The Rise of Web3 Incubation Investment: Opportunities and Challenges Coexist

Recently, some well-known investors have begun to shift towards an incubation investment model, which not only reflects adjustments in personal strategies but also heralds a transformation in the Web3 investment paradigm. In the current market environment, the traditional "invest-wait-exit" model faces challenges such as limited exit channels and a collapsed valuation system. As a result, some capital has started to adopt new methods, no longer solely betting on project growth but instead directly participating in the entire process from 0 to 1.

The core of incubative investment lies in deep participation. Investors are no longer just simple providers of funds; they become partners in the project. They not only invest capital but also take on operational responsibilities, and even bear more risks on a legal level. This model requires investors to possess comprehensive resource integration capabilities.

In practical operations, incubation-type investments usually include the following aspects:

1. Ecological Empowerment: Integrating traffic entry points, wallet integration, and community user resources to provide an initial user base for the project.
2. Technical Support: Assisting with engineering tasks such as underlying architecture optimization, security audits, and product testing.
3. Marketing Promotion: Responsible for content marketing, community operation, and joint event planning, comprehensively enhancing project exposure and user conversion rates.
4. Compliance Collaboration: Providing comprehensive compliance support from pre-investment due diligence to license application and legal consultation.

The investment departments of some large trading platforms are typical representatives of this model. They not only provide funding support but also offer comprehensive support for projects, including ecological access, trading launch, brand endorsement, etc., truly realizing "co-building" rather than simply "running alongside."

However, incubation-type investments also face unique challenges, especially in terms of legal and compliance.

1. Blurred identity boundaries: Investors may play multiple roles simultaneously, such as investor, advisor, actual controller, etc., which increases the uncertainty of legal liabilities.

2. Complex revenue models: Diversified revenue streams (such as revenue sharing, Token buybacks, etc.) may trigger more regulatory scrutiny.

3. Token issuance risk: Different countries have varying regulatory attitudes towards Tokens, and cross-border operations further increase compliance difficulties.

To address these challenges, investors need to adopt a series of strategies:

1. Establish appropriate investment structures, such as Cayman SPV, BVI holding company, or Singapore exempt fund structure, to achieve identity isolation and risk management.

2. Pay attention to avoiding securitization characteristics during the Token design phase, such as adopting the SAFT protocol and emphasizing the practical functions of the Token.

3. Select the appropriate legal jurisdiction based on the target market and prepare the corresponding compliance in advance.

Overall, incubator investments bring new opportunities to the Web3 space but also require investors to have more comprehensive capabilities and a longer-term vision. It is suitable for those willing to engage deeply and who possess rich resources and experience. For individuals who prefer light involvement and high liquidity investments, this model may not be suitable. In any case, before entering this field, investors need to fully assess their own capabilities and risk tolerance, and be well-prepared for comprehensive legal and compliance matters.