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Growing a Web3 Startup - Thought Leadership series #1
Web3 Growth Marketing - Interview with Shaun Heng, ex-head at Spartan Labs & Ex-VP of Growth at CoinMarketCap
It’s the year 2023. The air from the crazy DeFi yields, NFT whales & GameFi raises has cleared, paving way for numerous web3 teams to build the future of internet.
However, only a handful of these startups manage to make a mark in the broader market, achieving substantial user adoption.
What gets these startups rolling? Better Web3 Marketing? More defined Web3 Growth hacking? Or Community Analytics? Better Attribution using a Web3 CRM? 💡🤨
The questions around growing a vibrant Web3 community is the missing piece for most teams. While real product utility remains the #1 growth driver , a more practical question that founders ask is “How to craft a web3 GTM strategy?”
To uncover these secrets of achieving the elusive success in Web3, , we conducted an interview - a first in a series of many - with Shaun Heng, a renowned Angel Investor, former Head of Spartan Labs, and Ex-VP of Growth at CoinMarketCap.
We touch concepts around crypto native GTM techniques, web3 infra trends , learnings from CoinMarketCap & startup growth play books.
Keep reading to discover how you can shape a growth strategy for your own Web3 startup.
GTM Strategy for Web3 Growth
What is a strong Go-to-market Web3 Marketing strategy for Web3 projects?
When we asked Shaun this question, he curiously said “Airdrops” to be the golden elixir. But adding a twist to this rather highly used & misused concept.
“To drive crypto adoption across different industries, airdropping to Web 2.0 platforms appears to be the logical next step. Instead of reinventing the wheel to onboard new users, it is more efficient and convenient to leverage existing infrastructures and create synergies, while incentivising Web 2.0 users to interact with the Web3 ecosystem”.
Thus leveraging the big already existing web2 networks of distribution with the concept of fairer web3 rewards to the community.
We have seen this happen off late (Reddit being one of the poster boys).
Shaun in fact shared another rather undiscovered Anecdote, that of WeChat.
“A prime example of this strategy is WeChat's Red Envelope initiative, which offered a free money promotion based on the Chinese New Year gifting tradition. This initiative introduced gifting to the digital realm, promoted the product, and kickstarted adoption on an unprecedented scale.”
Practical steps for a founder?
Partner with adjacent web2 networks with your user audience (trading groups for DeFi , existing multi player games for GameFi)
Educate the audience to the benefits of web3 token & NFT rewards (e.g. early exit, passive income source etc.)
Running some numbers, DOTA has >7 Mill active players . Even a 0.1 % web2 → web3 transition unlocks 7k players for your latest metaverse gig (7x compared to the max 1k DAU these days in big web3 games).
This strategy however comes with its own challenges such as long lead time for community partnerships, speculative behaviour promotion etc. To quote Shaun
“Nevertheless, better checks and balances will be in place over time to ensure more equitable and fair airdrops. It's crucial to acknowledge that tokens/airdrops should be used to expedite growth and GTM, but not to attain product-market fit.”
Practical tips for the early stage founder
What should be the goal for Web3 Startups pre fund raise?
A seasoned investor like Shaun has a very simple but effective take on this : self reflect on the need to start a VC backable web3 company. He says
“At this point, most Web3 startups are overly focused on solving specific infrastructure issues.”
While the space may require these solutions, the question arises:
Is the solution VC-backable? 🚀
The truth is that some of these problems are not intended to become billion-dollar companies. The issue must be significant enough.”
He further proposes an alternative for founders not clear on their intrinsic motivations , a great way to explore the potential of web3 without risking it all:
“As a Web3 founder, the critical question to ask is what is the solution intended for? Is it meant to satisfy a personal itch, or is it due to the desire to be a CEO?
If the answer to these questions is clear, then the initiative can be scaled into a company. Otherwise, it may be better to present the idea to a well-funded organisation and become a product owner.”
Web3 Mainstream Adoption
What will drive the inflection point for web3?
This question is one of the most talked about in the nascent blockchain industry. Will DeFi overhaul the entire banking system, will web3 games replace the big web2 giants?
Shaun presents a solid take on what could drive the hockey stick growth for web3 as follows.
“Drawing inspiration from Reddit's collectibles avatar launch, the inflection point for Web3 projects may occur when users can interact with and experience the benefits of blockchain technology (open databases, server-less networks, smart contracts, etc.) in their daily activities.”
Thus, web3 goes mainstream when no one talks about it being “web3” .
After all, it is a major backend revolution anyway (one could argue it’s also a massive philosophical ethos change towards transparency , decentralisation & privacy) .
He also next talks about this idea in a different way - blockchain solving problems it is fundamentally suited to solve (cross border payments, a fairer creator economy etc.). To quote him
“Blockchain and smart contract technology empower us to enhance current businesses and construct more sustainable business models. It's more of a technological innovation/advancement than a paradigm shift. Projects can focus more on discovering significant enough problems in the real world where blockchain and smart contract technology can help us develop better businesses.
This approach can create an inflection point for Web3 startups. By prioritising ease of adoption and building on existing needs with blockchain-led innovation.”
Future of Web3: Web3 trend with Most Promise
Which Web3 trend has the most potential to grow in Web3?
Account abstraction is a new game changer for web3, bringing decentralized applications to a mainstream audience. Account Abstraction unifies Contract Accounts and EOAs making user accounts more ‘programmable’.
With AA, you remove the logic of signing transactions from the account, and you “abstract” it out unlocking much more flexibility. This paradigm shift is exciting since it will allow non-custodial blockchain UX to scale.
The potential of Account Abstraction has made smart contract wallets a buzz-worthy topic in the Web3 community. However, with the increasing number of players entering the space, it's becoming more crowded and competitive.
For those looking to build a smart contract wallet, the recommendation is two-fold:
Identify and emphasize your unique selling proposition to establish a competitive advantage over other players.
Develop a clear monetization strategy from the outset. Investors are currently wary of backing wallet companies due to the limited revenue potential in this space.
“Think outside the box and if you can solve the monetization problem and prove it, you would already have answered half of the questions investors might ask about this vertical.”
Web3 Growth Hacking @CoinMarketCap
What efforts at CoinMarketCap brought the most results?
Web2 Marketing mindset and essential GTMs cannot be completely ignored when building a web3 startup.
Web2 techniques can be nitpicked and implemented across different stages in a web3 startup, like - user acquisition, user or community engagement, retention, and community activation.
On this note, the main goal is to identify the primary drivers of growth and determine how product features can facilitate a viral product-led growth loop.
For CMC’s team, SEO played a crucial role - even when considering Web3 Growth marketing efforts. This allowed CoinMarketCap to scale the traffic in a sustainable manner. However, the approach we took was product-led SEO approach by prioritizing the needs of the customers over keywords.
This approach involved creating content that addressed
customers' specific search queries, while also
analyzing how users were reaching webpages and those of the closest competitors.
“This strategy enabled us to 50x our traffic and I think this was a major contributor to the growth sprout.”
Web3 Playbook: Community Engagement & Campaign Management
How can web3 projects can solve for user acquisition, and how instrumental are community and growth analytics for it?
Shaun continues to highlight how “airdrops” can be a promising method for web3 projects to kickstart their growth. Especially when coupled with campaign analytics & attribution.
He acknowledges a couple of major challenges with this
Risks around integrating off chain data with on chain footprint
Nascent wallet targeting infrastructure
To quote him, “However, the current challenge is that the data available today is still very limited and disorganized.”
In Web3, blockchain records are public, but identity can be kept confidential. In contrast, Web2 operates in the opposite manner. Numerous teams are grappling with the issue of integrating on-chain and off-chain data.
As an NFT collector, one often receive airdropped NFT collections from other projects. While most of these airdrops rely on the hit-and-miss approach, as the infrastructure is developed, it is apparent that we will be able to accurately target the right users at the appropriate time.”
There are a few more challenges our Intract community has highlighted around this space (airdrops prone to sybil attack , fragmented identity, audience resistance to the “ad” marketing paradigm).
Interestingly though, a lot of technological primitives have been developed that can supercharge web3 analytics for marketing. Some notable efforts in this space come from Graph Protocol, Push Protocol & Polygon ID.
Shaun concludes his take with a push for prioritising analytics when the time is right.
“When it comes to Web3 Growth marketing, Web3 Campaign Analytics & Attribution can be a crucial factor when your user base reaches a significant size and when you have gathered enough data. Community and Growth analytics are particularly intriguing in the blockchain realm because it functions like an open database.”