At the very beginning of 2022, CZ tweeted that GameFi and SocialFi will become the driving force of crypto market. But six months later, neither GameFi nor SocialFi has been lucky enough to survive the market downturn. For those two, the overlapping narrative lies in the ownership. The main characteristics of SocialFi are actually the characteristics of Web3 in a broad sense, which are mainly related to decentralization, openness and ownership.
1. Current Investment Landscape of SocialFi Projects
In a nutshell, the current SocialFi track is still at an early stage compared with DeFi and GameFi. In addition to many a SocialFi investment events in Q3 and Q4 of 2021, there are very few SocialFi projects worthy of attention after 2022. Among those projects secured funding successfully in 2021, the following are worthy of attention for one reason or another.
DeSo received $200M investment from a16z, Sequoia, etc.; Torum received $100M funding from Huobi Ventures; Rally raised $22M through Coinlist; RSS3 raised $13M through Copper LBP; FWB received $10M investment from a16z; Taki received $3.45M seed round investment from Coinbase Ventures, FTX, etc. DeSo, as a giant in the SocialFi space, is a public chain tailored for SocialFi applications. At present, more than 140 projects were built on DeSo. Also, there are some web3 projects that most of us are familiar with, such as Mask Network, which will not be repeated here.
2. How ventures view SocialFi
The current landscape of SocialFi is basically shaped by Tier-1 ventures. However, ventures and retailers alike should have reasonable expectations for SocialFi products for it is challenging to attract large-scale users in a short time. In terms of single financing event, DeSo and Torum both received their huge funding during the “bull run” period when both ventures and retailers would be more than optimistic about the future development of SocialFi.
But in other words, when Taki, Rally and Torum received funding, the very concept of “SocialFi” did not even exist on the market. Therefore, they should be categorized into Web3 social applications on a broader level back then and suddenly transformed to SocialFi when the new concept emerged.
Therefore, SocialFi as a category is relatively late in maturity without a notable giant protocol. If social tokens are included, SocialFi cannot be clearly defined for the time being because it might include too may social-related products and protocols. Not all projects that build Web3 social products are SocialFi, and the reverse is also true.
At present, this track still lacks a landmark product like Axie Infinity or StepN that could reach out to web2 users and bridge the gap between web2 and web3.
As for whether SocialFi is a false proposition, top-tier ventures seem to buy the enticing narrative and it is still too early to make the final call. For ventures who are capable of sparing resources, SocialFi is a promising land that worth their taking of risks.
3. Factors that ventures prioritize about SocialFi projects
Team makeup is still the most important consideration. Be it DeSo, Rally or Taki, it is difficult to convince ventures to be willing to invest if the core members of a SocialFi project do not have experience of building products for large-scale users. For example, Kevin Chou, the co-founder of Taki and Rally, is also the cofounder of Forte, a traditional gaming infrastructure. The founder of DeSo is also the founder of stablecoin Basis. However, if the founding team comes from web2 background without enough practice in web3, those “gold diggers” would be very likely to fail because of the cognition gap concerning user demands.
The direction of product development and the possibility to land the product in mass market are also prioritized concerns. The landscape of SocialFi is not finalized, so there are many demands waiting to be met. However, it is neither possible nor necessary to try to recreate a Web3 Twitter. That’s why BitClout chose to build DeSo, a public chain for SocialFi applications, seeking more possibilities from developers. Stani from AAVE also built Lens Protocol to help developers build Web3 native social media.
Relatively speaking, DeSo and Lens choose a direction of development with a higher fault tolerance rate. For Web3 startups that lack industry resources, finding a niche market might drive ventures more willing to invest. Whether it’s traffic distribution or marketing based on social networking, a more accurate and niche market is still the best choice to convince ventures.
4. Prospects of SocialFi
Compared with DeFi and GameFi projects which do not require too many users to “feed” a team, SocialFi relies more on the amount of capital and the level of marketing, especially considering the economy of scale. If you want to build a decentralized Twitter from scratch, you really don’t have to. First, the requirements for capital and team makeup are too high, coupled with the open attitude of the two social media giants. Whether Jack Dorsey hopes Musk could acquire Twitter and give it a new birth with decentralization, or Facebook changed its name to Meta, it shows their aggressive attitude towards Web3. However, small-scale innovation is still encouraged. SocialFi applications that can bridge web2 and web3 will be valued by ventures. After all, the current size of Web3 users is really unable to support the sustainable development of a SocialFi application.
“Social” in SocialFi is not necessarily equal to social media, and what SocialFi intend to do is certainly far more than building a decentralized social platform. Despite objective difficulties and doubts, SocialFi is still a promising land. In the long run, how to migrate more web2 users to web3 is a more urgent issue for the industry as a whole.
About BOOM
BOOM is a SocialFi platform connecting Web2.0 and Web3.0. Since it was launched in January, the early users have surpingassed 100K and Boom has now become the most popular decentralized Crypto Lovers vecommunity in 2022.
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