DAOs make it easy for people to pool funds over the internet. Investment DAOs are one of the most obvious and impactful uses of that unique feature of web3. Jason Levin explores how the sector is taking shape and the key actors to watch.
Investment clubs have existed long before web3, but blockchain can change these established practices. In crypto, we have investment DAOs: a decentralised group of individuals who come together to invest in onchain assets like NFTs or other assets like traditional stocks. With theses ranging from fashion NFTs to venture-style software-as-a-service firms, investment DAOs allow investors to act on collective investment decisions, providing a way for small investors to access the same types of investment opportunities that were previously only available to large institutions or wealthy individuals.
Syndicate is the tool that everyone who spends time in with investment DAOs should know. A DAO tooling startup for investment syndicates, it provides the fundamental governance infrastructure that is revolutionising the processes through which asset managers raise, manage, and deploy investment capital. “Welcome to the DAO side,” reads Syndicate’s community Twitter page — they claim that 10,000 clubs are built on their infrastructure, 10% of all DAOs (a figure which lacks independent verification).
The company, which recently raised $6m from investors including Andreesen Horowitz and Coinbase Ventures, provides tools that let users quickly spin up new DAOs to serve as onchain investment clubs. In just a few clicks, a group of friends or an established organisation can create an onchain club, optionally form a legal entity around it, and smoothly collect the required funds. Syndicate's toolbox is integrated with common web3 tools like Snapshot for voting and Gnosis. The customisable legal documentation was built in collaboration with Latham & Watkins, the law firm, and Doola, a law-tech startup that makes it easy for DAOs to set up as a legal entity.
As well as investing in onchain assets, accredited US investors can invest in offchain assets like startups or public companies. The individual clubs are governed by ERC-20 tokens (which are fungible, like stablecoins) that represent each member’s stake – and voting rights – in the club.
They brand their value proposition as the collaboration and community that they help make possible. “Invest together, win together,” calls the page for their investment club product, which counts genZ consulting and investment DAO The Symmetrical, the second fund for science-focused investment DAO Outliers, and RugDAO, the DAO of the leading web3 media group RugRadio, amongst others.
“Welcome to the DAO side”
Syndicate, however, is just the infrastructure. Whilst it provides the foundations for many of web3's most interesting DAOs, tooling is only as much as its impact. And when it comes to impact, MetaCartel Ventures and Red DAO are two of the most important investment DAOs in web3.
If the punk-rock kid from high school was a DAO, it’d be MetaCartel Ventures. But punk-rock is all grown up. A syndicate of 61 investors, including Stani Kulechov and Roneil Romberg, CEOs of Aave and Audius, respectively, MetaCartel Ventures stems from a drive to foster ecosystem-wide coordination.
MetaCartel takes a three-pronged approach in which participants can get funding, give funding as a member, or contribute to work in the DAO itself, which invests sums between $20,000 to $100,000 in web3 projects built on Ethereum. They’ve invested in DAOHaus, a no-code tool for building DAOs; The Defiant, a DeFi news outlet; the savings protocol and game PoolTogether; and Rarible, the NFT marketplace.
Their investments are directed by DAO members — which MetaCartel calls Mages — who conduct due diligence, write proposals, and fund investments. Whilst entry into the DAO is member-curated, anyone can work for the DAO and meet existing members; it is not a closed ecosystem.
MetaCartel funds projects with investments as well as grants, but argues that its network of community support is just as valuable as the capital — providing founders with advice, connections, and social capital from some of web3's leading operators and thought leaders. As they write across their website and social media presence: “if you want to go fast, go alone. If you want to go far, go together.”
Meanwhile, Red DAO is web3's answer to anyone who says crypto-natives have bad fashion taste. At 43 members, Red is smaller than MetaCartel, and with a minimum buy-in of 50 eth, has over 2,000 eth under management to invest in fashion NFTs. “A crypto investor, fashion student, 3D animator, Vogue publisher, and a web3-native attorney get together to debate the merits of a certain sneaker made of pixels,” writes Red DAO member Greta Rainbow.
The DAO launched as an offshoot of the NFT collecting DAO, Flamingo, and made headlines in September 2021 after buying Dolce & Gabbana’s blue sapphire and diamond-studded Doge Crown, which exists as a physical object and a digital asset, for 423 eth ($1.27 million at the time). Alongside these investments, the collection has grown to “hundreds of NFTs”, according to Greta, and includes Gucci Grails, fashion photography, and avatars from RTFKT, the digital sneakers studio that was acquired by Nike in 2021.
They’re not just investing in NFTs though. The DAO has written checks to The Fabricant, CYBR, Artisan, and others. And like MetaCartel, their capital is as much entry to a broader ecosystem as it is the main product. They advise projects which are “interested equally in luxury legacy brands who want to understand smart contracts and in teenagers creating with augmented reality in their bedrooms.” Members include public-facing figures like Dani Loftus and Megan Kaspar as well as investors like gmoney (who launched his own crypto-native fashion line 9dcc this summer) and Ethereum co-founder Joe Lubin.
While some may laugh about the idea of digital fashion, what many don’t realise is that the gaming skin market is already worth $40 billion per year. Already, top brands like Burberry, Gucci, Louis Vuitton, and more have entered the digital fashion market, which is only in its infancy today.
In 2020, the world was captivated by DAOs and NFTs. But when most crypto-curious people think of DAOs, they typically think of social DAOs like Friends with Benefits, the cultural society with coverage from The New Yorker to The Defiant. But as shown by the growth of investment DAOs, there is more to it than just partying with friends you made online.
Investment DAOs allow people from across the world with a shared vision to come together and help make that vision a reality. Like typical venture capital firms, each DAO has a specific thesis that they focus on. By investing both time and money, investment DAOs are at the centre of efforts to build web3’s future.
“A crypto investor, fashion student, 3D animator, Vogue publisher, and a web3-native attorney get together to debate the merits of a certain sneaker made of pixels,”
— Greta Rainbow, Red DAO
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