Investment DAOs
Loading...POPULARIZED BY METACARTEL VENTURES, SEED CLUB, AND ORANGE DAO
Investment DAOs function as a funding mechanism by decentralizing venture capital, allowing community members to collectively make investment deci-sions.
They were popularized by Metacartel Ventures, Seed Club, and Orange DAO, which adopted a community-centric approach. This model democratizes venture capital by spreading decision-making power across a larger group and shifting power away from traditional centralized investors.
This model is ideal for groups or individuals seeking flexible and community-driven funding.
Small investors, who may not meet the capital requirements of conventional investments, can participate through governance tokens, gaining decision-making power and sharing in profits.
Additionally, communities looking to pool resources while retaining democratic control over fund allocation can ensure that all participants have a say in capital decisions.
Building on traditional VC frameworks, investment DAOs incorporate features of crowdsourcing, crowdfunding, and cooperative models to support collective funding through community voting and enhanced investor engagement. These collectives pool resources and may target investments in venture capital, real estate, intellectual property, or various other asset classes.
Investors contribute to a DAO-controlled treasury by purchasing governance tokens, which grant them voting rights to influence investment decisions. Some investment DAOs also generate funds through mechanisms like staking to ensure ongoing capital availability for future investments. Funds are allocated based on votes cast by token holders, with each member’s voting power proportional to the number of governance tokens they hold. Additionally, some DAOs match funds to amplify the impact of community contributions.
The disbursement of funds can occur either upfront as a lump sum or be tied to specific milestones, depending on the project and DAO’s structure. Projects must submit a proposal detailing their vision, road- map, and funding needs, which are reviewed and voted upon. The funding process generally includes three stages: Proposal Submission - where propsective investments pitch. Voting - where a go/no-go decision is made. And finally, investment execution - where tokens are exchanged.
Funding rounds can be either fixed or rolling. DAOs like Hydra Ventures have fixed funding cycles such as quarterly or biannual rounds, during which invest- ment decisions are made collectively. Others, like Seed Club, operate on a rolling basis, making funding decisions continuously as long as capital is available.
Governance
Traditional VC ecosystems concentrate decision-making power among a few individuals or firms, while investment DAOs allow all token holders to engage in voting, rather than by a small group of partners .
Profits from successful investments are distributed among all token holders, aligning community incentives and enabling broader financial benefits .
VCs often lack transparency and inclusivity, focusing on capital control by a central governing body. Investment DAOs have a public and immutable record of all decisions and transactions, ensuring transparency throughout the investment process .
Investment DAOs can take different forms, from directly funding projects to investing in other DAOs, allowing for diverse approaches to supporting innovation.
Hydra Ventures operates as a “fund of funds,” aggregating capital to invest in other DAOs. They believe participants within their ecosystem possess greater expertise in evaluating investment opportunities than traditional venture capital firms.
Seed Club Ventures is the investment arm of Seed Club. They have launched a $25 million fund to invest in projects that build DAO infrastructure, web3 applications, and decentralized communities.
Orange DAO is composed of more than 1,000 Y Combinator alumni and is designed to back and invest in web3 startups. With $80 million in raised capital, Orange DAO leverages the expertise and networks of its members to asource and evaluate early-stage crypto and blockchain ventures.