This blog is a collaborative effort from the Outlier Ventures team, drawing on insights from across our investment, accelerator, and ecosystem teams.
TL;DR
- Short-term grants are creating long-term damage.
- Web3 founders are stuck chasing capital instead of users.
- Protocols are rewarding hype instead of product-market fit.
- We flip the script by bringing structure, stability, and signal to an industry that’s optimized for noise.
- Want more? The full “Who Funds the Builders?” report is embedded below.
The Grant Trap No One Talks About
From the outside, Web3 looks flush with funding. But for those on the inside, the reality is more complicated. There’s a quiet killer in early-stage Web3: short-term grants.
At first glance, they look like a lifeline. Free capital, no strings, just build. But in reality, they’re creating a toxic incentive loop where founders jump from protocol to protocol chasing the next pot of gold, instead of building where their product makes the most sense.
It’s a problem we see up close at Outlier Ventures. And it’s holding the industry back.
The Hidden Cost of Grant-Hopping
Too many founders are stuck in a destructive loop, hopping from one grant program to another, rebuilding their product just to meet new funding requirements. But, Web3 is supposed to be composable. Permissionless. Aligned around shared values.
So, what happens when founders migrate chains just to secure short-term funding?
- Technical debt from migrating contracts and infrastructure
- Fragmented communities that don’t know where you’re headed
- Security risks from rushed deployments
- Wasted dev time optimizing for grants, not product-market fit
John Goldschmidt, Head of Partnerships at Outlier Ventures, put it bluntly:
In other words, we’re not rewarding the best tech, we’re rewarding the best grant writers.
Fix the Funnel, Not Just the Funding
If you’re leading a protocol, fund, or innovation unit, here’s the uncomfortable truth: Your biggest barrier to adoption might be your own incentive design.
Short-term grants are great PR. But they’re rarely great strategies. They attract mercenary teams, not long-term builders. They inflate TVL without generating real user value. And they leave ecosystems struggling to retain meaningful projects.
For enterprises exploring Web3, the implications are even bigger. In a landscape driven by incentives – not alignment – how do you identify real partners? Where’s the signal?
Why Our Accelerators Are Built for Signal, Not Noise
Our Base Camp programs aren’t just accelerators. They’re on-ramps to real innovation, backed by 10+ years of experience, 40+ cohorts, and over 370 startups accelerated. Here’s what makes our model different:
- Structured funding tied to clear build milestones
- Cross-ecosystem support that maximizes strategic fit
- Hands-on support in token design, go-to-market, and technical architecture
- A vetted pipeline for capital partners and enterprise collaborators
And the results speak volumes:
- 73% of Base Camp teams raise follow-on funding
- $2.1M average raise post-program
- $5.8M median valuation (more than double the industry benchmark)
And the best part? Founders build where they actually belong, not where the next grant is.
Founders Deserve Better Than Shiny Objects
Early-stage startups are already walking a tightrope. Burn rate, team morale, user traction, investor updates…it’s a lot. Add in the pressure to rebuild every few months on a new chain, and you’ve got a recipe for burnout, not breakout.
It’s not just founders at risk. Protocol ecosystems relying solely on grants risk becoming short-term hype machines. What they need is structured acceleration that drives real product adoption, not TVL spikes.
When capital is structured properly, founders can focus on building where they belong, not where the next check is. And when protocols invest in acceleration, not just acquisition, they unlock:
- Stickier developer ecosystems
- Product-centric growth
- Long-term credibility as a platform for serious builders
Want the Full Report?
This blog pulls from insights featured in our full partner report: Who Funds the Builders?
It’s a deep dive into the challenges and solutions facing founders, capital partners, and ecosystems today. And, it’s backed by data, case studies, and actionable strategies from our Base Camp programs.
Whether you’re an investor, founder, or ecosystem operator, you’ll walk away with a clearer view of how to support long-term, sustainable Web3 growth.
Let’s Fund the Right Future
Web3 isn’t short on talent. It’s short on aligned incentives.
The next breakout startups won’t be the ones chasing hype. They’ll be the ones building with quiet conviction, backed by long-term partners who get it.
We’re here to help. If you’re:
→ A founder, ready to build without compromise
→ A protocol or enterprise, ready to power a vertical that matters
→ A capital partner, ready to access signal without spinning up a team
Let’s stop rewarding short-termism and start funding the future.
The post Chasing Grants Is Killing Web3 Innovation. Here’s the Fix. appeared first on Outlier Ventures.
