After the crypto bull run in 2017, many new crypto projects came about, only to die down soon after. So, how can a brand new crypto project take off and hit the ground running? Historically, business incubators would boost business ideas and turn them into a reality, resulting in growth and popularity. In crypto, incubators are sometimes known as venture capitalists or crypto incubators. These incubators help to fund and grow the project. Plus, they boost marketing and advertising while helping to foster the community. We’ll discuss more details on the history and benefits of incubators. In the next paragraph, let’s discuss “What is a crypto incubator?”
What is a Crypto Incubator?
With thousands of crypto projects coming out every year, the support of a notable incubator gives a cutting edge to new projects. Crypto incubators seek out top crypto projects and connect them with leading businesses, innovators, and experts across different fields. Incubators promote the crypto project for fundraising, the biggest hurdle in a budding crypto project. An incubator often has equity in the company or crypto project they are incubating, giving them a vested interest in its success. So, what is a crypto incubator? What exactly does it do? Let’s discuss this further.
From funding to tech development, incubators are involved with every aspect of the crypto project. Incubators handle marketing, community building, fundraising, business strategy, and tech development to ensure a successful launch. Some of the popular crypto incubators include Binance, GBV Capital, MAGIC Fund, DeFi Lab, and much more. These incubators search for innovative, game-changing crypto projects. They foster these projects from the ground up, offering legal and business advice for a successful launch.
Furthermore, the support that comes from incubators can help crypto projects grow at a rapid rate. If all goes to plan, the nudge that comes from incubators can generate further support and community growth as the project matures. However, incubators don’t guarantee success and have some drawbacks. We’ll discuss this in further detail in later sections. For now, let’s dive deeper into how crypto incubators turn ideas into reality.
Crypto Incubators: Turn Your Idea into a Reality
So, what is a crypto incubator, and how do they turn crypto dreams into reality? Well, each startup has different goals and needs. Startups don’t always end up reaching their goals and can sometimes fail. Unmarketable products, pricing mistakes, lack of funding, and competition are a few factors that can lead a startup to poor performance. Poor performance can shut down a startup within its first few years.
A crypto incubator may provide strategic guidance for building a strong community of supporters. Community support is crucial in almost every aspect of a crypto startup. A community will help to expand marketing, funding, and listing efforts. Incubators can also provide listing support and funding to new projects to boost visibility. Just like traditional startups, crypto projects are often low on budget or need tons of marketing support. Crypto incubators can provide that. In exchange for these services, the founder(s) of the project will agree to give equity in the project or distribute a number of tokens. In this way, both parties have the incentive to yield successful results.
Crypto regulations are still developing in most parts of the world. Startups must follow local legislation properly to avoid penalties or complete bans. A crypto incubator can hire a team of legal professionals who can guide the startup to be in line with local policies. Going against such policies can lead to regulators filing lawsuits against the startup or completely banning them from their region.
Overall, crypto incubators can hold the key to funding, marketing, listing, and community development. They provide important strategies for success and smooth operations. Such support and guidance can help keep a startup from plunging after launch. In the next section, let’s take a look at the history of incubators and how they have contributed to the success of Web3 businesses.
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The History of Incubators
Studies done in 1994 show that 40% of new ventures fail within the first year and a whopping 90% fail within ten years. Needless to say, starting a new business can be risky. Volatile market temperament and uncertain external influences can create a shaky foundation for new ventures. To survive in such fragile and turbulent times, traditional incubators can take a business and lead it in a direction for better chances of survival. Business incubators are important tools for encouraging creativity, preventing mistakes, and supporting entrepreneurship.
Business incubators can be used in a wide range of ways by startups. Incubators can sometimes provide office space, equipment, and tools, or they can also provide coaching, guidance, and key strategies for development. They can also play a critical role in community development, business networks, and finance providers.
Essentially, business incubators are one-stop shops for startups. They can help to reduce the overall costs of starting a business. Incubators can also help increase the chances of survival. The services they provide can be divided into five parts; physical infrastructure, office support services, access to financial support, process support, and access to the network. Now, let’s dive into how incubators work in the crypto industry.
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After the bull run took off in 2017, thousands of new projects came about, with many of them ending up to be scams or failing soon after launch. Amid so many new projects, startup crypto projects could easily get lost. A crypto incubator could help to boost engagement, funding, marketing, listing, community support and much more. Sometimes, without that solid support behind it, even the most advanced technologies and Web3 applications could fail. Now, let’s look at a few examples of crypto incubators.
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Well known for being one of the pioneering crypto incubator projects, DuckDAO helps promising crypto startups reach their full potential. Often, in the early stages of a startup, a high number of tokens can be bought by one or a few entities. Those entities can later sell their stack of tokens, causing a dump in the token price and upsetting the majority of retail investors. A dump of such magnitude can create a poor reputation for a brand-new crypto project, eliminating future support and funding. DuckDAO aims to prevent such scenarios from happening.
DuckDAO aims to give equal opportunity to all investors, big and small, to support startup crypto projects from the very start. Projects that coordinate with DuckDAO will allocate a number of tokens for the DuckDAO community. The only way to join the DuckDAO community is through investment in DuckDaoDime (DDIM).
The DuckDAO community is split into five categories:
- DuckDAO Fight Club: 10 DDIM
- Beach Club: 200 DDIM
- Gentleman’s Club: 2,500 DDIM
- Diamond Club: 10,000 DDIM
- Duck Allstars Club: Top ten DDIM holders
The higher the level, the more equity the community member will get in the startup. DDIM can be purchased through Uniswap or earned by participating in community events.
DuckDAO classifies its services into three tiers:
- Tier 1: Incubation Level. In this tier, DuckDAO supports the project from the ground up. DuckDAO helps with marketing, advisory, and listing to help catapult the project into success.
- Tier 2: Strategic Contribution Level. In this tier, DuckDAO helps with social media strategies including Twitter and Telegram.
- Tier 3: General Contribution Level: In this tier, there is no direct involvement with the project. The DuckDAO community, lovingly known as “ducks” are an important part of this process. They help with the financing and growth of the project.
Furthermore, before selecting a project to work with, DuckDAO goes through a rigorous selection process. Selections must meet safety criteria and stand an excellent chance of success. DuckDAO’s track record of success includes Geeq, DeFiPie, and Fyooz, each of which earned investors 10x returns.
The incubation program of Binance is known as Binance Labs. In 2022 alone, over 500 crypto projects applied for Binance’s rigorous incubation program, and only 14 were selected. Binance selects projects that demonstrate the most potential for future success.
What Does the Binance Incubation Program Provide?
- Seed investment, up to $10 million of initial funding to grow the startup.
- Mentorship, connecting founders with business leaders from the Binance ecosystem. These business leaders possess a wealth of expertise in the field of blockchain, startup operations, tokenomics, and technology.
- Extensive Network, startups will connect directly with the diverse Binance network of industry leaders to source partnerships, professional services, and more.
- Holistic support, including support for formation, regulatory and legal advice, recruiting, technical execution, fundraising, marketing, PR, and much more.
- Market Presence: after the eight-week program, founders and teams of the startup projects will present themselves in front of market-leading venture capitalists and industry partners.
The 14 projects selected by Binance for the incubation program can be categorized into five parts:
- Infrastructure: Projects include FilSwan, a layer-2 cross-chain solution provider for Web 3 projects. Grindery, a middleware Web3 automation tool. NuLink, a decentralized network that enables privacy-preserving application developers to implement privacy and security.
- DeFi: Projects include CODA ventures, a yield-generating protocol on BNB Chain. OpenLeverage, a permissionless lending and margin trading protocol.
- Gaming/Metaverse: Projects include ChapterX, an immersive 3D platform that enables users to build fully customizable worlds and avatars. AlterVerse, a BNB Chain native project building an advanced Metaverse.
- SocialFi/Creator Economy: Includes a project called Reveel, a platform for Web3 creators to track their portfolio, automate revenue sharing, and report on chain income.
- Crypto FinTech: Includes projects like Playbux, a blockchain-based exchange that integrates real-life cash-back points and consumer experiences in the metaverse.
Binance has a track record of working with successful startups. Previous crypto projects include Polygon, Perpetual Protocol, Injective Protocol, Dune Analytics, SafePal, and much more. In the next few months, Binance will launch its next season of the Incubator Program to select its next projects.
Now that we’ve addressed the question, “what is a crypto incubator?”, let’s look at the potential disadvantages of incubator programs in the following sections.
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Drawbacks of Incubators
As mentioned above, incubator programs can have significant advantages for startups. They provide networking opportunities, funding, large community support, business strategies, and countless other advantages. However, incubator programs don’t guarantee success. Plus, they aren’t always a good fit for every type of startup. While there are a ton of advantages, there are several disadvantages too. Let’s take a look at how incubator programs may be disadvantageous.
One of the most significant disadvantages of an incubator is giving up a chunk of the company. Startup crypto projects often have to commit to giving incubators a chunk of tokens or equity in the company. While this disadvantage is significant, it is important to remember that the connections and partnerships made through the incubator program could last a lifetime and that within itself is priceless.
Another disadvantage is giving up a relatively large part of control over your crypto project to the incubator. Crypto incubators know the industry well and can align your startup to achieve optimal success. That can lead to a lot of pressure to make changes to the project that may not always align with its goals.
Often, the benefits of crypto incubators outweigh the disadvantages. Project founders will have to weigh the pros and cons of using incubators to decide if it’s a good fit for their project.
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Traditional business incubators have a history of turning ideas into reality. While they are a relatively new idea, crypto incubator programs, like the ones mentioned above, have also proven successful. They can help to grow a crypto startup from the ground up.
Crypto incubators provide a wide range of services. These services, while they are sometimes only provided during the incubation period, can have lasting effects. The network connections made through the incubator program can last a lifetime and truly have priceless value for the startup. Having strong community support is crucial for long-lasting success. Funding at the beginning for any startup can be tight, incubators can help accelerate that. Startups may lack the equipment or management tools they need to achieve operational success. However, incubators can help guide them. The advantages of incubators are countless. Nonetheless, there are also some drawbacks.
Incubator programs may not work for everyone. Handing over a large chunk of equity or tokens in the project is not ideal for all founders and crypto teams. Having to change project goals and ideals to align with the incubators may be frowned upon by the founders or crypto development team.
Ultimately, whether or not a startup uses an incubator program will depend on its goals for the project. Incubators aren’t for everyone, but they can be powerful tools when used properly.