances adoption and interaction with your application. Ideally the user does not know they are using a complicated blockchain feature.

8. Choose the Right Blockchain Platform:

Selecting the appropriate blockchain platform is pivotal. Consider scalability, security, and community support. While Ethereum is popular, other platforms like Solana, Sui, Cosmos etc. offer unique features. Evaluate platforms based on your project’s needs.

Evaluate the use of smart contracts, which are crucial in many Web3 applications. They require secure, audited, and efficient implementation. Prioritize thorough testing and code reviews to avert security vulnerabilities with potential severe consequences.

9. Community Engagement and Marketing:

Cultivate a vibrant community around your product through active engagement on social media like Twitter, Discord and forums. Communicate updates, milestones, and respond to user feedback. Attend events and be present in the Web3 ecosystem. Implement a robust marketing strategy for awareness and investor attraction.

10. Tokenomics and Monetization: — Make sure you fully understand if and why your product need a token.

Design your project’s tokenomics carefully, defining the token’s utility and its value proposition. Explore monetization models like transaction fees, subscription plans, or token sales. Do not just have a token for the token’s sake or because you think you can raise money through tokens without having to give away your equity. An investor will want to invest into the aspect of your business where the value is accrued.

11. Compliance and Regulation:

Navigate the regulatory landscape in your operational jurisdictions. Ensure compliance with local regulations to mitigate legal risks and foster trust among users and investors. Make sure you keep up-to-date with regulatory changes in different markets that you operate in.

12. Iterate and Improve:

Stay adaptable in the ever-evolving Web3 space. Regularly assess user feedback, monitor industry trends, and be prepared to iterate and improve your product. Talk to your users and plan an upgrade path in advance (e.g. to be able to upgrade a smart contract). Continuous refinement is crucial for sustained success.

To summarise, building an investable product in Web3 demands a strategic approach, technological proficiency, user-friendly UI/UX and a commitment to delivering value. Following these steps empowers you to navigate Web3 complexities, increasing the likelihood of building a product that attracts users and investors. Embrace innovation, stay informed, and continuously refine your approach to leave a lasting impact in the dynamic Web3 space.

I look forward to seeing the development of some of the existing products and the emergency of the new products that will be built in the upcoming market cycle.