When considering Web3 partnerships, the background and perspective of the evaluator may lead to blind spots. Traditional companies and investors may know the business fundamentals and financial metrics to examine but be unclear on industry-specific “must-haves” such as necessary tech capabilities and a committed fan base. Industry insiders, on the other hand, may be impressed by a potential partner’s community presence and the features they promote but overlook the health of the financial and advisory foundations.
To ensure a profitable partnership that brings value to both parties and to end-users, it’s essential to examine both the big picture and the telling details. Below, 17 members of Cryptox Innovation Circle share tips for companies and individuals engaged in evaluating a potential Web3 partnership.
Any shortcomings you may inherit
Too often, companies will rush to partner in the hopes of doubling their chances of success. However, industry leaders should remember that their company also inherits any potential shortcomings in these scenarios. That’s why it’s important to conduct a full quality assessment prior to integrating any new solution. Blowback from a poorly vetted partner can do more damage than market volatility. – Oleksandr Lutskevych, CEX.IO
On-chain activity
When considering Web3 partnerships, companies should evaluate potential partners’ technical expertise, security measures and track record. Additionally, analyzing their on-chain activity can reveal the actual product or dApp engagement, allowing companies to understand the partnership’s benefits better and make informed decisions. – Tomer Warschauer Nuni, Kryptomon
Their fan base and community
Investigate the reputation and track record of the potential partner in depth, as well as their participation in the Web3 community. Do they have a substantial fan base and active community? What is their relationship with their users and supporters? Community size, participation, reputation and openness all matter — it’s particularly important that they possess a collaborative mindset. – Theo Sastre-Garau, NFTevening
Input from others who have interacted with them
It’s all about the founders. Companies in Web3 often operate with very little oversight and generally have no board of directors consisting of investors. That means that due diligence becomes not just a question of online intelligence, but human intelligence gleaned from partners and industry players who may have interacted with that company in the past. – Jason Fernandes, AdLunam Inc.
The actual value being accrued
Partnerships have to be meaningful and tied to usage or customers. When doing your due diligence, make sure that it’s not simply an empty partnership announcement to drive up price speculation. Still more important, ensure it is actually accruing value to the base protocol or project (that is, creating free cash flow). Quickly learn to distinguish between price-speculating partnerships and value-creating partnerships. – Nitin Kumar, zblocks
Their track record and reputation
Make sure your potential partners have a good track record, a good reputation, and verifiable qualifications and experience. Talk to them to see if they can answer all your questions and to get a feel for their energy and personality. Also, talk to other people or businesses who have dealt with them in the past to get their feedback. – Sharon Yip, Polygon Advisory Group, LLC
Their long-term vision and the value to your community
When it comes to Web3, community usually comes first in all decisions, including decisions about partnerships. I usually focus on two things while doing due diligence: whether the partner is building something with a long-term vision that we can align with and whether the partnership can bring value to our community. – Cindy Jin, Mintology
How well your team will work with them
While companies should thoroughly research a potential partner’s background and reputation within the Web3 community, it’s just as important to gauge whether your team will work well in this new partnership. Significant differences in opinion, culture, personalities and work ethic are a threat best avoided when your project’s success is at stake. – Sheraz Ahmed, STORM Partners
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Their fundamental business dynamics
When it comes to due diligence, Web3 companies should be treated the same as any other company you’ve considered working with. Their fundamental business dynamics should receive the same level of scrutiny you always give. To create a strong base for a partnership, ensure that their resources, debt, equity, forecasts and various other functions are all consistent with the best interests of potential partners. – Megan Nyvold, BingX
How well (or if) the partnership can serve non-Web3 natives
Don’t just look at the product’s unique selling proposition. Always look at how a partnership can deliver value for the user. How would your partnership cater to the 99% of users who aren’t Web3 natives? – Ilias Salvatore, Flooz XYZ
Alignment with your strategy and goals
Companies should assess the potential risks and benefits of the partnership and consider whether it aligns with their overall business strategy and goals. Things to assess include the company’s ability to stay solvent and make good on its promises, as well as the reputation of the team and the potential risks in associating with them. – Ty Smith, Coinbound
How (and if) they answer specific questions
Make sure that the other company is giving specific answers to your specific questions. If you’re asking about a certain problem you’re predicting, or if you need details about something that looks murky, don’t let them “hand wave” your concerns away or trick you with smoke and mirrors. Protect your company and employees by demanding specifics. – Jae Yang, Tacen
Whether they have quality advisers and seed investors
Check for quality advisers and seed investors. Support from well-known venture capital funds, for example, indicates that a project has valuable connections that trust in the team and the business outlook. While your own extensive research is of course still required, this can be a useful shortcut to quickly gauge the sentiment around a potential partner. – Wolfgang Rückerl, ENT Technologies AG
What they’ve actually done
Look at what the Web3 entity has actually done, not just what they claim. If they haven’t built anything yet, take their claims with a grain of salt. For example, if they claim that they have a decentralized exchange that allows for swaps, perpetual protocol, futures and options, use their testnet if it becomes available to see if it provides what you need. – Zain Jaffer, Zain Ventures
The people actually responsible for execution
If an initial relationship never gets past the business development manager’s level, it’s difficult to assess whether the team will really deliver on promises. Always try to connect directly with those who will be responsible for execution. There’s nothing wrong with an arm’s-length partnership, but a really good partnership relies on close collaboration and close ties. – Simon Harman, Chainflip Labs
The underlying infrastructure
Take a good look at the project’s underlying infrastructure to ensure it is decentralized, requires minimal trust and has client diversity. Vulnerabilities exist where there is centralization, so it’s important to consider the consensus mechanisms underpinning blockchain projects to uphold security standards. – Anthony Georgiades, Pastel Network
Detailed case studies and hard facts from the blockchain
Get past the badges, publications and vanity numbers of communities on Discord, Telegram and Twitter. It’s very important to consider the professional and personal track records of the team members themselves. Examining detailed case studies and hard facts from the blockchain (for example, auditing smart contracts) is a great way to verify all claims. Lastly, the quality, not just the quantity, of partnerships matters. – Arvin Khamseh, SOLDOUT NFTs
This article was published through Cryptox Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cryptox.
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