Written by: Ryan Yoon, Tiger Research
Compiled by: Saoirse , Foresight News
99% of Web3 projects generate no cash revenue; yet, many companies still pour huge sums of money into marketing and events every month. This article will delve into the survival strategies of these projects and the truth behind their "cash burn."
Key points
99% of Web3 projects lack cash flow, relying on tokens and external funding rather than product sales for cost expenditures.
Prematurely launching a product (token issuance) can lead to a surge in marketing spending, which in turn weakens the competitiveness of the core product.
The reasonable price-to-earnings ratio (P/E) of the top 1% of projects proves that the remaining projects lack real value support.
Early Token Generation Events (TGEs) allow founders to "exit and cash out" regardless of the project's success or failure, creating a distorted market cycle.
The "survival" of 99% of projects is essentially due to a flawed system built on investor losses rather than corporate profits.
The prerequisite for survival: having proven earning power.
"Survival depends on proven revenue generation capabilities"—this is the most crucial warning in the current Web3 landscape. As the market matures, investors are no longer blindly chasing vague "visions." If a project fails to acquire real users and generate actual sales, token holders will quickly sell and exit the market.
The key issue lies in the "cash flow period," which is the time a project can sustain operations without generating profit. Even without sales, costs such as salaries and server fees still need to be covered monthly, and teams without income have virtually no legal channels to maintain operating funds.
Financing costs in the absence of revenue:
However, this model of "surviving on tokens and external funding" is merely a stopgap measure. The supply of assets and tokens has a clear ceiling; ultimately, projects that exhaust all funding sources will either cease operations or quietly exit the market.
Web3 Revenue Ranking, Source: Token Terminal and Tiger Research
This crisis is widespread. According to data from Token Terminal, globally, only about 200 Web3 projects have generated $0.10 in revenue over the past 30 days.
This means that 99% of projects lack the ability to even cover their basic costs. In short, almost all cryptocurrency projects have failed to validate their business models and are gradually declining.
Overvaluation trap
This crisis was largely inevitable. Most Web3 projects went public (token issuance) based solely on their "vision," without even launching a real product. This contrasts sharply with traditional businesses—which must demonstrate their growth potential before an IPO; in the Web3 space, teams only have to justify their high valuations after going public (the token generation event TGE).
However, token holders won't wait indefinitely. With new projects constantly emerging daily, if a project fails to deliver on expectations, holders will quickly sell and exit. This puts pressure on the token price, threatening the project's survival. Therefore, most projects invest more in short-term hype than in long-term product development. Clearly, if the product itself lacks competitiveness, even the most intensive marketing will eventually fail.
At this point, the project fell into a "dilemma":
If you focus solely on product development, it will take a lot of time, and during this period, market attention will gradually fade and the capital turnover period will continue to shorten.
If you only focus on short-term hype, the project will become empty and lack real value.
Both paths ultimately lead to failure—the project fails to justify its initial high valuation and eventually collapses.
See through the top 1% to uncover the truth of 99% of projects.
However, 1% of the top projects still proved the viability of the Web3 model with their huge revenues.
We can assess the value of major profitable companies like Hyperliquid and Pump.fun by using their price-to-earnings ratio (P/E ratio). The P/E ratio is calculated as "market capitalization ÷ annual revenue," and this indicator reflects whether the company's valuation is reasonable relative to its actual revenue.
Price-to-Earnings Ratio Comparison: Top Web3 Projects (2025):
Note: Hyperliquid's sales figures are annualized estimates based on performance since June 2025.
Data shows that the price-to-earnings ratios of profitable projects range from 1 to 17. Compared to the average price-to-earnings ratio of approximately 31 for the S&P 500, these leading Web3 projects are either "undervalued relative to their sales" or have "excellent cash flow."
The fact that top-performing projects with real returns can maintain reasonable price-to-earnings ratios makes the valuations of the remaining 99% of projects seem untenable—it directly proves that the high valuations of most projects in the market lack a real value basis.
Can this twisted cycle be broken?
Why do projects with no sales still maintain valuations of billions of dollars? For many founders, product quality is a secondary factor—the twisted structure of Web3 makes "quick exit and monetization" much easier than "building a real business."
The cases of Ryan and Jay perfectly illustrate this point: both launched AAA game projects, but their outcomes were drastically different.
Founder Differences: Web3 vs. Traditional Models
Ryan: Choosing TGE, forgoing in-depth development
He chose a path centered on "profit": before the game's launch, he raised early funding by selling NFTs; then, while the product was still in a rough development stage, he held a token generation event (TGE) based solely on an aggressive roadmap and completed the listing on a mid-sized exchange.
After the IPO, he manipulated the token price to buy himself time. Although the game's launch was ultimately delayed, its poor quality led to a mass sell-off by holders. Ryan eventually resigned to "take responsibility," but he was the true winner of this game—
On the surface, he pretended to be focused on his work, but in reality, he was drawing a high salary while simultaneously making huge profits by selling unlocked tokens. Regardless of the project's ultimate success or failure, he quickly accumulated wealth and exited the market.
In contrast, Jay follows the traditional path and focuses on the product itself.
He prioritized product quality over short-term hype. However, the development of AAA games takes several years, during which time his funds gradually ran out, plunging him into a "cash flow crisis."
In the traditional model, founders only reap substantial profits after the product is launched and sold. Although Jay raised funds through multiple rounds of financing, he ultimately shut down the company before the game was even completed due to a lack of funds. Unlike Ryan, Jay not only failed to generate any profit but also incurred huge debts, leaving behind a record of failure.
Who is the real winner?
Neither case resulted in a successful product, but the winners are obvious: Ryan amassed wealth by exploiting Web3's distorted valuation system, while Jay lost everything in his attempt to build a superior product.
This is the harsh reality of the current Web3 market: it is far easier to exit prematurely with inflated valuations than to build a sustainable business model; and ultimately, the cost of this "failure" is borne entirely by the investors.
Returning to the initial question: "How do 99% of unprofitable Web3 projects survive?"
This harsh reality is the most honest answer to the question.
