Web3 is taking over another aspect of the traditional world: VCs, VCs. Or more down-to-earth, venture capital DAO is reshaping the way venture capital operates.
DAO is to achieve a common goal, and everyone gathers in the community. They don't need to trust each other, and decisions are recorded and executed through encrypted technology traces. DAOs are the "type" of organization that can really go this way to get what they want. As investors, they test the waters. What does VC money from a DAO look like? Compared with traditional venture capital, what are the advantages of DAO?
Investing in DAOs allows more ideas and different perspectives to guide financing and investment strategies. In other words, investing in DAOs can be seen as a community organized around a larger mission, rather than a small group of investors organized around a topic, more idea-driven than individual-driven.
The democratic nature of DAOs allows funds to be distributed among those with different views. Because consensus and group decision-making are embedded in the DAO's formula, the investments and choices made by VCs can be guided by the DAO's collective mind, rather than a single individual.
We believe investing in DAOs can change the financing industry in the following three ways:
1. Get more investment opportunities.
2. More diversity in who controls and receives funds.
3. Improve the transparency and accountability of venture capital.
Let's dig into each question:
1. More investment and job opportunities
Until now, venture capital has been a playground for people of a certain stature. The challenge holding back VCs from becoming more diverse (and reaping higher returns) is how difficult it is for people who aren't born with huge privileges to get in the door and contribute. All paths to working at a VC firm or managing a fund require extraordinary wealth, privilege, perseverance or grit (often a combination of these factors).
Unlike traditional VCs, a VC DAO (or VDAO for short) typically consists not just of a small team, but a carefully curated community of investors, experts, enablers, advisors, and supporters through which the VDAO Access to ideas, deal flow, expertise and connections. The size and freedom of a DAO provides ample opportunity for new talent and a diverse group of people to gain exposure to the venture capital world, learn skills, and build strong networks. VDAOs typically employ no full-time staff at all, but have the flexibility to leverage and reward community contributors, expertise, and shared information.
Venture DAOs can significantly improve career opportunities in venture capital. For example, AngelDAO lists jobs and awards that new contributors can apply for. Unlike the traditional VC world, which depends a lot on where you went to college, and who in your network, Investing in The DAO is that anyone in the world can apply to work in a VC DAO, or Just get a bounty and start earning money.
No more spending years preparing for VC interviews and spending 60 hours a week traveling in order to build a reputation and network in the VC world. This means that high-quality individuals who are also parents, carers, neurodiverse, or have limited capacity to work due to health or other reasons, can be utilized in a flexible and mutually beneficial manner.
The surge in investment and career opportunities has opened up the world of venture capital and will demystify and diversify the industry.
2. More diversity in who controls and receives funds
VC DAOs also have the potential to bring more diversity in terms of control over VC funds.
Diversity in all its forms is a strong indicator and/or prerequisite for a company's success. Diversity-led startups achieve higher revenue and more than double the financial return per dollar invested, even though they receive less than half the investment of non-diversified startups. McKinsey found that in corporate performance datasets, the more women on top executive teams, the greater the performance gains: A 10 percent increase in gender diversity was associated with a 3.5 percent increase in pre-tax profits.
Despite this, 93% of VC money is controlled and invested exclusively by white men. In Europe and most advanced economies, about 90% of funding goes to men-only teams, while in the US 77% of funding goes to white founders. On closer inspection, the capital allocation looks even bleaker - just 2.6% for Black and Latinx founders. The statistics are not improving, which represents a massive failure, not just for the founders who are missing out on funding - investors, VCs and society at large are missing out on the innovation these founders could have brought.
DAOs offer an opportunity to change that.
DAOs introduce decentralized decision making, so there is no single leader at the helm. This provides an environment for assessing from multiple perspectives who can be funded. Also, the permissionless nature of DAOs means that traditional barriers to entry, such as the degree you have or who you know, are far less important than the value you bring to the DAO.
So what does VC money look like when it's controlled by a more diverse group? For The DAO, it's too early to tell, but the data shows that diversified funds are faring much better. Research shows that funds with diverse investment teams outperform on average by 20 percent, while a Harvard Business Review study found that venture capital firms that increased the number of female partners by 10 percent increased fund returns by 1.5 percent per year, with fewer exits. Profits rose 9.7%.
An early leader in the field, the LAO (a non-profit DAO organization, (LAO is a global group of Ethereum enthusiasts and experts supporting the work of Ethereum builders) sought to "build a permissionless Silicon Valley,” which means that theoretically, one does not need an Ivy League degree or a large network to receive funding. Conversely, if one’s proposal must stand up to community evaluation in order to receive funding, this is An open way to provide investment opportunities for individuals and teams that have not been funded by traditional VC firms. How many new teams, different founders will receive funding from DAOs instead of traditional VCs? We believe there will be many.
3. Improve transparency and accountability of venture capital investments
One of the values of DAOs is transparency. On the blockchain, all transactions are transparent and universally visible. Information is power, so many DAOs seek to empower their contributors by making information widely accessible.
Risk DAOs are transparent by default because, in theory, all transactions will be publicly recorded on the blockchain. Anyone can analyze the DAO's wallet address to see where the funds are going. VC DAOs will need to take greater responsibility for understanding what they invest in and why.
Another way transparency manifests itself in some investment DAOs is through the public release of white papers and governance processes. If a DAO chooses to share these documents, anyone can see exactly how the organization is run and how decisions are made. This "build in the public" ethos makes VC DAOs, and all DAOs, more accountable for their actions and choices.
Public records of proposals, team composition, and funding amounts can also give communities, stakeholders, and marginalized groups an idea of how much funding founders like themselves are receiving. It's like pay transparency, where startup founders and other VCs can look in detail at how much funding each has received, and use that to craft their pitches or build their own VC DAOs. The more information that is shared, the more diversity can be increased across the industry.
We believe that DAO venture capital is a better business model in the future. Through VC DAO, we can release VC's obsession with exclusivity, create a new form of VC for everyone, and build on the values of fairness, transparency, openness, and continuous improvement. to create real change.
Examples of VC DAOs
1. LAO: Invest in Ethereum ecosystem projects.
2. MetaCartel Ventures: An offshoot of MetaCartel, the venture capital group funds Web3 startups that use the power of encryption to make the world a better and fairer place.
3. BanklessDAO Fight Club: An affiliate of BanklessDAO that will invest in emerging Web3 projects to support bringing more than 1 billion people to Web3.
4. BitDAO: Invest in decentralized protocols.
5. PleasrDAO: Raising funds to purchase and fund culturally significant works of art.
It's early days for VC DAOs, but they're coming. are you ready? If you're a startup founder or angel investor looking to be part of a better 2030, it might be time to start looking into Venture DAOs. Or, if you work in a traditional VC, learn about VC DAOs to understand your future.
Article by Samantha Marin, Ben Hoelzl, Isla Munro
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