Our Approach
PE FOR PERMISSIONLESS TECH
Part 1 // The Assessment
Web3 Venture Capital is Broken
The Problem
// Short-term interests in web3
There are a lot of investors in the web3 space. By 2024, the ratio of web3 venture capital funds to web3 start-ups was 1:34 (that’s 500 venture capital funds and 17,000 start-ups). In web2, VC’s existed at a 1:2000 ratio to start-ups in the same period (7000 venture capital funds for 150 million start-ups). Venture Capital investors in the web3 space have proliferated because of the widespread success that many investors had from 2017 to 2021.
But now, returns are harder to generate: only 9% of 2021-vintage funds have produced DPI, compared to 25% of 2017-vintage funds. What’s more, in Q1 2024 only $9.3B was raised by 100 web3 VC funds, and 90% of the funds raised were under $25M. In 2024 and 2025, access to LP capital is dwindling and web3 VCs need to prove performance by any means necessary if they want to raise another fund.
Unlike traditional venture capital that requires a company to succeed, in some shape or form, before an exit scenario is plausible. In web3, a venture’s lifecycle is non-linear. A TGE can provide investors with an exit opportunity before the company has found real users or generated revenue. Because the web3 exit horizon is almost immediately within reach, many investors push their ventures into short-term thinking. By pushing for a token launch, investors can improve their performance. But, the venture often pays the ultimate price.
Investors will push teams to increase their exposure, launch an unresolved token, hasten the timeline to TGE, and reduce vesting across the allocation table. In 2024, 25% of web3 founders gave up over 30% at pre-seed and while it is difficult to parse the increase in token launches for VC-backed ventures due to the rise of memecoins, the number of token launches overall has increased from around 3000 in 2021 to a probable 2M in 2024, according to CoinGecko. While the number of launches has exploded, the average time to launch has decreased to 14 months and team vesting has decreased to 12-18 months. Suggesting that under market pressure, investors are making efforts to cash out more frequently and sooner.
The trickle down
// Effects on tokens and listings
In order for a VC to exit a token position, listings are required. But, to get listings, certain vanity metrics must be fulfilled. So, the space suffers from the incredible marketing bloat of tokens with little behind them. The tokens that do get listed on Tier-1 exchanges typically see their price drop by 48% within 30 days according to DeFi Llama. For all listings, 95% of tokens have less than 5% initial float and only 17% percent of tokens reached half of their projected TVL within six months. The premise for listing and launches has changed: they are now, often, a mechanism for venture capital exit and no longer about the launch of a protocol with promising token incentives in place.
// Effects on service providers
For many web3 ventures, their investor is the only stakeholder and, often, the only signal of success they have. Pre-TGE, with little to no users, an investor’s interests can easily become paramount. The landscape of service providers has specialized to serve investor interests, and many extract incredible value from a venture to provide the necessary hype for a launch that serves as a VC exit opportunity.
Exchanges have become a gatekeeper for exits and charge accordingly for the opportunity. They charge up to 10% FDV, often with low vesting requirements, plus an additional fee that can range from $50’000 to $2.5M and most tokens drop by over 90% after listing.
Market makers are a gatekeeper for liquidity. Ventures often engage in unfavorable agreements. Loan options where no liquidity is added, rather extracted via an OTC deal from the MM, that can lead to a collapse of the token price.
Agencies have become a gatekeeper for building retail token audiences. Some charge as much as $200’000 per month as a retainer to build a token audience, and often product marketing is secondary. Founders go broke hyping their token so that their investors can sell at the peak. The impact:
The Impact
// The web3 space is at a standstill
It is proven that venture capital investments indirectly influence the strategic decisions of companies in the same sector. This influence is true, without exception, within web3 verticals. Between 2023 and 2024, 70% of capital raised went to infrastructure. In the same period, the number of L2s skyrocketed with 150 new L2s emerging, despite the fact that only 12% of infra projects had more than 5000 DAUs at TGE. Infrastructure tends to capture investor attention because adoption metrics are blurry while opportunity for token speculation is clear — it is easier to make money with hype over product-market fit.
Venture capital also typically influences market sentiment acting as a signal for other investment flows. However, this influence is increasingly losing relevance in web3. Retail investors are now acutely aware of their intended role as exit liquidity and, as a result, their participation in listings has dropped 38% since 2022 with fewer and fewer users interacting with launchpads.
The space is at a standstill: Investor priorities are driving what gets built but retail investment flows aren’t following. Builders are fulfilling investor interests with no users in sight. Retail investors are less interested in venture-backed TGEs and founders turn to OTC deals because it is impossible for them to make money with their own project.
Part 2 // The Forecast
Web3 is Ready for Modified Growth Capital
A new opportunity
// Growth capital in a matured space
The PE firm makes money by identifying a promising target that is ready to go public. It acquires a majority ownership and with full control introduces a tactical approach to increase the company’s value and then executes an IPO. Its gain is directly proportional to the increase in valuation it can achieve. Growth capital is a subset of private equity that doesn’t seek full control. Rather, this approach supports restructuring, expansion, or scaling in cooperation with existing stakeholders.
Growth capital seeks out companies in matured sectors and industries. A matured sector has dominant players but also smaller firms, aggressively innovating, ready to the lead position. The fact that major players exist, evidence that the market size is big enough and shows a precedent for scale. But, a class of challengers that are innovating aggressively, prepared to overtake these incumbents, evidence budding opportunities for a growth-focused investment.
In 2025, web3 evidences three of the five trademarks of a mature sector: It has significant growth, ever-increasing regulatory clarity, and a high propensity for technological disruption. However, web3 solutions are not yet fully aligned with consumer trends and competitive dynamics are not well established. For this reason, we can say that web3 has matured but is not yet mature, which makes it ripe for a growth capital investment approach.
1. Web3 has a significant and growing market size
The global Web 3.0 market is projected to grow from USD 4.43 billion in 2024 to USD 6.15 billion in 2025, representing a 38.9 % CAGR. This industry-wide growth rate can support the sustained double-digit growth for individual companies that growth capital typically seeks.
2. Web3 has a favourable regulatory environment
Following the SEC approval of 11 spot Bitcoin ETFs, in 2025 an executive order established a digital asset markets working group to promote regulatory clarity, access to crypto-related banking services, and support for USD-backed stablecoins worldwide. These steps signal that web3 is a strategic priority for the current administration and risks of ventures being stalled by regulation are reducing.
3. Web3 has propensity for technological disruption
The web3 space is capable of integrating other disruptive and emerging technologies, leading to ventures that leverage multiple technologies. The BlockchainAI market is one example, it is forecast to expand from USD 220.5 million in 2020 to USD 973.6 million by 2027, at a 23.6 % CAGR. This propensity suggests that foundational offerings are possible and the risk of irrelevance in the face of emerging technologies are low.
4. Web3 is not yet fully aligned with consumer trends
In the past year, web3 is said to have found its first widespread product-market-fit with stablecoins. As of early 2025, there are USD 239 billion worth of stablecoins in circulation and the average daily transaction volume on major stablecoins exceeded the daily transaction volumes of Visa. Gambling and yield-bearing products are also finding their way toward mass appeal. But, the widespread use of DeFi and Web3 applications is not yet a reality.
5. Web3’s does not have well established competitive dynamics
Within the product segments that have found product-market-fit, specifically stablecoins, there are benchmarks for certain competitive dynamics. We know how much a protocol should pay for TVL and how much APY should be offered. However, competitive dynamics, including pricing, margins, and customer acquisition costs, are not so well understood that they can be predictably leveraged when scaling across product classes or verticals.
A growth capital approach is worth pursuing in a matured sector because its targets typically come with a lower risk profile: they tend to be well on their way to finding product-market-fit, making failure rates lower and exponential returns nearer. They also offer clearer paths to liquidity. In a web3 context, these are generally the tokens that can hold their value for a sustained exit opportunity, making them valuable for a liquid investor post TGE as well. Adopting private equity tactics — drawing from growth capital in particular — is perfectly timed to a matured web3 space and the standstill caused by current venture capital tactics.
A New Target
// The challenger
The target of a PE investment approach in web3 is a venture that is ready to overcome the areas of immaturity that the entire space is struggling with. These ventures are best positioned to align with consumer trends so that they are capable of addressing real demand. They are also capable of resolving competitive dynamics for themselves, potentially setting a precedent for companies that follow them. We call the target ventures of PE tactics “challengers” for their ability to challenge the status quo. They are capable of reshaping well-established behavioural patterns within their user groups to usurp incumbent solutions and claim dominant positions in their vertical.
A Challenger Example: GEODNET
GEODNET is a DePIN that gathers real-time positioning data to enable high-precision GPS applications. Today, the network offers affordable solutions for users in need of precise geospatial coordinates, often to operate robotics (robotic farming is an immediate demand driver); in the future it has the potential to provide a compelling value proposition for autonomous robotics (including self-driving cars).
The network has scaled to include over 16,000 devices across 140 countries providing 75% of the world’s population with 2cm position accuracy. It has grown to over $3 million in the last 30-day annualized network fee revenue (up 500% YoY).
GEODNET targets industry-specific demand, offering web3 solutions that bring efficiency, cost reduction, and innovation potential that were previously impossible under a centralized provider. By targeting real demand, GEODNET has scaled aggressively, resolving unit economics and value chain capabilities in the process. These competitive dynamics would be difficult to optimize without product-market-fit. Its token utility is fundamentally linked to network performance and comes with an aggressive value accrual proposition: Not only does GEODNET buy back GEOD tokens with 80% of its revenues but protocols that rely on GEODNET, like ROVR, are also buying back GEOD rather than simply paying network fees. These fundamentals make it one of the most sought after liquid investments (a Grayscale to 20 token) for value investors in the space. GEODNET is an example of a challenger whose offering addresses real demand head-on and as it has scaled it has resolved competitive dynamics, specifically the unit economics of its offering.
A New Approach
// PE for Permissionless Tech
Challengers like GEODNET don’t need the typical approaches of private equity — from leveraged buyouts to tight-fisted control. While growth capital takes a more collaborative approach and doesn’t require a majority position, it still needs to be reconsidered for web3. Specifically, it should address web3’s non-linear venture lifecycle and permissionless nature.
PE for permissionless tech is early stage
The lifecycle of a web3 venture is non-linear. A TGE creates an exit opportunity that can often precede scaling (and sometimes even adoption). So, a growth trajectory needs to be charted before token listing to target enduring and sustained growth that maximizes protocol utility and token price. The timing for growth activities in web3 are then, necessarily, early stage and should prioritize adoption pre TGE and immediate scaling potential following a TGE.
PE for Permissionless Tech embraces tokenholders
Web3 growth requires influence rather than control. A major component of early stage growth activity includes aligning influential stakeholders with the long term vision so that the community and ecosystem of owner/users can be guided to support protocol growth and prevent value extraction. Many ventures launch and navigate early adoption under a centralized structure. Becoming decentralized is often essential for growth, but this new operating model can also present blockers for a founding team.
A token’s highest and best purpose is to offer financial incentives that bootstrap a network with low platform utility in its early days, creating token holders who are users and owners that participate in the network's eventual success. Total control that eliminates small stakeholders is not the best investment outcome in web3, because it alienates users. Rather, the challenge to achieving profitability at scale is to ensure that token holders continue to think like owners rather than users, prioritizing the commercial success of the network over user perks, like free access.
PE for Permissionless Tech is more equity than capital
Web3 growth needs less capital and more ownership. In web3, exit opportunities happen proximal to a series A round, not a series B or C as with traditional tech startups. This means that early stage growth activity is happening well within the time frame of a venture capital investment. For this reason, growth protocols are often well funded but still lack the embedded growth support with an owner’s mindset that comes with an injection of late-stage growth capital. For this reason the capital aspect is much less valuable than the growth capabilities that an investor with an owner’s mindset can bring. In web3 private equity growth capabilities can be comfortably separated from capital.
A Case Study
// The Uniswap front-end fee switch
On May 10, 2023, GFX Labs, a Uniswap governance delegate, submitted a proposal to activate the protocol fee switch. This initiative aimed to redirect a portion of trading fees from liquidity providers to the Uniswap protocol itself, generating revenue for the DAO.
Benefits of activating the fee switch:
Revenue Generation: A sustainable revenue stream could fund development and community initiatives.
Market Positioning: By demonstrating its ability to generate revenue, Uniswap could reinforce its position as a leading DeFi protocol and set industry standards.
Incentivizing Governance Participation: Allocating a portion of fees to UNI token holders might encourage more active participation in governance decisions.
What prevented a positive vote:
Uncertainty: Activating protocol fees could raise questions about Uniswap's classification under securities laws and redirected fees could introduce ambiguity related to reporting obligations.
External Influence: Gauntlet recommended a cautious, incremental approach to implementing protocol fees.
Self Interest: LPs didn’t want fees to reduce their incentives, potentially affecting liquidity on the platform.
What are the ongoing implications of a negative vote:
Lost Revenue: It has been estimated that Uniswap was on track to earn $760M in fees by 2024.
Lost Market Share: In October 2023, Uniswap held over 50% of the DEX market share. By September 2024, this had decreased to 36%. Competitors like Aerodrome and Orca gained traction with the ability to cut fees and incentivize users.
Although Uniswap’s fee switch proposal wasn’t simple, it offers us a case study to consider the potential of the PE for permissionless tech approach. If we believe that turning on the fee switch would have generated meaningful revenue, improving market share and contributions to the space, and that these things are the preferred outcome. Then, PE for permissionless tech tactics could have helped to create a positive vote.
A clear commercial growth trajectory established early on could have anchored token holders' thinking and provided the basis for a commercial mindset.
Harnessing the soft-power influence of critical stakeholders could have prevented opposition opinions from driving community sentiment.
Owner-centric governance thinking could have helped to shape governance participation and overcome the tension between user/owners who voted in favour of free access.
These are exactly the gaps that early stage growth equity for permissionless tech intends to address.
Part 3 // Our Belief
PE for Permissionless Tech Needs a Venture Firm
Our Gut Feeling
// 2025 is a pivotal year for web3 investing
There have been more watershed moments for web3 in the last 15 years than one could count. And, again, 2025 will be important. We believe that the space will reflect on 2025, not because of sudden rallying price action, a surge in adoption, or the cataclysmic collapse of a valuable protocol, but because of the critical nexus that is upon us. In the near future, it will be evident to all that in 2025 early web3 investment and growth approaches had come to an expiry, however serendipitously, at the precipice of maturation for the space, leaving a gap for a new approach to venture capital.
Our Call to Action
// The Problem is ours to solve
Looking, now, at this critical nexus from the present, it is already clear that web3’s remaining path to maturity is dependent on internal action, by players within the space. Growth rates, regulation, and disruption from other technologies are of decreasing concern. So, we in the space can now focus on user alignment and resolving competitive dynamics for ourselves. The potential for impact is great and the players that champion new approaches are likely to be remembered. Certainly, the investors and founders that continue to rely on the 2017-2021 approach to deploying and accessing capital will be forgotten.
Our Precedent
// The early activists
Early tech and its investors have seen these gaps before. In the 1970s, a group of west-coast venture capitalists, including Don Valentine and Tom Perkins (from Sequoia Capital and Kleiner Perkins, respectively), were raising capital in a challenging economic climate and decided to take a new approach. They had tactical skills as company builders and were capable of rolling up their sleeves. They were tired of the timid, number-crunching by the financiers on the east coast. They knew that financial analysis and arm’s length perspective were no match for first-hand experience they had gained in the entrepreneurial trenches. Finally, they saw a new generation of inventions coming from Silicon Valley that were being overlooked.
These investors raised funds on the premise that traditional investors, from private equity or merchant banking, were not capable of understanding new technologies and not willing to take the decisive action needed to drive a company forward. In 1974, Don Valentine used his capital too invest 150,000 USD into a popular arcade-machine game called Pong. Despite the obvious popularity of the game, the company had failed to raise because of the founder’s laid-back style and inability to articulate a business model. Valentine immediately recognized the game’s “at home” potential and wrote a business plan that attracted Sears as an exclusive distribution partner, validating the market and setting the company up for a $28M USD acquisition by Warner in 1976.
Don Valentine championed what eventually became known as activist capital. Although now the term has come to define a very specific style of board involvement and corporate control, these early investors were successful for their deep involvement in early tech. ventures while working in alignment with — not opposition to — their founders. They approached the investment into new technologies that had not yet found product-market-fit as business leaders and fellow entrepreneurs, delivering tactical skills and actively setting their portfolio companies onto a clear growth trajectory.
Web3 in 2025, does not need a copy-paste of an investment tactic from the 1970’s, but in many ways it does require a return to fundamentals. We know that alpha compresses to zero over time. So, reinvention and new approaches are critical for relevant investors. What the early activists show us is that those who possess essential skills and can fill gaps for founders, will ultimately fill a gap in the investment landscape.
Our Course of Action
// Driving forward as a venture firm
WTG Ventures is a venture firm. The moniker is intentionally vague because we see our activities as constantly evolving. As very early founders in the space, we came together in 2018 as both the architects and builders of businesses and their leadership and execution team. For us, a venture firm is the title that can be worn by any value-add investor who is more interested in seeing themselves as a work-in-progress than limiting themselves to a fixed way of working. They build repetitive capabilities, team depth, and real alpha by any means necessary.
Our journey as a venture firm stems from the trenches as early and ambitious blockchain founders and extends through the patient accumulation of vital, tactical skills during the seven years that we collectively led one of the largest venture studios in the space. If we were once contractors (brain and muscle power for hire while operating a venture studio), we are now a SWAT team (a tactical force for founders, capable of deployment into the most challenging situations). But, as with the champions of any new approach, we will need to continue evolving. As we pursue and iterate on the PE for permissionless tech approach, we intend to expand our capabilities to that of a full-fledged intelligence agency: shaping venture success alongside founders in full alignment.