Fundraising in Web2 and Web3 today follow very different paths. Web2 usually relies on traditional venture capital, angel investors, and established funding rounds focused on proven business models. In contrast, Web3 fundraising often involves token sales, decentralized autonomous organizations (DAOs), and grants supported by blockchain networks.

Understanding these differences is key for crypto founders and VCs. It shapes how startups attract capital, engage communities, and plan for growth. This shift also affects investment strategies, with more emphasis on transparency, on-chain data, and community involvement in Web3.

In this article, you’ll learn how the approaches differ and why that matters for founders and investors looking to succeed in 2025’s evolving funding environment.

Fundamental Differences Between Web2 and Web3 Fundraising

When comparing Web2 and Web3 fundraising, the distinctions go beyond just technology—they reshape how ownership, investment, and control function. Web2 fundraising depends largely on traditional, centralized systems where a few players control the process and terms. Web3 flips that model, handing power back to communities and individuals through decentralized platforms and token-based mechanisms.

These differences impact everything from who holds the decision-making power to how investors can access their returns. Let’s break down the core contrasts so you can better understand what makes Web3 fundraising unique—and why it’s changing how founders and investors think about raising capital.

Centralization vs Decentralization

Web2 fundraising is built around centralized platforms such as venture capital firms, Angel investors, and crowdfunding sites. These entities control the process and typically own significant shares of the company, often reflected in strict cap tables. Ownership is concentrated, and governance decisions flow through a limited group, sometimes leading to bottlenecks or misaligned interests between founders and investors.

By contrast, Web3 fundraising pushes toward a decentralized model. Projects issue tokens representing ownership or participation rights, handing control over to a broader, global community. This decentralization spreads influence and decision-making power among token holders, often through decentralized autonomous organizations (DAOs). The ownership isn’t just a legal claim but an active community stake, encouraging engagement and shared goals.

Key takeaway: Web2 fundraising relies on a few centralized decision-makers, while Web3 empowers communities with shared ownership and governance.

Equity Shares vs Token Economics

Web2 companies raise funds by selling equity shares, recorded on paper or cap tables. These shares represent ownership percentage and come with voting rights and dividends tied to company performance. Investor returns typically depend on exit events like acquisitions or initial public offerings (IPOs). This model is familiar but rigid, with limited flexibility after shares are allocated.

Web3 introduces token economics (tokenomics), where investment stakes are represented by digital tokens. These tokens have characteristics beyond ownership, including:

  • Supply: Total tokens minted and distribution limits.
  • Utility: Functional use within the ecosystem (e.g., access, governance).
  • Liquidity: Ability to trade tokens on secondary markets.

Valuation and returns depend not only on project success but on token demand, scarcity, and the token’s role. This creates dynamic investment opportunities but also requires understanding complex economic models around inflation, staking rewards, and governance voting.

Remember: Tokens are more than just shares; they’re programmable assets with diverse functions.

Liquidity and Exit Opportunities

In Web2, investments tend to be illiquid until a company undergoes a major exit event like an IPO or sale. Investors often wait years before realizing any returns, which can limit flexibility and increase risk exposure.

Web3 tokens often trade on secondary markets such as decentralized exchanges or crypto marketplaces. This enables investors to buy and sell tokens almost instantly, providing early and flexible liquidity options. Investors can realize gains—or cut losses—much sooner than traditional equity holders. This liquidity advantage makes Web3 fundraising attractive for those wanting faster access to returns.

However, token prices can be volatile, so understanding market dynamics and risks is crucial.

In short: Web2 investors wait for a big exit, but Web3 investors can often cash out or adjust their holdings anytime through token trading.

These core differences highlight how Web3 fundraising shifts control, flexibility, and investment mechanisms from centralized gatekeepers to open, community-driven systems. Understanding these changes will help founders decide the best route to funding, while giving investors clarity on their roles and opportunities.

Investment Structures and Valuation Metrics

When we talk about fundraising, investment structures and how projects are valued set the foundation for every deal. Web2 and Web3 use quite different ways to structure investments and determine value. These differences shape what investors get, how they make decisions, and what founders can expect down the road. Let’s explore the typical models in Web2 and Web3, then tackle the unique valuation challenges that Web3 projects face.

Traditional Venture Capital Deals in Web2

Web2 fundraising mostly follows the classic venture capital (VC) playbook. Startups raise money through equity rounds like Seed, Series A, B, and so on. These rounds come with term sheets that detail the conditions of investment—things like share price, rights, liquidation preferences, and board seats.

Valuations in Web2 startups rely heavily on financial KPIs. Investors look at revenue, growth rate, user numbers, or gross merchandise value (GMV), applying multiples based on the sector and stage. For instance, a SaaS company might be valued at a multiple of its annual recurring revenue (ARR).

Exit strategies are usually clear-cut: investors aim for an IPO or acquisition, events that provide liquidity and returns. This path can take several years, and until then, investors hold equity stakes on a cap table, waiting for the company’s value to mature.

Key features of Web2 investment structures include:

  • Ownership is represented by shares in a centralized company.
  • Legal contracts govern investor rights firmly.
  • Investor returns depend mainly on company growth and exit events.

This system has been tested and trusted, but it also means long wait times for liquidity and sometimes limited investor control between funding rounds.

Token Sales and DAO Governance in Web3

Web3 fundraising breaks away from traditional equity, introducing token sales like Initial Coin Offerings (ICOs) or Initial DEX Offerings (IDOs). Instead of buying shares, investors acquire tokens that can have multiple functions—access rights, governance participation, or economic incentives.

Tokens are often distributed in phases and structured carefully to align with project goals and regulatory compliance. Unlike shares, tokens are programmable digital assets that can be traded instantly on exchanges, providing greater liquidity from the start.

At the same time, many Web3 projects organize under Decentralized Autonomous Organizations (DAOs). These function as decentralized governance bodies where token holders vote on key decisions—from treasury management to protocol upgrades. This flattens power structures and allows communities to influence the project’s direction.

Important points in Web3 investment include:

  • Tokens may represent utility, governance, or economic value, sometimes all three.
  • Legal agreements might be SAFTs (Simple Agreements for Future Tokens) or token sale contracts detailing rights and lock-up periods.
  • DAOs introduce community governance, shifting control from a centralized board to token holders directly.
  • Token distributions can involve vesting schedules, airdrops, or staking rewards.

How do investors protect themselves when rights look so different? The answer lies in custom legal frameworks that marry blockchain tech with regulatory compliance.

Valuation Challenges in Web3 Projects

Web3 makes valuation trickier. How do you value a token when there’s no traditional revenue yet? Investors wrestle with several questions:

  • What adoption metrics matter—active users, transaction volume, or TVL (total value locked)?
  • How do token utility and governance rights contribute to value?
  • Should valuation focus on protocol growth, the token market cap, or some hybrid metric?

Unlike Web2 startups, many Web3 projects operate as open-source protocols with incentivized networks rather than companies selling products. This means:

  • Token price can be volatile, driven by speculation as much as fundamentals.
  • Network effects and community engagement become critical indicators.
  • Some tokens split utility and governance functions into different assets, requiring separate evaluations.

Investors often look at:

  • The token supply model (max supply, inflation rate).
  • Lock-up and vesting terms impacting token circulation.
  • On-chain data such as wallet activity and protocol interactions.
  • Roadmaps for increasing token utility or ecosystem partnerships.

With these factors, valuing Web3 projects blends financial analysis with deeper insights into community strength and tokenomics design. It’s a new skill set that mixes traditional investing with on-chain data analytics and legal innovation.

Understanding these contrasts in investment structures and valuation metrics helps founders and investors set realistic expectations and tailor strategies to their ecosystem. In Web3, fundraising isn’t just about capital—it’s about building sustainable digital economies governed by the people who care most.

Legal and Regulatory Considerations

Raising funds in Web2 and Web3 not only depends on different technologies but also navigates very different legal and regulatory frameworks. Understanding these regulatory environments helps founders and investors avoid costly pitfalls and build confidence in their fundraising efforts. In Web2, clear rules and standards guide how companies raise capital and protect investors. Web3 token offerings, however, stand in a space that’s still forming, where legal definitions and compliance practices are evolving quickly. Let’s examine these key distinctions and what they mean for fundraising today.

Securities Laws and Fundraising Compliance in Web2

Web2 fundraising operates under well-established securities laws designed to protect investors and maintain market integrity. When a company raises capital by selling equity shares, it is subject to strict regulations enforced by bodies like the US Securities and Exchange Commission (SEC).

Key points about Web2 compliance include:

  • Equity fundraising requires registration or exemption under securities laws. Companies must file disclosures such as prospectuses or private placement memoranda to inform investors of risks and rights.
  • Investor protections include anti-fraud rules, disclosure obligations, and limits on resale to prevent market manipulation.
  • Regulations often require thorough due diligence, legal documentation, and reporting on financial health and governance.
  • Compliance ensures investors receive clear information about ownership rights, voting power, dividend policies, and return expectations.
  • Violations can trigger penalties, delays, or litigation, so founders work closely with legal counsel to navigate these routes.

The Web2 process is heavy on paperwork and centralized control but provides a clear, predictable framework for both startups and investors. This regulated environment reduces uncertainty and encourages more conservative, trust-based investment.

Navigating Legal Uncertainty in Web3 Token Offerings

Unlike Web2, Web3 fundraising revolves around issuing tokens that may serve multiple functions—governance, utility, or financial rewards. This creates a gray area when it comes to legal classification and compliance.

Here’s what makes token sales complex:

  • Tokens may qualify as securities under tests like Howey, depending on their characteristics and how they’re marketed. This determines whether they fall under traditional securities regulations.
  • The regulatory landscape varies across jurisdictions, and global rules are still evolving, creating a patchwork of requirements.
  • Legal structuring involves careful design of token sales, such as using SAFTs (Simple Agreements for Future Tokens) or token warrants, which aim to balance fundraising goals with regulatory compliance.
  • Projects must consider licensing, Anti-Money Laundering (AML), and Know Your Customer (KYC) obligations to operate legally.
  • Decentralized issuance mechanisms—like community-led token minting or DAO governance—add complexity in accountability and legal responsibility.

Due to these uncertainties, projects often invest heavily in legal counsel and choose jurisdictions with clearer Web3 regulations. Emerging best practices emphasize transparency, documentation, and phased token releases that help reduce regulatory risks.

Investor Protections and Transparency

Transparency and protection for investors contrast sharply between Web2 and Web3 fundraising models.

In Web2:

  • Centralized companies provide regular financial reporting, audits, and governance disclosures.
  • Investor information flows through formal channels such as board meetings, shareholder reports, and regulatory filings.
  • Investor rights and protections are enforced through contracts and law, with centralized bodies overseeing compliance.

In Web3:

  • Transparency is built into the blockchain via on-chain transactions visible to anyone, allowing investors to track token flows and project activity in real time.
  • Smart contract audits ensure the code governing token behavior is secure, reducing risks of bugs or exploits.
  • Community oversight through DAOs creates a form of decentralized governance where token holders can vote on important decisions.
  • However, the lack of centralized controls can also bring risks related to fraud or mismanagement if projects lack clear accountability.
  • Privacy concerns arise since on-chain transparency exposes transaction histories publicly, requiring a balance between openness and confidentiality.

Investors in Web3 gain access to unprecedented levels of real-time data and self-enforcement mechanisms but must also scrutinize technical documentation and community governance effectiveness more closely. This open model contrasts with Web2’s reliance on centralized reporting and regulatory mechanisms to protect investor interests.

Understanding these legal and regulatory differences helps founders prepare smarter fundraising campaigns and guides investors to evaluate risks responsibly. The evolving nature of Web3 law demands ongoing vigilance, while Web2’s regulatory clarity remains a cornerstone of traditional equity markets.

Industry Applications and Emerging Trends in Fundraising

Fundraising methods in Web3 have expanded and shifted to match new technologies and market demands, changing how capital flows in various sectors. The difference between Web3 and Web2 is not just technical — it’s about who participates, how value is created, and what possibilities open up. Looking at specific industries reveals how decentralized finance, digital ownership, and gaming are reshaping fundraising. At the same time, traditional players are adjusting, and scaling challenges remain. Here are some important developments and what they mean for founders and investors in 2025.

DeFi, NFTs, and Gaming: Web3 Fundraising Use Cases

Fundraising in Web3 sectors like DeFi (decentralized finance), NFTs (non-fungible tokens), and blockchain gaming contrasts sharply with traditional fundraising models.

  • DeFi projects raise capital by issuing tokens that represent participation in decentralized lending, yield farming, or liquidity pools. This opens access to a global, permissionless investor base with immediate liquidity on decentralized exchanges. Unlike traditional finance startups that rely on bank loans or VC rounds, DeFi fundraising is continuous and community-driven, reflecting real-time demand for financial services without middlemen.
  • NFTs enable fundraising through digital collectibles and assets that users can buy, trade, or hold. For example, gaming startups sell unique in-game items as NFTs that players own outright. This shifts fundraising from just equity to owning parts of an ecosystem with utility and cultural value. Projects often sell NFTs in initial offerings or auctions, attracting fans as investors. This directly links fundraising to user engagement, unlike Web2 approaches that separate product users from investors.
  • Blockchain gaming adds layers of token economics, enabling players to earn, trade, or stake tokens earned in-game, blending entertainment with finance. Games build token economies where fundraising happens through token sales, play-to-earn models, and community treasury funds. This creates a feedback loop—players become investors, boosting both game adoption and capital. In contrast, traditional gaming fundraising typically depends on upfront funding and later revenue share, lacking this dynamic participation.

Broadly, Web3 fundraising in these spaces is more open, more liquid, and tied to user experience and ownership. This creates new risks and rewards but unleashes more diverse capital sources and faster feedback than the closed, equity-based models of Web2.

Changing Role of Venture Capital and Community

The role of venture capital (VC) in Web3 is evolving alongside the rise of community-led models. Traditional VC firms have long dominated Web2 fundraising, offering capital, expertise, and networks in exchange for equity stakes. Web3 challenges this with new investment styles:

  • Community-driven investing through DAOs and token sales lets projects tap a broad base of individuals worldwide. This democratizes fundraising and builds a sense of shared purpose and governance early on. Communities vote on budgets, product decisions, or grants, actively shaping the project direction. It’s a shift from passive investors to engaged stakeholders.
  • VC firms are adapting by creating or partnering with Web3-focused funds, buying tokens directly, and backing DAO initiatives. They now look for projects with strong communities and clear tokenomics. Some traditional VCs contribute technical, legal, and strategic support to help navigate regulatory uncertainty and token design. Others experiment with hybrid deals combining equity with tokens.
  • Collaborations between VCs and communities are increasing, with VC firms sometimes acting as orchestrators to bootstrap governance while retaining influence. However, this raises questions about decentralization and whether large token holders gain outsized power. The balance between community control and institutional discipline is still playing out.
  • Early-stage investors now consider on-chain metrics, social engagement, and token utility alongside traditional due diligence, reflecting a broader ecosystem focus.

This signals a transition from closed-door funding rounds to open, participatory capital raising. Founders can build deeper connections with supporters but must manage more complex stakeholder dynamics.

Scalability, Adoption, and Future Outlook

Despite the promise of Web3 fundraising, adoption and scaling remain critical hurdles.

  • Scalability challenges involve blockchain transaction speeds, gas fees, and infrastructure limits. Projects need efficient layer-2 solutions, Sidechains, or new consensus models to support tens of thousands of users interacting with tokens for fundraising, governance, or utility without prohibitive costs. Without scalability, user experience suffers and fundraising loses momentum.
  • User adoption barriers still limit Web3 growth. Complex wallets, regulatory concerns, and unfamiliarity with token mechanics keep many investors and users on the sidelines. Improving interfaces, education, and regulatory clarity will be essential to broaden participation beyond tech-savvy early adopters.
  • Regulatory uncertainty, especially in major markets, continues to shape fundraising strategies. Clearer frameworks could boost institutional confidence but might also constrain decentralized models. How regulation evolves will directly impact fundraising mechanisms.
  • Looking ahead, convergence or coexistence between Web2 and Web3 fundraising seems likely. Startups might combine traditional equity rounds with token offerings, or VCs use on-chain data to enhance valuations. Web3 fundraising could act like an innovation layer layered on established financial methods, speeding community engagement and liquidity while still connecting to proven capital sources.
  • Predictions suggest fundraising will center on sustainability, transparency, and utility, moving away from pure speculation. DAO-driven funds, token-curated registries, and impact-focused capital allocation may define the next frontier.

Understanding these trends helps founders plan strategies that balance innovation with practical challenges, while investors stay ready for new opportunities and risks.

What does this mean for founders and investors?

  • How do you tap early communities while maintaining governance balance?
  • Can your project scale without spiraling costs?
  • Are you prepared for evolving regulations and market expectations?

The answers influence whether Web3 fundraising becomes a mainstay or remains niche alongside Web2 models.

Conclusion

Web3 fundraising shifts power from centralized investors to broader communities, offering faster liquidity and more flexible token-based models than Web2’s equity and traditional VC rounds. Founders and investors must carefully adapt strategies to handle decentralization, token economics, and emerging regulations.

Both approaches bring strengths: Web2’s legal clarity and proven structures complement Web3’s open governance and real-time data transparency. Combining these models can unlock new opportunities while managing risks.

As fundraising continues evolving, staying informed about regulatory shifts and market dynamics remains essential. Reflect on how your project or portfolio can blend these elements to harness capital efficiently and build stronger, more engaged ecosystems.