What is the Business Model for a Web3 Company?
If your Web3 startup doesn’t have a business model, chances are it’s an expensive hobby.
What is a Business Model?
My Testing Business Ideas co-author Alex Osterwalder describes a business model as how an organization creates, delivers and captures value.
I’ve found that many new Web3 companies focus on one or two of these aspects, but rarely all three:
They create but can’t deliver or capture value.
They create and deliver but can’t capture value.
They capture value but don’t create or deliver.
It isn’t entirely surprising, especially since I experienced many of these same growing pains during the first dot com craze of the late 1990’s.
New technology is often pushed ahead but the business models lag behind.
A Web3 Business Model Example
One of the experiments to come out of this early Web3 movement is the “Move 2 Earn” model, a subset of the “Play 2 Earn” space.
Companies reward people for being healthier in a gamified manner, while also introducing them to Web3.
An example of such a Web3 Move 2 Earn company is Stepn, based out of Australia.
Stepn rewards people for walking, jogging or running outdoors.
So what’s their business model?
Let’s use the Business Model Canvas from Strategyzer to explain below.
Stepn’s customer segment is tech savvy walkers, joggers and runners. One of the biggest hurdles in Web3 right now is the disjointed and confusing processes, tools and know-how needed to get started. They need to be tech savvy enough to get started but don’t have to be experts in Web3.
Stepn tries to simplify that through their value proposition of lowering the barrier to Web3. In addition to this they want to help people stay healthy while combatting climate change. Stepn does this by making a monthly commitment to pay for carbon removal.
Stepn uses the App Store, Twitter and Discord for their acquisition and distribution channels. This is how they acquire new customers and deliver their value proposition.
They utilize the Web3 Community for their customer relationships and leverage a Habit Forming Machine. The gamification of the app is a strong lock-in with customers. Think Pokémon GO like retention numbers here. Customers want to keep moving and earning while customizing their NFT sneakers along the way.
Stepn makes money by charging fees on sneaker trades, minting and rentals. These are key for them to sustain over time and plugs in nicely to their Habit Forming Machine.
So that was the front stage of their business model, but what about the back stage? What do the folks at Stepn need to do to make this all happen?
Quite a bit for a small team.
The Stepn app uses GPS to track your movement and steps (think Fitbit), which requires software development and maintenance. They need to design cool looking Sneaker NFTs, as well as build their community.
For resources, they need the Web3 App, NFT Platform and Sneaker NFTS.
And this all costs money, which is represented in the cost structure of their business model. This includes marketing, software and ecosystem costs as well as paying processing fees.
So far they’ve partnered with Binance Labs, but I could envision Stepn partnering with athletic footwear companies in the near future. It would align to their business model rather well since people love collecting sneakers (even digital ones).
This is just one example of a Move 2 Earn Web3 business model, but you’ll notice how it creates, delivers and captures value.
Web3 Startups Need Business Models to Survive
I suggest a few steps to get you aspiring Web3 founders started:
Before investing all of your money into a Web3 startup, sketch out your business model.
Next, write down what would have to be true for it to work.
Go out and test it.
There are many, many other possibilities when it comes to Web3 business models. I simply unpacked one for you to help you on your journey.
Good luck!
