What Are Web3 Funding Rounds?

Web3 funding rounds are stages of capital raising that help blockchain startups grow from concept to full-scale operation. Unlike traditional startups, Web3 projects often combine venture capital, token sales, and community-driven funding. These rounds typically follow a progression similar to Web2 companies—starting with pre-seed, seed, and Series A—while incorporating decentralized fundraising mechanisms like DAOs, grants, and token-based incentives. Each round serves a specific purpose, from initial development to scaling and widespread adoption, shaping the project’s trajectory in the decentralized economy.

4 Key Web3 Funding Rounds

Here are the key funding rounds present in every Web3 project:

1. Pre-Seed Round: The Idea Stage

The pre-seed round is where a Web3 startup secures initial funding to develop a whitepaper, prototype, or proof of concept. Investors at this stage include angel investors, accelerators, and early-stage DAOs, often funding through equity, SAFTs, or grants. This phase carries high risk but offers early backers deep discounts on future token or equity allocations. Notable players include Binance Labs, Gitcoin Grants, and Web3 incubators like Outlier Ventures.

2. Seed Round: Building the Product

In the seed round, startups with an MVP or proof of concept raise funds to refine their product, expand their team, and start marketing efforts. Crypto-focused VCs, angel investors, and strategic partners typically invest through token sales, equity, or SAFT agreements. Some projects also leverage community seed funding via DAOs. Notable investors include a16z Crypto, Paradigm, and Framework Ventures.

3. Series A: Scaling the Ecosystem

By Series A, the project has a functional product and a growing user base. Funding focuses on scaling operations, improving security, and forming strategic partnerships. Institutional VCs and crypto-native firms invest through equity and token warrants. Major investors include Sequoia Capital, Multicoin Capital, and Pantera Capital. Many projects at this stage integrate tokens into broader ecosystems to drive long-term sustainability.

4. Series B and Beyond: Growth & Adoption

At this stage of the Web3 funding round, the project already has a proven business model and is expanding rapidly. The funding supports scaling infrastructure, regulatory compliance, and market expansion. Late-stage VCs, institutional investors, and hedge funds invest through equity, token warrants, or convertible notes. Notable players include SoftBank, Tiger Global, and Brevan Howard Digital. Many Web3 projects transition to decentralized funding models before reaching this stage.

What Web3 Investors Need to Know

For investors, Web3 presents both high-reward opportunities and significant risks. Unlike traditional startups, Web3 projects often rely on token-based models, making assessing tokenomics, utility, and vesting schedules critical. Due diligence should focus on the project’s team, roadmap, and underlying technology to gauge long-term viability. Regulatory uncertainty is another key consideration, as evolving laws in different jurisdictions can impact token distributions and investment structures. Investors should also evaluate liquidity risks, as some tokens may have restricted trading periods or limited market adoption. Engaging with the project’s community and governance mechanisms can provide additional insights into its strength and sustainability.

Things to Keep in Mind as a Founder

Securing funding in Web3 requires a strategic mix of venture capital, token sales, and community-driven mechanisms. Unlike Web2 startups that rely solely on equity financing, Web3 projects must carefully design their tokenomics to balance investor incentives with ecosystem growth. Founders should also be mindful of regulatory compliance, as improper structuring of token sales can lead to legal complications. Building strong relationships with both institutional investors and decentralized communities is key to long-term success. Additionally, transparency and clear communication are vital—investors and users alike expect regular updates on development progress, token allocations, and governance decisions. By aligning fundraising strategies with both financial sustainability and decentralization principles, founders can position their projects for lasting impact.

Alternative Web3 Fundraising Mechanisms

Token Sales

Token Sales in the form of IDO, IEO, and ICO allow projects to raise funds by issuing and selling their native tokens. Initial DEX Offerings (IDOs) enable fundraising through decentralized exchanges, ensuring broad accessibility and liquidity. Initial Exchange Offerings (IEOs) involve token sales hosted by centralized exchanges like Binance and OKX, offering investors a layer of security and credibility. Initial Coin Offerings (ICOs) were once the dominant fundraising model, allowing direct token sales to the public, though they have become less common due to regulatory scrutiny.

Community-Driven DAOs & Grants

These provide funding through decentralized governance. DAOs, such as MetaCartel and MolochDAO, allow members to collectively vote on investment decisions, distributing funds to promising projects. Additionally, blockchain ecosystems like Ethereum, Polkadot, and Solana offer grants to developers building innovative solutions within their networks, supporting projects without requiring equity or token allocations.

NFT-Based Crowdfunding

This type of fundraising has emerged as another alternative, where startups sell NFTs to raise capital. These NFTs can grant holders governance rights, early product access, or exclusive rewards, aligning financial incentives with community engagement. This method not only generates funding but also fosters long-term loyalty among early supporters.

Retroactive Public Goods Funding (RPGF)

In Retroactive Public Goods Funding, projects receive funding based on past contributions rather than upfront capital raises. Protocols like Optimism use this approach to reward teams that have already demonstrated value, shifting the way Web3 projects sustain themselves while promoting innovation and long-term development.

Conclusion

Web3 funding rounds combine traditional venture capital with decentralized and token-based mechanisms. While early-stage funding remains high-risk, the potential for transformative innovation is immense.