Web3 companies hitting the stock market? Sounds like a party, right? Maybe not. From your barber to your Uber driver, they’re all raving about Web3 IPOs being the next big thing. Suddenly, I feel like I’m surrounded by darting, dangerous high beams, this cacophony of flashing red lights. I’m not saying Web3 is bad, but the current rush to IPOs feels less like a strategic evolution and more like a desperate scramble before the music stops. Here's why I think this whole Web3 IPO craze is a bubble waiting to burst, and why you should be very cautious.

Dwindling VC Cash: The Real Driver?

Let's be honest. The prevailing story is that IPOs provide a relatively safe fundraising route. But is that really the whole story? Global cryptocurrency venture capital investment has crashed by more than 60% between 2022 and 2024. To me, that sounds a lot more like a gun to the head pivot than a well-considered strategic move.

Think of it like this: imagine a group of startups all relying on the same watering hole (VC funding). Suddenly, the water dries up. Do they all miraculously gain a sudden passion for, let’s say, digging wells (IPOs). No, they're just thirsty and desperate.

IPOs generally don’t indicate strength when they’re a product of a forced hand. They're a sign that the original plan A (token-based fundraising) and plan B (VC funding) didn't pan out. IPOs are far more costly and heavily regulated.

Regulatory Minefield: Are You Ready?

Regulation in the space Web3 is still the Wild West —lots of opportunity, but wide-open lawlessness. The principle is simple enough—what’s legal today might be a felony tomorrow. That’s not precisely the type of environment investors adore.

Enter the companies bragging about the strategic merits of IPOs in avoiding regulatory vagaries. That’s the equivalent of saying you are intentionally going driving through a blizzard because you have snow tires. Of course, that would be great if it worked but you’re still stuck in a freaking blizzard!

IPOs require substantial investment in regulatory compliance. Are these still-developing Web3 companies truly prepared to be subject to that kind of scrutiny and cost? I doubt it. Part of the issue is that many are built on some pretty dubious legal ground. An IPO is the worst thing for that because it just throws a giant spotlight on those weaknesses. The SEC just isn’t the sort of place to be messing around with a bunch of cowboys.

Token Utility? Or Just Hype?

And there are numerous Web3 companies that still need tokens to function at their core. Here's the rub: IPO investors aren't necessarily interested in buying into your ecosystem. They want profits.

Can you actually possibley persuade normie institutional clients that governance tokens are a good buy. Something that the highly variable value of your utility token is a stable revenue source. Good luck with that.

Companies may strategically combine both models. But the underlying business model needs to be robust enough to not need the crutch of the token.

Mainstream Dreams: Are They Real?

The Web3 IPO narrative has lately relied on the story arc of “mainstream adoption” and “institutional integration.” Are we really there yet? I opine that Web3 will be even more niche because of such a lack of understanding of the underlying technology.

Some institutions are beginning to take the plunge into these uncharted waters. Even so, the overwhelming majority are sitting on the sidelines for good reason. They hear about the volatility, the regulatory risks, and the absence of any clear business models.

An IPO won’t suddenly conjure up the knowledge needed to appreciate what you’ve built enough to get an average investor excited about it. It doesn’t really make you more open, it just opens you up to a broader range of much-more-possibly-skeptical eyes.

Community vs. Shareholders: Who Wins?

After all, Web3 was founded on the principles of community ownership and decentralized governance. An IPO fundamentally changes that dynamic. Now, you're beholden to shareholders.

Who do you prioritize? Your loyal community that supported you when you were bootstrapping, or the institutional investors who require you to provide quarterly returns.

This tension is a recipe for disaster. There’s nothing like the IPO to quickly dissatisfy the very community that created your company in the first place. Without that community, your “Web3” company is simply a cool tech company with an interesting new label.

I'm not saying Web3 is doomed. Far from it. Now, all I’m trying to say is that the current cycle of IPOs is a high stakes gamble.

So if you’re considering making an investment in a Web3 IPO, make sure to do your research first. Don't get caught up in the hype. Get past the jargon and ask the hard questions. Is there a real business model? Is the regulatory environment stable? Is the business actually prepared for the demands of the public markets?

Lastly and most importantly, know that Web3 is still very much in the early stages. Like any young industry, it’s full of bubbles. Don’t be the fool left holding the bag when this one goes off.

Information in this article is sourced from industry analysis and interviews, including reports by Tiger Research. When quoting their reports, please credit ’Tiger Research’ and include the Tiger Research logo.

Disclaimer: Information in this article is sourced from industry analysis and interviews, including reports by Tiger Research. Please state 'Tiger Research' as the source when citing their reports and include the Tiger Research logo.