Banking for Web3 Startups

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Congratulations! You’ve launched your startup! But now, comes the time to choose the financial tools for your startup. Historically, startups looked to the traditional finance world for their banking needs, choosing a mix of banking providers and credit card providers to fulfill their requirements. But a web3 startup also deals with crypto (raising funds in crypto, getting paid in crypto, making payments in crypto) and therefore it’s important to find the right provider for your specific requirements.

Fiat vs crypto

Many web3 startups have a combination of crypto and fiat assets – this means their money lies both as crypto and as traditional currency (e.g. US dollar, euros, etc). Therefore it’s important to understand the variety of banking options available to you, and choose the one that best suits your needs. An important aspect to note is that most traditional banks still refuse to onboard web3 startups – any project that is associated with crypto (crypto exchanges, NFT projects, blockchain startups) are usually rejected by traditional banks. This limitation is frustrating, but you can find even better alternatives – such as mesha, which provides both fiat and crypto banking solutions for web3 projects.

Securely hold your funds

The most important aspect of banking for a web3 startup is to hold your funds securely. If you have fiat funds, you will hold these funds in a traditional bank account – depending on the country of incorporation of your startup. You can sign up for a business bank account Things to look out for in business bank accounts:

  • Annual maintenance fees
  • Minimum balance
  • Opening fees
  • Account opening process
  • International wire fees
  • Local transfer fees
  • ATM fees
  • Card issuance fees

Many traditional banks have high fees for the features above, as well as a difficult, if not impossible account opening process for web3 projects. Neobanks for businesses are better, and provide an easier experience. Do your research beforehand, so as to avoid wasting time going through an account opening process that prohibits blockchain businesses. If you have crypto assets (such as Ethereum or stablecoins), you have a few options: The most commonly used option by web3 organizations is to hold your funds in a multisig wallet (such as a Gnosis Safe, provided by mesha). A multisig wallet is a multi-signature wallet, meaning transactions require multiple wallet owners to sign off. This unique feature has the benefit of:

  • Increased security, as transactions require multiple people to confirm
  • Increased back up, as if one person loses their wallet, the funds are still accessible through the other owners

Multisig wallets are smart contract wallets, meaning they are completely on-chain and thus will hold funds in the native blockchain (e.g. Ethereum blockchain multisig wallets will hold ERC-20 tokens and Ethereum). Read more about setting up multisig wallets here. One beneficial aspect of smart contract wallets is that they don’t require any KYC, as they are completely pseudonymous and decentralized. Other options to store your crypto include centralized custodians (such as Coinbase), hot wallets (Metamask) or cold wallets (hardware wallets). It is highly recommended to not use a hot or cold wallet – should you lose access to this wallet, your entire company’s funds will be unrecoverable, leading to catastrophe for your startup.

Making payments

One of the core aspects of banking is making and receiving payments. If you’re a web3 startup, making and receiving payments can mean everything from getting paid, paying vendors, payroll and more. When choosing a financial provider for your payment needs, consider the following:

  • Which blockchain is it on? Is it multi-chain?
  • Can you make mass payouts? Being able to batch multiple transactions into one single transaction is not only a time-saver but also saves gas fees
  • Can you schedule payments?
  • Are there any fees for receiving or making payments?
  • Does the provider optimize for gas fees (a real issue if you are an Ethereum project)

Credit cards for web3

An often overlooked aspect of banking for startups is being able to access credit, namely credit cards. It’s hard to get a credit card if you’re a startup. Unfortunately for many web3 projects, it’s even harder to get a credit card if their funds are in crypto – most providers don’t recognize their crypto assets for underwriting, thereby denying them access to a Visa or Mastercard credit card (use mesha if you’re looking for a credit card backed by your crypto) Using a credit card is essential for web3 startups:

  • Spend your crypto anywhere, without having to convert to fiat
  • Free up cash by accessing credit
  • Earn rewards and cashback to extend your runway

To summarize:

  • For your fiat needs, find a banking provider that accepts crypto projects
  • For your crypto assets, use a multisig wallet
  • Finally, consider your treasury needs (read more here).

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