Revealing the secrets of investing in DAO and investing in first-line projects

Competitiveness comes from a sufficiently diversified network and the knowledge of leading the market in a specific field.

In the previous article, we discussed the characteristics and structure of investing in DAO and the importance of building a member network. This article will provide an in-depth breakdown of the daily operations of investing in DAO. Again: there are many models for investing in DAO, and the content of this article cannot cover all models on the market. And even if the organizational model is similar, the specific operational details will be different for each DAO.

As a DAO, how do you make investments and how do you advance specific matters?

This is a question I have been asked 100% of the time in past interactions.

We usually rely on 3 tools. 1. Discord, used for daily communication. 2. Investment portal, this is a customized portal that lists all project opportunities and displays them by stage (New, Active, DD, Voting, Closing, Archive). It is convenient for members who don’t have time to read discord to quickly understand current project opportunities and investment status. The Portal also includes on-chain voting, net worth statistics, fund changes, voting statistics and other functions. 3. Zoom, used for deal calls and weekly meetings.

When a new investment opportunity arises, everyone will discuss it on Discord for several days. If you are not interested, just pass. If everyone is still interested, we will arrange an online meeting with the founder, and all members can participate. There will be 2-3 days of discussion after the meeting, and DD will also occur during this time. If there are no significant differences after the discussion, a preliminary vote will be held on Discord to decide whether to invest and how much. Once consensus is reached, the next step is to initiate a formal vote on the blockchain. After the vote is passed, funds can be unlocked and related paperwork can be carried out.

The entire process is flat and relatively efficient, and can respond quickly to market opportunities. Of course, the saying that people talk too much also applies. If most people like a project, it will be very efficient. If most people don’t like it, it will be very efficient. However, if there are major differences of opinion, it means that there will be "quarrels" for a long time, and in the end, consensus will often not be reached, and some opportunities will be missed. But to be honest, I quite like the process of "noisy". It is a kind of collision of wisdom, and I often benefit from it.

The daily work of an investment institution is certainly not just about discussing and making decisions. A simple breakdown includes: Fundraising, investment research, looking for investment opportunities, due diligence, post-investment, and exit.

Fundraising - As covered in previous articles, investment in DAO attracts members through targeted invitations, and each member Funds must be invested, so when you build a network of members, you also complete the fundraising. In order to ensure that voting rights are not too concentrated, there are strict limits on the investment caps of individual members, which means that the total assets under management (AUM) of the DAO are not large.

The AUM is not large, and the checksize of a single project will naturally not be too large. If you encounter a project that everyone is optimistic about, but the minimum investment amount exceeds the acceptable range, we have a process to quickly launch an SPV. The DAO will participate as an investor in the SPV, while other funds will be supplemented by additional contributions from members. Most members have the additional funds and interest to participate in this type of investment. In this way, we are able to flexibly respond to various investment opportunities and effectively expand the investment scope and impact even if the AUM is relatively small.

Investment Research - There is no systematic workflow. However, DAO members all have good research capabilities and have unique understandings in their respective professional fields. There are often various discussions in discord on a daily basis, which can be regarded as a non-traditional form of investment research. Although not systematic, it covers a wide range of topics and in-depth analysis. For specific directions, sometimes we organize focused discussions, ranging from technical research to industry development trends, to analysis of various players in the track. This method relies on everyone's professional knowledge and active participation, and it also has good results.

Looking for project opportunities - DAO members are mainly founders and investors from different fields, and a considerable proportion of them are deeply involved in Silicon Valley is the center of this AI wave. This background allows us to be exposed to many projects. So far, almost all investment projects have been obtained through personal networks. However, relying solely on personal networks has limitations in systematicness and coverage.

As the investment portfolio gradually takes shape, we have gradually established a certain reputation among the AI ​​founder circle, and the number of proactive projects has increased significantly. For areas that are particularly promising, everyone will continue to express their opinions and investment theories to express their opinions and attract more investment opportunities. This is a future plan that has not yet been implemented.

There are often projects that everyone is particularly interested in but no one knows, and they will take the initiative to contact them. However, this kind of project is usually in the subsequent rounds and is often more expensive. We will only deploy a small amount of funds on such projects.

Of course you can find projects that are only half completed. Popular projects are all oversubscribed and investors are very picky. Most of the founders of the AI ​​projects we are currently investing in have no idea what a DAO is, but after talking about it, they are very willing to leave some quota. This is because during the communication process, the other party can recognize the professionalism and diverse resources and background of this group, which is attractive to founders.

Due Diligence - Similar to investment research, it is conducted through collective discussion and feedback.

Post-investment management - There is an internal AI tool used to track the public information of all invested projects and provide weekly reports. In addition to tracking information, each invested project has a designated member responsible for communicating with the team. Our strategy is to try not to annoy the founders, and only when the team needs resource support or encounters obvious problems, we will actively step in to provide help. Since each member has their own areas of expertise and network resources, this allows us to form a strong EIR-like (Entrepreneur-in-Residence) team. Relying on such resources, we have effectively helped founders solve problems.

Exit execution - There are some basic strategies that everyone has discussed and agreed on, but it is still in the early stages of the investment period and there is no exit practice yet. .  

In addition to direct investment-related work, there are also some spontaneously formed virtual groups responsible for media releases, ecological cooperation, and organizing annual gatherings of Portfolio and Friends wait.

I will write about it first in this issue, and I will probably write another article later to talk about the challenges I have encountered, as well as lesson and learn.