Original source: A16Z

Original Compilation: Alpha Rabbit

Original Compilation: Alpha Rabbit

This article is from Alpha Rabbit Research Notes.

The main purpose of compiling this article:

To build an entrepreneurial project from zero to one, in addition to verifying key assumptions and requirements, you also need to face how to open the market and carry out a cold start. The author of this article is Maggie Hsu, a partner of A16Z who is responsible for the encryption track. He mainly talked about the GTM (go to market) of the Web3 project. How does the product go to the market? Entrepreneurs need to ensure that the value of the product can be passed on to users after launch in order to obtain market returns.

When researching and judging a company, a series of indicators and a thinking framework are also needed. This article provides a good idea. This series is divided into several articles. The first article is A16Z: Description of Web3 Project Measurement Indicators (DAO)This article mainly talks about the strategic impact of airdrops, SaaS Crypto projects, Meme, etc. on startups.At the end of the article, some suggestions are also provided for Web3 entrepreneurs.

preamble

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Startups are faced with a problem:How to start a business cold start? How to go from zero to one? How to get customers? How to create network effects? how the hell"Go to market and get potential customers to spend money, time or attention on a product or service?

The Web 2.0 era is defined by large centralized products and services such as Amazon, eBay, Facebook, and Twitter.In the Web 2.0 era, most of the value does not belong to ordinary users, but to the platform.

The path of most startups in the past was,Significant investment in the sales and marketing business segment as part of a traditional go-to-market (GTM) strategy focused on customer acquisition and retention. However, in recent years, a completely new organizational model has emerged that is not under the centralized control of the enterprise. The approach of traditional companies is that the leadership decides the overall product and service methods.The new organization building model utilizes decentralized technology, and through digital elements such as Token, ordinary users have decision-making power and become the owners of the organization.

We call this new model the new model under Web3, which has changed the entire GTM concept in the past. Although some customer acquisition models still follow traditional methods, the emergence of tokens and new organizational structures, such as decentralized autonomous organizations (DAOs), requires various new methods of starting and interacting with the market.

Since Web3 is still a new concept to many, there is huge potential in this space.

In this article,Table of contents

Table of contents

• Start with Layer 1 & Layer 2

  Go To Market for Layer 1 Blockchain Protocols

  Centralized Token-free Mode: Web2-Web3 Hybrid

  Software as a Service SaaS

  Market Platforms and Exchanges

• Analysis of common specific GTM strategies

  Airdrops

  Developer Grants

  Meme

• Advice for Web3 Entrepreneurs

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Go To Market for Layer 1 Blockchain Protocols

Layer 1 of Web3 refers to the underlying blockchain.Examples of Layer 1 blockchains like Avalanche, Celo, Ethereum, and Solana are usually open source, and anyone can build on Layer 1, copy, and integrate with them. The growth of these chains mainly comes from the increasing number of applications continuing to build on top of them.

Layer 2 refers to the solution layer that operates on top of Layer 1 to solve the L1 expansion problem. The main goal is to help solve the scalability problem of the Layer 1 network.The solution for Layer 2 is usually rollup. The Rollup principle mainly refers to,Process transactions in batches, and then pass the data back to the first-tier network through the Bridge.The second layer of Rollup has two main categories.The first type, the Rollup of Optimism,"Optimistically"Assuming the transaction is honest, there is no fraud through fraud proofs. The second category, zk scrolling, uses"zero knowledge"proof to be sure.Most of these second-layer solutions are currently being developed for Ethereum, and most have not yet issued their own tokens.

In addition, protocols can be built on top of other L1 or L2, taking the Uniswap protocol as an example, it supports Ethereum (L1), Optimism (L2) and Polygon (L2).

Growth in layer-one blockchains, layer-two scaling solutions, and these other protocols may also come fromFork is to take the source code of a chain and then change it (similar to washing manuscripts, or declaring secondary creation). For example, the first layer blockchain Ethereum was forked by Celo. Optimism, also a second-layer scaling solution, was forked by Nahmii and Metis. After Uniswap was forked, SushiSwap was created. Although this initially appears to be negative,But the number of forks a network has is actually a measure of success, indicating that others recognize its value and want to replicate it.

The abstraction is the part in the upper right corner of the figure below:

These examples and ways of thinking are concentrated in the upper right quadrant,That is, a decentralized network with Token. In general, this is what we consider to be the most advanced example of Web3 right now.

However, depending on the type of organization, there are still many commonalities in GTM's strategy that blends the Web2 and emerging Web3 models.Therefore, if entrepreneurs are just starting to develop a marketing strategy, they should understand the range of various methods, and now let us talk aboutsecondary title

Centralization and Token-free mode: Web2-Web3 hybrid

Centralized and no token: The Web2-Web3 hybrid

As shown in the lower left quadrant of the figure above, many corporate teams in this quadrant are centralized.Without Token, the main services and functions are mostly to provide access and interaction for users to access Web3 infrastructure and protocols.

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Software as a Service (SaaS)

Companies like Alchemy (for more information, please clickThe total financing exceeds 300 million US dollars, and the Web3 infrastructure company Alchemy is disassembled in 5,000 words), the model is similar to SaaS/PaaS. Its service model is to provide nodes-as-a-service. This type of company provides on-demand infrastructure to B-end users through various levels of subscription models and fees.The fee earned is determined by factors such as the amount of storage required, whether the node is dedicated or shared, and the number of monthly requests.

However, the SaaS business model usually requires a traditional market incentive mechanism that favors Web2.The way to acquire customers is mainly through the combination of product-led and channel-led strategies.

Product-led customer acquisition is mainly to let users try the product first.

For example, one of Alchemy's products is Supernode, an Ethereum API aimed at any organization or institution that builds on Ethereum but doesn't want to operate the infrastructure themselves.In this case, the customer would try Supernode through the free model, and once the feedback was good, the customer would recommend the product to other potential customers.

In contrast, a channel-led acquisition model focuses on different customer segments (e.g., public versus private sector customers) and aligns sales teams with those customers.In such cases, a company might have a sales force that focuses only on public sector customers, such as government and education, and will develop a deep understanding of the needs of this type of customer.

This article is just an introduction, mainly to help explain the difference between Web2 and Web3 GTM strategies,secondary title

Market Platforms and Exchanges

Marketplaces and exchanges

Other companies in the lower left quadrant mainly rely on the models of markets and exchanges that consumers are relatively familiar with, such as the P2P NFT market OpenSea and the cryptocurrency exchange Coinbase.Businesses in this category generate revenue based on a transaction fee (usually a cut of the transaction), which is similar to the business model of classic online marketplaces such as eBay and Amazon.

For this type of company, revenue growth mainly comes from the increase in the number of transactions, the average transaction value, and the number of users on the platform. These factors together lead to an increase in the total transaction volume, which has a certain network effectAt the same time, it can also benefit users in terms of varieties and market liquidity.

A key GTM strategy here is to further increase channel distribution and showcase selected products by cooperating with other platforms.It's similar to Amazon's affiliate program, where bloggers can link to items they like, and purchases made through those links give bloggers a commission.

But a key difference from Web2 is that web3 is structured to allow royalties to be distributed back to creators in addition to affiliate fees. For example, OpenSea offers a traditional affiliate sales channel through their White label program, where purchases made through a referral link bring in a percentage of the sale for the affiliate, but it also allows for royalties where creators can continue to earn any Percentage of secondary sales. (This Web3 functionality is enabled by properties unique to the crypto space, as smart contracts can pre-encode percentage arrangements, blockchains track provenance, etc.).

Since creators now have the opportunity to continue monetizing their work through secondary markets, such monetizationfirst level title

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Airdrops

Airdrop means that a project distributes Tokens to users to reward user behaviors that the project wants to incentivize, such as users testing the network or protocol. These Tokens can be distributed to all existing addresses on a specific blockchain network, or can be distributed in a targeted manner (such as to specific key influencers); usually,Airdrops will be used to solve cold start problems, such as guiding early adoption, rewarding or motivating early users, etc.

In 2020, Uniswap airdropped 400 UNI to any user who has used the platform. In September 2021, dYdX airdropped DYDX to users. Recently, ENS conducted an airdrop to anyone who owns an ENS domain name (a decentralized .eth domain name); the airdrop is in November 2021, but anyone who owns an ENS domain name before October 31, 2021 will have Eligibility (until May 2022) to claim $ENS tokens,This provides holders with governance rights related to the ENS protocol.

In the NFT field, airdrops of NFT projects are also becoming more and more popular to attract more people to join the project. A recent notable airdrop is from the Boring Ape Yacht Club, a collection of 10,000 unique NFTs; on August 28, 2021, BAYC created the corresponding Mutant Ape Yacht Club. Every BAYC token holder received the mutated serum, allowing them to mint 10,000 of them"Mutations"Apes, In addition, a new 10,000 mutant apes are also available for new entrants.Since there are different types of serums, serums can only be used once, and since a bored ape can't use multiple serums of the same level, a new rarity mode has been added for serums.

These airdrops are done retroactively to reward NFT holders or users of the network and protocol (just like the ENS airdrop), but airdrops can also be used as a proactive GTM strategy to encourage users to follow specific projects, since the information is stored on the blockchain Publicly, new projects can be airdropped to, for example, all wallets using a particular market, or all wallets holding a particular token.

However, be aware thatsecondary title

Developer Grants

Developer grants are grants from the protocol's treasury to individuals or teams that contribute in some way to improving the protocol. This could serve as an effective GTM mechanism for DAOs, since developer activity is an integral part of the protocol's success. Examples of projects and protocols with developer funding include Celo, Chainlink, Compound, Ethereum, and Uniswap.

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Meme

Meme refers to the ideas spread in the community, representing a shared subculture or perception of reality. Images that go viral with text overlays are another GTM tactic for web3 organizations.Given the complexity and breadth of the cryptocurrency ecosystem, and the short attention spans of social media users, memes can convey information quickly,Memes can also signal belonging, community, goodwill, and more in a highly information-dense way.

The NFT project Pudgy Penguins, a series of 8888 penguins, started due to its memorability. The main run of the collection sold out in 20 minutes, and the collection was covered by major media outlets, which in turn helped bring this type of project into the mainstream. PFP"(Avatar image) series of social displays and community elements. Twitter recently rolled out a feature that allows users to prove their ownership of NFTs via a hexagonal profile picture linked to OpenSea’s API.

Property owners with large social media followings draw attention to projects when they change their personal photos to photos of the project, and the project owner usually follows all other members of the same project. These moves would in turn spawn other memes, like Crypto Covens and"web2 me vs. web3 me "first level title

Advice for Web3 Entrepreneurs

What do these strategies mean for the founders of Web3?

The first is actually a change of mentality. In a Web2 company, founders not only set a top-down vision, but also develop a team that plans and executes against that vision.

In Web3, founders act more as gardeners, helping to nurture and nurture potentially successful products, while also providing the freedom for this to happen.While the founders of Web3 still set the purpose of the organization, as well as the initial governance structure, the governance structure itself may soon spawn a new set of roles.Founders can optimize protocol usage and community quality, not just headcount growth or revenue and profitability.Furthermore, following decentralization, founders must adapt to an environment where hierarchical power structures do not exist, and founders are only one of many actors championing the success of a particular project.

Before the power is actually delegated to employees, founders should think carefully about ensuring that the project can succeed in such conditions.

I saw some of this firsthand while working on the staff of former Zappos.com CEO Tony Hsieh, an e-commerce company that is now owned by Amazon.The company began experimenting with a decentralized (in contrast, only top-down) governance structure in 2014, including what is known as"holacracy "self-organizing management system. Holacracy involves hierarchies of jobs, not people, with mixed results.

But Tony Hsieh offers a useful analogy, comparing his role to that of a grower of plants in a greenhouse (in a holistic management model),Instead of being the best plant, entrepreneurs need to be like"architect of the greenhouse"Likewise, by setting the right conditions, all other plants can flourish and thrive.

Alex Zhang, head of Friends with Benefits (FWB), agrees, working"Instead of setting a top-down vision", but instead promotes the creation of"Frameworks, licensing and regulations for community members"Co-approve, and continue to develop and build upon.

While Web2's leader is focused on updating the product roadmap and pushing new product launches, Zhang sees himself more as a gardener than a top-down builder.His role included watching FWB's other Discord Neighborhood Channels), weeding out channels that weren't engaging, helping support and grow more dynamic channels by creating a framework for those channels, and creating playbooks to drive channel success (such as campaigns combination, clear leadership and governance structure), Alex Zhang becomes more of an educator and communicator.

As far as the founder of the NFT project is concerned, the role is mainly the initiator and temporary manager of intellectual property (IP).According to the founders of the Bored Ape Yacht Club:"We see ourselves as interim custodians of intellectual property, which is in the process of becoming more and more fragmented. Our ambition is to make it a community-owned brand with tentacles reaching out to world-class gaming, events and streetwear". Owning an NFT, be it an image, video or sound clip, or other form of NFT, transfers all rights associated with the NFT to the owner.

As NFTs are bought and sold, this ownership is transferred, and as the ecosystem around NFTs develops, these benefits will go to NFT owners, not just the founding team of the NFT project.

NFT ownership can also be community-driven licensing and community-driven content (unlike traditional intellectual property franchises). An example here is Jenkins The Valet, an NFT avatar from the BAYC series (specifically Orangutan #1798), contracted by Creative Artists Agency (CAA) to represent in various forms of media. Jenkins was created by Tally's lab, which owns ape 1798.

Tally Labs decided to infuse the ape with its own branding and backstory, and reverse the notion that an NFT's statistical rarity is a major determinant of its price and success.They then created a way for others to pass"writer's room"NFTs participate in the creation of content around Jenkins, for example, community members were able to vote on the genre of the first book.

There are many possible new models in the future. The traditional Web2 GTM framework is just a useful reference and provides some interesting ways to play, but they are only a small part of the many frameworks available to Web3 organizations.

The key difference is that the goals, growth and success metrics of Web2 and Web3 tend to be different. Builders should start with a clear purpose,Develop a community around this purpose, and match their development strategies and community incentives accordingly, as well as the corresponding market incentives, we look forward to the emergence of various new models in the future.