Talking about the market structure of investment DAO: Can everyone be a venture capitalist? How to participate?

Original source: Global Coin Research

Compilation of the original text: Bai Ze Research Institute

Throughout history, there has been an ongoing struggle to democratize financial power. The story of the financial industry is littered with examples of the power of the few over the many. From the medieval guilds of merchants who controlled trade and excluded outsiders to the 20th century Wall Street magnates who often acted as gatekeepers to wealth, the world of finance has been marked by a persistent imbalance of power. **

A new chapter has arrived, and the investment DAO (Investment DAO) has begun to take shape in recent years of development. Its goal is to democratize investing, break down the barriers of traditional finance, and empower the many, not the few. Through blockchain technology, these DAO organizations pool resources and invest collectively, providing individuals with a new, more inclusive way to invest.

In this article, we'll dive deep into the various aspects of investing in DAOs and their potential, revealing the future of decentralized, inclusive, and democratic investing.

**Why do you need to invest in DAO? **

To truly understand the revolution brought about by investing in DAOs, we must first understand their unique characteristics and benefits.

Venture Capital (VC) and Investing in DAO — Each has a unique style and serves different functions in the financial ecosystem.

VC represents the traditional investment landscape, which is characterized by centralized decision-making. The advantages of this model are fast decision-making and expert knowledge. However, the limitations of VC are obvious, as its membership is usually limited to accredited investors, excluding a large proportion of potential contributors.

Additionally, VC decisions lack the diverse insights that investing in DAOs can provide, and may overlook many opportunities in niche areas. In addition, the traditional VC model requires a significant investment of time and capital from investors and investee companies, which adds to its limitations.

Investing in DAOs represents a shift towards decentralization. Unlike traditional VC, power is not centralized, and all members can participate in voting on investment decisions. Thus, these DAO organizations leverage collective intelligence to discover promising opportunities in emerging industries.

The following figure compares the characteristics of VC and investment DAO:

**What types of investment DAO are there? **

Investing in DAOs can be categorized by their focus area.

Generalist Investment DAO (Generalist Investment DAO) can invest in various types of assets, such as tokens, startup equity, NFT, etc. The main feature of the Universal Investment DAO is its flexibility and wide range of investment opportunities.

Leading general purpose investment DAOs include:

**• Global Coin Research: **Focus on the Web3 ecosystem, and often publish research reports in the community. Well-known projects invested include Manta Network, Mysten Labs (Sui), etc.

**• Metacartel Ventures: **Focus on early stage projects in Ethereum and the wider Web3 ecosystem. In addition to investing large sums in high-profile projects, a host of smaller projects have been funded through “grants,” including Zapper, Odyssy, and others.

**• Spaceship DAO: **Focused on Web3 ecosystem startups and emerging crypto networks. Portfolio includes EigenLayer, Argus and Arcadia among others.

**• BitDAO: ** has the largest DAO treasury (approximately 2.1 billion US dollars), and has invested in EduDAO, Game 7, etc. Currently in the process of merging with the L2 network Mantle, a $200 million Mantle Ecological Investment Fund has been established to invest in high-potential projects in the Mantle ecosystem.

**• LAO: **Early project focused on Ethereum and Web3 ecosystem. Well-known projects invested in include Snapshot, POAP, ondo, NFTFi, etc.

An investment DAO that focuses on xx fields is a DAO that specializes in investing in a specific field. These DAOs leverage the collective knowledge of their members to make informed investment decisions within their chosen domain.

Examples of domain-focused investment DAOs include:

**• Seed Club Ventures: **Focus on investing in the "intersection" between Web3 and other industries, such as early projects of "Web3 + AI" and "Web3 + Social". Well-known projects invested include Lens Protocol, Stability AI, etc.

**• Layer 2D AO: ** Focus on investing in Ethereum L2 network and ecological projects, investing in Velodrome, Acre Finance, Sperax, etc.

**• ZeroDAO: ** Focus on investing in projects based on zero-knowledge proof technology, investing in Risc Zero and Lagrange.

**• BeakerDAO: **Focus on investing in decentralized science (DeSci) projects, investing in VitaDAO, LabDAO, etc.

**• Hydra Ventures: **Focus on investing in other investment DAOs. Invested in the aforementioned ZeroDAO and BeakerDAO.

**• Komorebi Collective: **The first investment DAO focused on female founders and non-binary founders.

An investment DAO focused on NFT is a DAO that specializes in investing in NFT or NFT projects. These NFTs can represent a variety of tangible and intangible items, from digital art and music to virtual real estate and even rare physical artworks.

Examples of NFT-focused investment DAOs include:

• PleasrDAO: A DAO of dozens of crypto investors who have been teaming up to buy popular high-priced NFTs.

**• PunkDAO: **Invested in early projects in the NFT field, including Lens Protocol, Argus, Tribe, etc.

**• Flamingo DAO: **Invests in early-stage projects in the NFT space.

• Fingerprint DAO: A DAO composed of artists to create and collect NFTs of well-known works of art.

These DAOs often grab headlines for their high-profile purchases of NFTs and their innovative approaches to managing them.

The game-focused investment DAO is a DAO that specializes in investing in blockchain games. Investment objects include game development companies, in-game assets and game infrastructure.

Examples of gaming-focused investment DAOs include:

**• Dark Horse DAO: **A DAO based on the digital horse racing game Red Run, which aims to acquire and manage NFT in the game to maximize revenue generation.

**• Ready Player DAO: **Invest in the game economy through asset acquisition, strategic partnership and guild development, and have invested in more than 20 blockchain game projects such as Petaverse, Pixion, and Avalon.

• Blackpool DAO: Owns and manages a range of digital assets, from items in P2E games to virtual lands in the Metaverse.

There are also geo-focused investment DAOs that focus investments based on specific geographic regions. These DAOs invest in recognizing that different regions have unique markets and opportunities.

Examples of geographically focused investment DAOs include:

**• Glimmer DAO: **Asia-focused NFT collection DAO

**• Upside DAO: **Investment DAO focused on Australian crypto projects

• Afropolitan: An investment DAO that is currently focusing on creating a "digital nation" that will enable all Africans to live affluent lives.

It's worth noting, however, that while these DAOs invest geographically, their membership is often global.

**How to participate in the current investment DAO? **

Investing in DAOs harnesses the power of decentralization and blockchain technology to create a new investment structure in which everyone can participate and participate in decision-making.

There are generally two types of participation thresholds for investing in DAOs:

• Membership fee only: Must pay a one-time fee, stake your asset (NFT) or hold a certain amount of DAO tokens. Such as Global Coin Research, Blackpool DAO, BitDAO

• **Membership Fee + Contribution: **Must pay a one-time fee and contribute to the DAO in some way. Typically, joining these DAOs has to be vetted, and some have incentives to contribute. Examples include ZeroDAO and Hydra Ventures

As a DAO member, you will participate in the research that investment projects do. You have a voice, a vote to decide whether a DAO invests in a project, and some DAOs even allow you to invest your personal capital in a project.

Some DAOs allow members to customize membership fees, the higher the membership fee, the more shares. As seen by Hydra Ventures, Seed Club Ventures and Flamingo DAO.

During their participation in the DAO, members can further increase profitability through marketing, recruiting, and other support to help the projects they have already invested in succeed.

Opportunities and challenges faced by investing in DAO

While investing in DAOs is revolutionary, it comes with its own set of challenges. After an in-depth study, we identified six key issues that, if addressed, could substantially enhance its functionality and impact.

**• Risk Management: **Like any VC, investing in DAOs is risky. But in the world of DAOs, these risks are magnified by their decentralized nature and inherent volatility in crypto markets. Therefore, a robust risk management strategy needs to be tailored for DAO.

**• Dynamic Voting Rights: ** In the current system, voting rights are static and based on token holdings. But what if we could implement a dynamic system where the size of voting power is also influenced by members' contributions to the DAO? Successful investment advice or active participation in governance can give you more say in DAO decisions.

• Cross-DAO Reputation System: Imagine a reputation system that operates across multiple DAOs, incentivizing good behavior and discouraging malicious behavior. Members can earn reputation points for positive contributions and lose reputation points for negative behavior. It's like your credit score in the DAO world.

**• DAO Incubator: **Experienced DAO members can provide guidance and support to new DAOs, helping them navigate common challenges and avoid potential pitfalls.

• DAO-to-DAO Services: DAOs can develop services that are offered to other DAOs, from technical services to governance consulting. This helps create a vibrant DAO ecosystem that supports each other and grows together.

• DAO Legal Toolkit: A resource kit containing legal document templates, guidance on relevant laws and regulations, and "How to Run an Investment DAO" may be beneficial to DAO developers, which may lead to a surge in investment DAOs

The exploration of investment DAO has opened up a new field in the financial world. This journey, while still full of unknowns, has the potential to revolutionize the investing landscape. The outlook is bright, and we're excited about it.

risk warning:

The above items and opinions should not constitute investment advice, DYOR. According to the "Notice on Further Preventing and Dealing with the Risk of Hype in Virtual Currency Transactions" issued by the central bank and other departments, the content of this article is only for information sharing, and does not promote or endorse any operation and investment behavior. Participate in any illegal financial practice.