How Web3 Venture Capital Differs From Web2

5 reasons to get in, and 9 reasons to think twice.

A number of high-profile venture capital firms have established crypto arms in the past year.

Sequoia Capital announced its $500M+ crypto fund in February, which will primarily invest in cryptocurrencies traded on third-party exchanges.

Former a16z partner Katie Haun’s announced Haun Ventures’ $1.5 billion crypto fund in March, two months after her former employer announced a $4.5B fund — on the back of the $2.2B crypto fund it announced last year.

Relative newcomers and crypto-native funds such as Electric Capital closed a $1 billion crypto fund in March, whilst Paradigm debuted its monster $2.5 billion crypto fund in November.

So why are these forward-looking capital allocators so bullish about web3?

And how should traditional and web2 investors think differently about the nascent but fast-growing sector?

I offer some non-exhaustive thoughts below and welcome you to add to them in the comments.

Why invest in web3?

Outsized returns

The token economies that underpin web3 projects can result in outsized returns, relative to web2 —…