In the rapidly evolving Web3 landscape, you never have to wait too long for the next hot trend to emerge. However, the art is in recognising the ones with long-term viability versus the countless fads that spring up within open and permissionless technologies like blockchain.
In expanding markets such as the UAE, some of the hottest topics right now include the merging of physical and retail—phygital—and decentralised physical infrastructure networks (DePINs). However, there was a time when these innovations were purely conceptual, speculative innovations that were years away from debut. The tactful few who identified key market indicators around these trends and placed the right bets early on are now in a position of considerable strength. Ultimately, Web3 is like running product experiments on steroids—few can stay on top and navigate this minefield. Let’s look at some key ingredients needed to hone in on pre-trend narratives.
Deep market analysis
Early-stage technology markets are messy and change rapidly. Traditional metrics and models don’t apply, and in many ways, they are more of an art than a science. Art can be broken down into many components: intuition, experience, technological understanding, relationships, and the ability to learn fast. Interacting with builders, researchers, and end-users will help one grasp where the puck is headed. It’s also important to consider broad macro elements while digging into first principles through deep research.
Technological expertise
Technical proficiency is essential when wading through the weeds of Web3. Tapping into a wide network of industry experts can help develop a thorough understanding of early-stage technology investing dynamics while getting insights into secondary and tertiary innovations coming down the tracks. Deep-level tech expertise can also help you dodge potential investment bullets. If you aren’t surveying the landscape through a sharp lens, it can be easy to mistake pure hype for genuine innovation. Amidst this hype, charlatan projects will ride the wave and not produce any tangible value.
Focus on founders
Founders have become our strongest edge and richest source of quality information. To succeed in the hyper-competitive Web3 arena takes a special breed of founder who firmly understands Web3 primitives and technology while also knowing how to bridge that gap to the mainstream public. Additionally, founders who are deeply motivated to go the distance and believe fundamentally in their vision with conviction will be best placed to persevere through speculative cycles inherent in developing emerging technologies. Assessing the merits of the founder’s vision and roadmap rather than simply focusing on the business idea will lead to a more informed investment rationale.
Regulatory awareness
Developing a 360 view of regulatory trends and staying attuned to potential changes is essential for identifying opportunities and mitigating risks. Industry leaders closely monitor regulatory developments across different jurisdictions with a fine tooth comb and incorporate this understanding into their investment strategies. Then, when it comes to making sound investments, timing is everything. Remember, a good founder with the right idea at the wrong time will lead to a bad investment. Recognising when is the right time for a particular product to come to market is essential.
Product-focused approach
Prioritising highly monetisable, scalable solutions with well-defined product roadmaps is critical. Often, certain “trends” are adopted superficially due to FOMO instead of being based on the underlying utility. Having a clear product-focused approach ensures that the projects have a distinct path to market and a sustainable business model rooted in fundamentals. However, the notion of a business model often comes into play much later when it comes to early-stage investing. Often, it’s mainly about the right team and the right technology/product direction that can drive adoption. Business models are often figured out after that is established.
Pre-trend narratives and up-and-coming markets
From a Web3 investment perspective, the biggest opportunities lie in pre-trend narratives and up-and-coming markets. But identifying sectors and technologies on the cusp of breaking out is no easy feat. Lemniscap has been actively involved in key verticals such as DeFi, NFTs, Scalability, Interoperability, and Privacy—both from an infrastructure and consumer layer perspective—long before they were popularised. We were firm in our conviction that these trends could endure in the long term throughout periods of market volatility and regulatory uncertainty.