How do 99% of unprofitable Web3 projects survive?

Writing by: Ryan Yoon, Tiger Research

Translation: Saoirse, Foresight News

99% of Web3 projects have no cash income, yet many companies still invest huge sums monthly in marketing and events. This article will delve into the survival rules of these projects and the truth behind “burning money.”

Key Points

99% of Web3 projects lack cash flow, relying on tokens and external funding for expenses rather than product sales.

Going public (token issuance) too early causes marketing expenses to surge, weakening the core product’s competitiveness.

The reasonable P/E ratio of the top 1% of projects proves that the rest lack actual value support.

Early Token Generation Events (TGE) allow founders to realize “exit liquidity” regardless of project success or failure, creating a distorted market cycle.

The “survival” of 99% of projects fundamentally stems from systemic flaws built on investor losses rather than corporate profitability.

Prerequisite for survival: verified revenue-generating ability

“The prerequisite for survival is verified revenue-generating ability” — this is the most critical warning in the current Web3 space. As the market matures, investors no longer blindly chase vague “visions.” If a project cannot acquire real users and actual sales, token holders will quickly sell off and exit.

The key issue is “funding turnover period,” i.e., how long a project can sustain operations without profitability. Even without sales, fixed monthly costs like salaries and server fees still need to be paid, and teams with no income have almost no legitimate channels to maintain operational funds.

Financing costs without income:

However, this “relying on tokens and external funds to survive” model is only a stopgap. Assets and token supplies have clear limits. Ultimately, projects that exhaust all funding sources will either cease operations or quietly exit the market.

Web3 revenue ranking table, source: token terminal and Tiger Research

This crisis is widespread. According to Token Terminal data, only about 200 Web3 projects worldwide have revenue of at least $0.10 in the past 30 days.

This means 99% of projects lack the ability to even cover their basic costs. In short, almost all crypto projects have not validated the feasibility of their business models and are gradually declining.

Valuation traps

This crisis was largely inevitable. Most Web3 projects go public (via token issuance) based solely on “visions,” without even having a real product. This contrasts sharply with traditional companies — before an IPO, they must prove growth potential; in Web3, teams often need to justify high valuations only after going public (TGE).

But token holders won’t wait indefinitely. As new projects emerge daily, if a project fails to meet expectations, holders will sell off quickly. This puts downward pressure on token prices and threatens the project’s survival. Therefore, most projects invest more funds in short-term hype rather than long-term product development. Clearly, if the product itself lacks competitiveness, even intensive marketing will eventually fail.

At this point, projects fall into a “dilemma trap”:

Focusing solely on product development: requires a lot of time, during which market attention wanes, and funding turnover shortens;

Focusing only on short-term hype: makes the project hollow and lacking real value support.

Both paths ultimately lead to failure — the project cannot justify its initial high valuation and will eventually collapse.

Seeing the truth of 99% of projects through the top 1%

However, 1% of top projects prove the viability of the Web3 model through massive revenue.

We can assess their value via P/E ratios (PER) of major profitable projects like Hyperliquid, Pump.fun, etc. The P/E ratio is calculated as “market cap ÷ annual revenue,” reflecting whether the project’s valuation is reasonable relative to actual income.

P/E comparison: Top Web3 projects (2025):

Note: Hyperliquid’s revenue is based on an annualized estimate since June 2025.

Data shows that profitable projects have P/E ratios between 1x and 17x. Compared to the S&P 500’s average P/E of about 31x, these top Web3 projects are either “undervalued relative to sales” or have “excellent cash flow.”

Top projects with actual earnings can maintain reasonable P/E ratios, which makes the valuation of the remaining 99% appear unjustified — directly proving that most projects in the market are overvalued without real value backing.

Can this distorted cycle be broken?

Why do projects with no sales still maintain valuations of billions of dollars? For many founders, product quality is secondary — the twisted structure of Web3 makes “quick exit liquidity” much easier than building a real business.

The cases of Ryan and Jay illustrate this perfectly: both launched AAA-level game projects, but their outcomes were vastly different.

Founder differences: Web3 vs. traditional model

Ryan: Chooses TGE, abandons deep development

He opts for a path centered on “profitability”: before the game launches, he raises early funds by selling NFTs; then, while the product is still in rough development, he holds a token generation event (TGE) based on a bold roadmap, and lists on a mid-tier exchange.

After listing, he maintains token prices through hype, buying time for himself. Although the game was delayed, its quality was poor, and holders sold off en masse. Ryan eventually resigned citing “taking responsibility,” but he was actually the real winner in this game—

On the surface, he appears focused on work, but in reality, he earns high salaries and profits massively by selling unlocked tokens. Regardless of the project’s ultimate success or failure, he quickly accumulated wealth and exited the market.

Contrast with Jay: follows the traditional path, focusing on the product itself

He prioritizes product quality over short-term hype. But AAA game development takes years, and during this period, his funds gradually deplete, leading to a “funding crisis.”

In the traditional model, founders must wait until the product launches and generates sales to earn significant returns. Jay raised funds through multiple rounds of financing but ultimately had to shut down before completing the game due to lack of funds. Unlike Ryan, Jay did not profit and left with huge debts, leaving a record of failure.

Who is the real winner?

Both cases did not produce successful products, but the winner is obvious: Ryan accumulated wealth by exploiting the distorted valuation system of Web3, while Jay lost everything trying to build a quality product.

This is the brutal reality of the current Web3 market: using overvalued exits is easier than building sustainable business models; ultimately, the cost of this “failure” is borne entirely by investors.

Returning to the initial question: “How do 99% of unprofitable Web3 projects survive?”

This harsh reality is the most honest answer to that question.