Fred Wilson: Web3 investors will need nerves of steel in 2023

Fred Wilson, co-founder of venture firm Union Square Ventures, warned investors about the serious potential risks of investing in projects related to the next-generation internet.

What Will Happen In 2023 https://t.co/DT7tNZqw10

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“Although Web3 has compelling values, I’m not sure it is yet safe to wade back into the river if you don’t have nerves of steel and you’re not oriented toward a very long time horizon,” Wilson wrote in his blog.

He added that last year was “painful for most and destructive for many.”

“The capital of our family has been hit hard. The book value of assets under management at Union Square Ventures halved this year,” the entrepreneur emphasized.

According to him, the Web3 sector remains highly vulnerable compared with the broader tech sector.

“There are insolvent structures that have not been restructured. There are funds that are so unprofitable that they may be liquidated. These activities will continue to pressure Web3 tokens at least through the first quarter of 2023,” Wilson warned.

The investor expects problems for many traditional startups as well. In his view, the tech sector will return to the “new normal” of 2015. Back then, the amounts raised in Series A rounds ranged from $15–25 million.

However, Web3 startups with solid tokenomics and a strong value proposition will attract investors’ attention, Wilson believes.

“I am personally more optimistic about Ethereum, because it has the best economic model among all Web3 assets,” the entrepreneur shared.

Union Square Ventures (USV) invested in well-known platforms such as Twitter, Coinbase and Etsy.

In early 2021 USV announced its intention to invest in crypto startups about $75 million. Soon after this announcement, the company led a funding round for the startup Matter Labs, which is developing Ethereum-layer-2 solution zkSync.

In early 2022, Wilson’s firm raised $625 million in two funds focused on Web3 and traditional-market technology solutions.

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