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№ 02·0202 · Industry issues4 min read · Section 2 of 3

2.2 Why capital flows are inefficient

Four types of core friction: screening costs, trust costs, promotion fractures, and failure to settle results.

Updated
2.2 · Capital efficiency issues

There is a lot of capital and a lot of transactions, but effective capital flows remain expensive, slow and unstable.

Web3 seems to have been active, but the flow of truly high-quality capital has not been smooth. The problem is not just the amount of funds, but that there are still a lot of screening costs, trust friction, insufficient structuring and promotion gaps between funds and projects.

Function of this pageUnraveling structural inefficiencies between capital and projects
core judgmentMany connections, few closed loops
Reading highlightsFour types of friction + system cost + WCN entry point

Surface active ≠ efficient configuration

Judging from the news, social platforms, and live events, it seems like investments, partnerships, and market expansion are happening all the time in Web3. But from the real perspective of the project and investors:

"There are a lot of capital flows" does not mean "capital allocation is efficient." Many capital flows are noisy, short-cycle, and relationship-driven. Really high-quality, reusable and sustainable capital flows are still scarce.

A group of industry observations: Traditional VCs look at 200+ projects per person per year and invest in 3-5 projects; Crypto VCs may look at more than 3 times as many projects, but the quality of information is lower, the cost of due diligence is higher, and the deal break rate is higher. The core reason is not that there are not enough people, but that the system is not enough.

Four types of core friction

1. Screening costs are too high

"Seeing many items" does not mean "seeing the right item". Project information is inconsistent, quality varies greatly, background is opaque, and progress is difficult to verify, resulting in investors having to spend a lot of time on preliminary screening.

Projects are difficult to judge quicklyThe information is inconsistent, the materials are incomplete, and the narrative is unclear, making it difficult for investors to make quick judgments.
Capital preferences are difficult to mapStage preferences, track preferences, and ticket preferences are scattered in the human brain and are not structured.
A large number of projects are not preparedLack of clear financing structure, legal preparation and evidence of business progress.
High-value opportunities are drowned out by the noiseReally good projects and really suitable capital find it difficult to meet each other because of the noise.

2. The cost of trust is too high

Many projects and capitals do not lack a one-time opportunity to get to know each other, but what they lack is a sufficient foundation of trust and verification. Without a credible middle layer, review layer, and promotion layer, capital will continue to be conservative, and projects will continue to feel "difficult to obtain funds."

Is the team credible?Whether background, experience, and track record can stand verification.
Is the structure clear?Is there a clear framework for legal affairs, rights, obligations and risks?
Is the progress real?Are milestones, deliverables and commitments documented.
Is the docking party reliable?Whether the introducer or intermediary is willing to take responsibility for the authenticity of the information.

3. Promotion costs are too high

Even when a project reaches potential investors, the process often breaks down in the middle.

No one moved forward after the meetingI've seen it, talked about it, and I feel good about it, but I lack the owner to follow up.
Insufficient materialsThe project party does not know what the investors really lack, and the investors are not willing to repeat education.
There is no unified Deal spaceMinutes, materials, status, and next steps are scattered in different channels.
Responsibility cannot be lockedWho will continue to follow, who will urge, who will organize, and who will be responsible for the results - it is often not clear.

4. The results are difficult to precipitate

Even if financing or strategic cooperation is achieved, the result is still a one-time transaction.

No unified evidence filingCooperation was achieved, but the evidence was not systematically deposited.
No unified contribution attributionMany participants helped, but no one can say who actually drove the results.
There is no unified settlement entranceThe results are difficult to account for in long-term credit, PoB, or network value systems.
Unable to form a reuse flywheelOne success is not precipitated into a more efficient standard process next time.

Inefficient capital flows drive up system costs across the industry

Project parties are forced to spend a lot of time financingThe founding team repeatedly changed the deck, found people, explained, supplemented information, made appointments, and followed up. Without system assistance, these actions continue to consume precious execution time.
Capitalists are forced to do repeated screeningInvestors should spend their time on high-value judgment and allocation, but in reality a lot of time is consumed in preliminary screening, confirmation and low-trust communication.
Servers and collaborators cannot access stablyWhen the financing process and collaboration process are unstable, it is also difficult for roles such as legal, security, research, brand, and growth to enter the workflow earlier.
The entire industry relies more on favors than systemsWhen there is no unified routing layer, capital allocation relies more on "who knows whom" rather than a more transparent, efficient, and replicable network structure.

Entry point for WCN

One of the core values ​​of WCN is to upgrade "capital contact at the relationship level" to "capital flow at the system level."

It is not about exposing projects to more investors, but about allowing more suitable capital to enter a high-quality closed loop faster through a clearer structure, lower friction and stronger execution system.

Core conclusion

Inefficient capital flows are not a single problem, but are caused by four structural frictions:

Screening costs are too highInformation is unstructured, and investors and project parties are looking for needles in a haystack of noise.
The cost of trust is too highThere is a lack of credible middle and review layers, capital is conservative, and project parties are tired.
Promotion costs are too highDeal breaks frequently in the middle stage, lacking owner, space, and closed loop.
Sunk costs are too highAs a result, it cannot be turned into a network asset, and every cooperation starts from scratch.
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