Over the last few years since 2021, we’ve seen a surge in the number of companies built in crypto — a majority of those funded companies raised capital at generous valuations. From an investor perspective, an exit into these companies largely comes from a token at some point with the rare possibility of an acquisition and even rare chance of an IPO. Looking at token generation events in the past, an investor getting in at the pre-seed/seed stage, made at least over 10x returns through their allocation as long as the project did decently well and made the right partnerships.

It’s clear that speculation is a utility, token can be the product and investing into the right tokens early can amount to significant long-term returns. In this post-ICO era, where more companies are launching tokens and an entire ecosystem of airdrop farmers working full time to get an allocation, it’s incredibly important to understand the lifecycle of a token launch, what gives them utility and how it sustains value long-term.

Before launching a token, it’s important to find product market fit, a clear direction for where the company is headed and plans for decentralisation. Most companies entirely skip this step and move on to inflating their numbers — acquiring users through quests, campaigns, partnerships (KOLs) and overall optics on social media channels. All of this amounts to potential partnerships with market makers (eg: GSR, DWF) that provide liquidity and exchanges (eg: Binance) that list the token. Finally, tokenomics and airdrops play a huge role in the launch—it affects community sentiment negatively especially when the core team and investors get a disproportionately high allocation in comparison. Planning the right allocation, time of unlock and airdrop to the right users is key to a successful token launch.

Executing all of these is like running a whole another company and can be distracting but this is ultimately where everyone invested gets an exit. Considering that all of these steps leading up to the launch are executed well, there’s still a lot of luck and timing that matters which is difficult to control.

However, investing in the web3 ecosystem is still much better than investing in web2 for a number of reasons—getting an exit through an IPO is quite challenging in the current market since there’s no one trading the stock until the company becomes quite big, acquisitions on the other hand are scarce since buyers like Facebook aren’t making active investments and lastly. The only other option is through secondary sales or private equity. Crypto by nature is an open market (with certain geographical exceptions due to regulations) where retail investors can invest in tokens. Additionally, as an early ecosystem and a strong community of backers, web3 is a growing market for investors where there’s real innovation built from the ground up. There’s strong use-cases today that are uniquely enabled by blockchain, like decentralised compute and verifiable global identity which are exciting to me as an investor. Alternatively, culture is both financialized and propagated  in web3 through memecoins and scenecoins that enable users to invest in the next viral internet subculture. It’s thrilling to see net positive ways to make money on the new internet and invest in an open equitable economy.