The Web3 landscape is changing incredibly fast. Firms are growing more reluctant to use Initial Public Offerings (IPOs) as a means of raising capital and achieving publicity. This strategic pivot takes a step back from a strategy of pure token fundraising. It unlocks billions of dollars of institutional capital and guides players through complex regulatory landscapes. Successful IPOs by Coincheck and Coinbase highlight the growing appeal of this model. Web3 companies are aggressively pursuing IPOs as a signal of their desire for sustainable growth in the long term. As global cryptocurrency venture capital investments decline and regulatory frameworks evolve, IPOs present a compelling alternative for Web3 companies aiming to solidify their market position and attract a broader investor base.

The Allure of IPOs for Web3 Companies

IPOs provide Web3 companies with a crucial advantage: access to significant institutional capital that is typically unavailable through token-based funding mechanisms. This fresh infusion of capital allows companies to focus on dramatic business diversification and rapid expansion plans. The IPOs of firms such as Coincheck and Coinbase demonstrate the highly viable, lucrative and appealing nature of this fundraising path.

>Coinbase’s initial public offering this week is a watershed moment for the cryptocurrency industry. It demonstrates that institutional investors are beginning to value and reward companies that prioritize regulatory compliance. Coinbase's proactive collaboration with over 150 government institutions has solidified its position as a leader in regulatory adherence, making it an attractive investment for institutions seeking to navigate the complexities of the cryptocurrency landscape.

Global cryptocurrency venture capital investment has fallen by more than 60% from 2022 through early 2024. Such a quick drop reinforces the growing importance of IPOs as a vital funding source for Web3 firms. This decline in venture capital highlights the need for companies to explore diverse funding options to sustain growth and innovation.

Circumventing Regulatory Hurdles and Market Access

IPOs provide a strategic asset in steering through robust cryptocurrency regulations, especially in volatile ecosystems like Korea and Japan. These markets typically feature stringent barriers to entry for direct cryptocurrency investments. IPOs form smart indirect investment routes, providing sophisticated investors a conductive path to access the cryptoeconomy through publicly listed cryptocurrency-agnostic companies.

Together, global sovereign wealth funds control an estimated $13 trillion in assets. They can still dip a toe into cryptocurrency markets indirectly by supporting publicly listed companies such as Coinbase or MicroStrategy. With these funds, investors can gain access to the cryptocurrency market through indirect exposure. This approach allows them to sidestep direct involvement with crypto, which may be prohibited by their investment guidelines or regulatory constraints.

Japanese investors, for example, are able to avoid onerous cryptocurrency trading taxes via IPOs, rendering it a more attractive asset class. The preferential tax treatment is a powerful magnet for investors. When combined with the regulatory burden of publicly listed companies, IPOs become a very attractive alternative in markets with high barriers to entry for crypto.

Potential IPO Candidates and Market Dynamics

Three categories of Web3 firms have already become leading contenders for going public. These have included exchanges such as Bithumb, Bitkub, and Kraken, as well as custodians – for instance, BitGo. These companies have proven to reach critical mass market and are proof of the path for long-term growth and profitability. Their proven infrastructure and usage make them irresistible to institutional investors who want to get exposure to the Web3 world.

Aethir and Jupiter are two more Web3 industry companies that have already garnered large amounts of revenue and now stand as exciting potential IPO candidates. Their financial prosperity and disruptive business models set them up nicely for the long haul and dominance in their markets. These companies show that there is a third way, where Web3 businesses can focus on creating real value, generating revenue and catching the eye of serious investors.

As investors, it’s important to understand the potential downsides of token unlocks. Such events can cause dramatic average price declines of 25%. In fact, data shows that 90% of token unlock events negatively impact price—be it a growth unlock, team/partner unlock, etc. size. This is why careful planning and communication in and around token unlock events is key. These strategies prevent potentially damaging effects on market sentiment and increase investor confidence.