Introduction

Grants programs have become a common practice in the Web3 ecosystem. They serve various purposes such as attracting talent, onboarding existing dApps to a network, and incentivizing the development of new applications. While motivations can vary, the overarching goal of most grants programs is to grow and strengthen the ecosystem.

Traditional Setup of Grant Programs

Typically, grants programs are set up from scratch by the projects running them. This often involves combining a range of existing tools:‍

Application Forms: Google Forms or Typeform for collecting applications.

Data Storage and Evaluation: Notion, GoogleSheets, or Airtable to store and assess application inputs.

Fund Distribution: Multi-signature wallets like SAFE for distributing grants to recipients.

Problems with the Traditional Setup

While the traditional setup offers flexibility and customization, it often proves challenging to maintain over time. We saw foundations with their self-managed grants programs struggling running efficiently.  In our experience, as grant programs mature the tools needed to operate them effectively also need to adapt. The key issue is that the ability to customize also introduces complexity and potential for human error. For instance, changing a field in a Google Form necessitates corresponding updates in Airtable and other connected tools. As tools become more interconnected, they are also more prone to errors and breakdowns.

Custom-built grants programs can work well, provided that the team managing them is small and remains consistent. However, frequent changes in personnel can lead to mismanagement and inefficiencies.

Using Existing Infrastructure to Run Your Grants Program

At Lemma, we often recommend our clients to utilize specialized infrastructure such as Grants Stack, Questbook, or CharmVerse. We've discussed the differences among these tools in a separate article. Here’s why leveraging these infrastructures can be beneficial:

Reduced Setup Time: Implementing a pre-built solution significantly cuts down on the time required to set up the program.

Error Reduction: These specialized tools are designed to minimize human errors and provide a more streamlined process.

Marketplace: Many of these infrastructure providers act as a marketplace, making it easier for potential grantees to find your program.

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The main trade-off when using existing infrastructure is the limited customization and the dependency on the chosen platform. However, the benefits often outweigh these disadvantages, especially for organizations looking to scale their grants programs efficiently.

Common Mistakes Projects Make When Running Grants Programs

Whether you are building your grants program from scratch or using existing infrastructure, it’s important to be aware of common mistakes to avoid them. We’ve identified several frequent pitfalls that occur when running grant programs.

1. Lack of Clear Objectives

One of the most common mistakes is not having well-defined goals for the grants program. Without clear objectives, it becomes difficult to design an effective program, evaluate applications, and measure success. Projects should start by clearly articulating what they hope to achieve, whether it’s fostering innovation, supporting existing projects, or attracting new developers to the ecosystem. Clearly stating the objective, provides clear guidance when making decisions.

2. Inefficient Application Processes

A cumbersome or unclear application process can deter potential applicants. Projects often make the mistake of asking for too much unnecessary information upfront or using overly complex forms. Simplifying the application process and making it user-friendly can increase the number of quality applications.

3. Poor Communication

Communication is critical in managing a grants program. Projects frequently fail to keep applicants informed about their application status or provide timely feedback. This lack of communication can frustrate applicants and harm the project's reputation. Establishing clear communication channels and regular updates can mitigate these issues.

4. Inconsistent Evaluation Criteria

Another common mistake is not having a standardized evaluation process. When evaluation criteria are not clearly defined or consistently applied, it can lead to perceptions of bias or unfairness. Projects should develop transparent and objective criteria to evaluate applications, ensuring a fair and merit-based selection process.

5. Underestimating the need for Monitoring and Support

Providing grants is just the beginning. Many projects fail to follow up with grant recipients, missing out on opportunities to support them and ensure their success. Regular check-ins, providing additional resources, and offering mentorship can help grant recipients stay on track and deliver valuable outcomes.

6. Ignoring Feedback and Failing to Adapt

The Web3 landscape is dynamic, and grants programs need to evolve accordingly. Projects often make the mistake of ignoring feedback from applicants and recipients or failing to adapt their programs based on changing needs. Regularly reviewing the program, gathering feedback, and making necessary adjustments are crucial for long-term success.

7. Neglecting Regulatory Compliance

Regulatory compliance is a critical aspect that many projects overlook. Depending on the jurisdiction, projects may be required to conduct Know Your Customer (KYC) or Know Your Business (KYB) checks before distributing funds. Failing to adhere to these regulations can lead to legal issues and undermine the credibility of the grants program. Ensuring compliance with local laws and regulations is essential to avoid potential legal pitfalls.

How Lemma Can Support

At Lemma, we specialize in helping projects implement their grants programs on robust, specialized infrastructures like Grants Stack, Questbook, and CharmVerse. Our comprehensive support services include:

Implementation: We assist in setting up your grants program on the chosen platform, ensuring a seamless and efficient launch.

Application Review: Our team can takeover the task of reviewing applications, ensuring that only the most promising projects are considered for funding.

Evaluation: We provide thorough evaluations of applications based on your predefined criteria, ensuring a fair and transparent selection process.

Communication: Lemma handles communication with applicants and grant recipients, keeping them informed and engaged throughout the process.

Regulatory Compliance: We initiate and manage KYC/KYB checks where necessary, ensuring that your program complies with all relevant regulations.

Ongoing Support: Beyond initial setup, we offer continuous support to monitor the progress of grant recipients, provide additional resources, and make necessary adjustments to the program.

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With Lemma’s expertise and support, you can focus on strategic decisions while we handle the operational aspects, ensuring your grants program runs smoothly and achieves its objectives.

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Conclusion

Setting up a grants program in the Web3 space is a powerful strategy to foster growth and innovation within your ecosystem. While traditional setups offer flexibility, they can be challenging to manage and prone to errors. Leveraging specialized infrastructure can significantly ease the process, reduce errors, and allow you to focus on achieving your strategic goals. By avoiding common mistakes such as unclear objectives, inefficient processes, poor communication, lack of monitoring, and neglecting regulatory compliance, you can create a successful and impactful grants program. Lemma’s comprehensive support services can further enhance the efficiency and effectiveness of your program, helping you achieve your ecosystem's growth and innovation goals.