VC funding for Web3 can be ‘dangerous,’ says Startmate’s Lauren Capelin

“I think the dangerous thing is venture capital funding these communities,” she says. “But there’s definitely space for VC in capitalising the core infrastructure of this space [through] more traditional sources of funding.”

Capelin is not the first to raise these concerns, with Twitter founder Jack Dorsey recently accusing major Web3-friendly VC firms such as Andreessen Horowitz of looking to monopolise the space, warning “you don’t own Web3, the VCs and their [limited partners] do.”

I do think this is a truly expansive opportunity for people with community-centric models and genuine creativity to really take flight.

Startmate principal Lauren Capelin

Web3 investors are at their most valuable when providing advice and connections, Capelin notes, saying that capital itself was the “more questionable” part of what venture capitalists bring to the table.

It’s this position Capelin seeks to replicate through Startmate’s accelerator program, which is backed by major VC Blackbird and has been home to success stories such as HappyCo, BugCrowd and non-alcoholic beer company Heaps Normal.

The accelerator takes in two cohorts of ten companies a year, providing them with a small amount of funding ($120,000) and a 12-week program where they receive training, mentorship and access to talent.

Startmate began in 2011 when it was struck up by Blackbird founder Niki Scevak alongside the founders of Atlassian, Mike Cannon-Brookes and Scott Farquhar. Since then, it’s ridden out some rough patches in the Australian startup scene, including COVID, which Capelin acknowledges saw the end of many other competing accelerators.

“It definitely has had an impact, but I don’t know if it was directly COVID related or if the fragility of the accelerator model finally hit around the same time,” she says. “The reality was that a lot of the other accelerators did rely on more corporate backing.”

Startmate instead relies on its mentors, who personally invest in each cohort to ensure they have skin in the game. The accelerator also has form in backing winners, and last year cashed out of its investment in property tech startup HappyCo, netting the fund $3.4 million – more than 100 times its initial $25,000 investment.

Since joining the accelerator from VC firm Reinventure two years ago, Capelin says she’s seen some distinct trends emerge in the sort of startups applying, with initially a number of direct-to-consumer startups signing on, hoping to emulate the success of local DTC businesses like Koala and Eucalyptus.

Loading

Other notable trends are, of course, Web3 businesses and climate change startups, though Capelin says she sees fewer of the latter than she’d like, something the investor attributes to the higher-than-average level of capital required to start climate change-related businesses.

But it’s Web3 that has captured Capelin – and many other investors’ – attention, drawn to the possibilities and potential of a totally decentralised internet. She says the advent of Web3, and its highly community-focused mode of operation has the potential to give way to a new era of startups where value is placed more on creators rather than technical prowess.

“We’ve done this hand-wavy, ‘your community is really important’ thing for the longest time across the venture-backed startup ecosystem, but I think this is really a turning point,” she says.

“The opportunity for creators is almost instrumental to the success of these [Web3] projects. I do think this is a truly expansive opportunity for people with community-centric models and genuine creativity to really take flight.”

“I think we’ve only just scratched the surface.”

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.