In a wide-ranging study, published this September and released as an NFT by Gitcoin, researchers Mashal Waqar, head of growth and partnerships at Bankless Publishing, and Eugene Leventhal, executive director of Metagov, spoke to thirteen web3 grant programs. These programs have cumulatively committed over $1 billion to recipients.
The study, funded by Gitcoin’s Grants Matching Pool and Rich Brown, examined the grant-making activities of active organizations, including the Ethereum and Solana Foundations. Additionally, the sunset programs Algorand and NEAR Foundations offered.
As an emerging industry, web3 has not had as much research focus as other sectors of the economy, but Leventhal thought that a scholarly inquiry into grants was critical. “I had a concern earlier in the year that grant programs would shift towards becoming in-house VCs,” he told nft now in a written interview. This led him and Waqar to design this study, conducting dozens of interviews with funders and grantees, exploring the creation, structure, and implementation of grants, and evaluating the impact that these grants have had on recipients, as well as the Web3 ecosystem as a whole.
The State of Web3 Grants Report is finally here!
It's a working doc so don't surprised by some changes based on feedback
— Eugene Leventhal (@bbeats1) September 25, 2023
“I’d more recently been researching and doing case studies and reports on quadratic funding rounds, public goods, and token models in a web3 context,” said Waqar.
“One issue I’d encountered consistently was grants programs feeling like a black hole— with little clarity around them. So, after talking to Eugene, we realized we were both passionate about wanting to demystify this space—and we started with very basic aspects of these programs by covering operations, impact assessment, and review processes. Despite that, we still had to prod a lot to uncover some of the granular details around these programs. With over $1 billion committed by just a handful of web3 grant programs, there should be more transparency and accessibility about grant programs and how they’re run. So, it felt important to uncover these insights, for the industry as a whole,” she said.
“With over $1 billion committed by just a handful of web3 grant programs, there should be more transparency and accessibility about grant programs and how they’re run. So, it felt important to uncover these insights, for the industry as a whole.”MASHAL WAQAR
Grant programs across web3 are often broad in scope and can fund anything from digital public goods (like development to improve the security, speed, or reliability of a protocol or tool) to the costs of organizing an event. The bulk of the study describes and reviews each of the programs it covered in turn, and can serve as a helpful guide for anyone who is thinking of designing a grant—or applying for one.
Although the report highlights areas of strength (and opportunities for improvement) for each program, many of the most interesting takeaways highlight how new grant builders—and the space as a whole—can build a better grant landscape going forward.
One important takeaway for the researchers was on governance—an essential focus when many prominent DAOs, from Nouns DAO to ApeCoin DAO, face controversy and loud debate on how community money is spent.
“Each program is iterating, but good governance requires strong communication, understanding, engagement, and a very hands-on approach from a community perspective while also being able to synthesize and break down vision and strategy. We saw each program dealing with different challenges depending on their maturity, program type, and deployment stage. Some had issues around diversity, equality, and inclusion; some had issues around bias and fairness, and some definitely dealt with challenges around community sentiment and engagement as well,” said Waqar.
The study suggests that solving problems in governance is a matter of getting organizational culture and process right. “One factor that wasn’t as explored by programs was to tie in engagement with very clearly defined metrics. Algorand Foundation’s xGov program did a great job of this by enforcing a rule of voting on each proposal for folks to qualify as Governors. Ex-governors who don’t fulfill their duties are disqualified,” she explained.
There is no magic solution for governance, added Leventhal. “I don’t think there’s a single right answer here. My personal view is that governance for grants starts with assessing the mission, vision, and values, especially in terms of how much accountability and involvement from the community is desired. Even if programs choose to run programs via a council hired by a foundation with no input, it’s important to keep the program accountable to the community. Culture is really important and needs to be embodied by those building and running the program,” he said.
Another important concern is grantee support—the guidance and assistance offered to recipients of funds after they have received the money. When organizations facilitate it, grantees can often offer each other excellent peer support, and the researchers noted Aave, Uniswap, ESP, and Polygon as standouts in this area.
“Support for grantees where they’re better able to become financially independent (either through revenue or alternative routes), would allow more projects to continue building and growing.”MASHAL WAQAR
Support with the nuts and bolts of project implementation—everything from community building to marketing—is a key success factor, as is help with project design and planning. “I’d love to see programs adding support areas for grantees to help them better plan their roadmap and operations. Support for grantees where they’re better able to become financially independent (either through revenue or alternative routes), would allow more projects to continue building and growing,” says Waqar.
Other takeaways note that clarity of purpose, transparency, and accountability are crucial to grant program effectiveness. Some programs in the study have not provided a full accounting of how they’ve spent their budgets, and web3 communities can feel like they are left in the dark without input into the grant program’s objectives and methods.
The report is an evolving document, and a summary of the reports will soon be available as a free mint issued by Gitcoin. “Minting on Gitcoin will introduce our research to a large community of folks who are actively invested, interested, and supporting public goods…This report has been the first step, and we hope to see more builders and ecosystems allocate more resources to work of this sort so the space can collectively grow and benefit from it,” says Waqar.