🔮 Deciphering Web3 & Buy Now Pay Later startup ideas
Founders Factory Startup Bulletin #8 (March)
👋 Welcome to the Founders Factory Startup Bulletin. Each month, we bring you a round-up of startup and investment stories, key learnings from founders, and insights from the Founders Factory team.
The last few years have been critical for understanding Generation Z. In 2015, the first slew of Gen-Z-ers (born between 1997 and 2012) left school, went to university. They got their first jobs and their first salaries. They voted in their first elections. As each year passes, we learn more and more about this age group.
We know how internet-native they are. This is a generation born after the inception of the web, submerged not just in the technology but also in the culture that surrounds it. Their identities are hybrid, existing simultaneously in the real world and online. While concepts like online dating, online working, and even aspects of online shopping might be alien to their parents’ generation, these things are the norm for Generation Z.
Generation Z is also incredibly discerning. They approach major institutions with distrust and concern, crediting organisations with social progressive values while punishing those without. Even more importantly, they value privacy.
This creates a paradox: a generation who simultaneously distrust technology, yet can’t live without it. This demonstrates the pressing demand for rethinking how technology can serve us and make our lives better—a consideration that sits deep in both the Web3 movement and Buy Now Pay Later.
Here’s what you can read about in this month’s newsletter:
Web3—future of the internet or passing hype?
Buy Now Pay Later—three startup ideas
Our top recommended reads this month
Latest news from our portfolio & opportunities for founders
P.S. Before you read this, just to let you know we’ve launched another newsletter, ff3, dedicated to Web3, following our thought leadership and experiences in that area. Check it out, and subscribe, here. Not convinced yet? Read on for reasons why you might want to learn more.
🧠 Web3—future of the internet or passing hype?
In recent months, we’ve seen the price of cryptocurrencies tumble. After reaching a high in November, just shy of $50k, Bitcoin now sits at around half that value. Ethereum has fared no better—falling from $3500 to $1900 in the last three months. Even louder than the cries of crypto investors, though, are those dissenting voices decrying the end of the Web3 hype. For them, it was always a scam—this has just cemented it.
At Founders Factory, we see things a little differently. As venture builders, we have to be able to look five-to-ten years down the line and understand how the world is going to look then. Here are four reasons why we believe Web3 is more than a passing hype…
1. Web3 is the culmination of a decade-long movement
You might think the Web3 movement took off during the COVID pandemic, when cryptocurrency values soared and NFTs were flying off the shelves. But actually the story dates back much further, back to the early days of the internet.
The early internet—or Web1, if you like—was built on foundational values of openness and collaboration. While the technology was fairly primitive, the internet was this great shared resource that everyone could access and contribute to, for free and at the click of a button. This dream didn’t last though—tech companies understood the opportunity to capture data and ultimately monetise users. Web2 became a privatised, siloed landscape, where Big Tech became rich off aggregating online experiences.
Central to Web3 is the movement towards decentralisation. Web3 technology promises to move power away from Big Tech companies and major financial institutions, cutting out the middle men and instead rewarding suppliers and consumers.
2. It presents an opportunity for purer competition
If you’re building tech startups, you’ll be well aware of the ‘kill zone’: the periphery close enough to Big Tech companies that puts you at risk of being acquired or being eliminated by the sheer weight of your competition.
Web2’s closed ecosystem allows this. Companies like Facebook and YouTube house all your content: delete your account, and thus delete all of your content. This entrenches power in incumbents, and makes it harder/impossible for new businesses to compete.
Web3, however, presents a movement towards open data and transposability (the ability to move your data/property across platforms). This is why companies like Braintrust can compete with Fiverr, Mirror can compete with Substack, and Audius can compete with Spotify.
3. In Web3, the product is king
The best way to illustrate this concept is to tell the story of OpenSea and LooksRare. The former was the dominant NFT marketplace, the latter a new competitor. Within days of its launch, LooksRare hit $100 million daily trading volume, almost triple that of OpenSea. Two key decisions influenced this:
LooksRare airdropped 12% of their $LOOKS tokens to OpenSea’s most active users, incentivising them to transact on their marketplace
They gave 100% of trading fees to $LOOKS token holders (compared to OpenSea which takes 2.5% on all transactions)
In Web3, it’s very difficult to be an incumbent. At the end of the day, users will go where they get the best experience, meaning the best products win out.
4. JPEGs & NFTs are just the tip of the iceberg
It’s easy to ridicule images of cartoon apes, and even more so the idea of spending $250k on one. But don’t make the mistake of thinking NFTs are the ceiling of Web3. Conversely, they’re just the beginning.
Founders have the opportunity to create real value on the blockchain, whether that’s building intricate online communities, sophisticated new technologies for financial transactions or supply chain management, or even novel ways of engaging with art and fashion. The opportunities are endless—it’s just up to the innovators to uncover them.
Subscribe to ff3 to follow our latest thinking and experiences on Web3 venture building
💡Buy Now Pay Later—three startup ideas for founders
Interested in being the next Klarna, Afterpay, or Scalapay? Resident Founders Factory fintech expert Sarah Kocianski suggests three areas in BNPL that are ripe for innovation
Problem: No existing easy way for customers to view all their instalment payments in one place, making it hard to track what is owed and to who
Solution: Use open banking APIs to provide customers with a consolidated view of all their BNPL payments to avoid missing payments
✍️ BNPL debt management
Problem: BNPL makes it easier for customers to accrue debt
Solution: Opportunity for how that debt is managed—build up-to-date tools that help customers with problem debt track and pay off what they owe
💰 BNPL savings
Problem: Common criticism of BNPL is that it encourages unhealthy spending behaviour
Solution: Opportunity to turn this on its head. Take concept of flexible payment options to encourage savings towards a particular purchase. This isn’t a novel concept, but accessing it through an app tied to ecommerce sites is.
Read Sarah K’s Fintech Briefing on the Future of BNPL
🐦 Tweet of the month
📚 What we’ve been reading
Female founders need money, not more mentoring (Sifted) - OLIO founder Tessa Clarke responds to a new mentoring scheme that purports to correct underinvestment
Apple: Thief (No Mercy/No Malice) - renowned big tech cynic Professor Scott Galloway examines how Apple might become the first trillion dollar revenue company
Talking Shop: The transformation of commerce (Digital Native) - Rex Woodbury dives into different aspects of commerce, their relevance globally, and how tech powers them
Phil Libin skewers the metaverse (Pitchbook) - tech veteran Phil Libin offers a cynical view on the promise of Web3 and the metaverse
💸 News from the Founders Factory portfolio
Data visualisation platform Flourish was acquired by Canva for an undisclosed sum
NFT studio Veople announced the launch of their Bad Influence collection. Watch the trailer here
We hosted our Pre-Seed/Seed Investor Showcase, where twelve startups from our portfolio pitched to 170 investors in-person and online. Read more here
Solar energy startup Solivus raised £2.4 million, fuelled largely by their Crowdcube fundraising campaign
Due diligence automation technology Umazi raised $1 million in a pre-seed round, funded by Innovate UK
We launched ff3 - our new Web3 venture building community. Stay up to date with our latest thinking and news through our ff3 newsletter
🗓 Opportunities for founders
Lunch & Learn: How to do Pricing (Virtual, March 9th) - Founders Factory & Stripe are hosting this joint event on how to price your B2B product or service. Register here
AWS Software Startup Awards 2022 - shining a spotlight on innovative B2B/SaaS startups (deadline March 4th). Apply here
Venturers Club ‘Tales from the Front’ (London, March 16th) - a free networking event for founders. Find out more
Elevating Founders Pitch Programme 2022 - applications are open for any startup/scaleup looking to raise Seed or Series A funding (deadline April 1st). Learn more and apply here
Hubspot for Startups Ads offer - HubSpot have partnered with Google and LinkedIn to offer up to $800 in ad credits to anyone that signs up with HubSpot for Startups. Find out more
We’re hiring! There are a number of positions that we’re actively hiring for, in our Venture Studio as well as across our portfolio. Discover all our open roles here
See you next month 👋
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The Founders Factory Startup Bulletin brings you a round-up of startup and investment stories, key learnings from founders, and insights from the Founders Factory team.