Venture DAO

DAO Market

DAO Treasury currently amounts to $13.4B (approx. KRW 17 trillion), per DeepDao, a research platform. Number of DAOs grew by 550x over the past 3 years, from 20 DAOs in early 2020 to 11,000 DAOs in early 2023.

Traditional VC vs Venture DAO

Venture DAO is more efficient than traditional VCs in many ways.

Traditional venture capital takes at least 2~5 months in their decision making process, and they tend to prefer later rounds of investments, as opposed to pre-seed and early-stage startups. They also put in a considerable amount of time and effort to find the appropriate, potential opportunities.

For Venture DAOs, members themselves are investors as well as general partners. Any member can propose a potential investment opportunity. Other members vote to decide whether to proceed with the opportunity, and the entire process is automatically handled by Smart Contract. Ultimate investment decision is made on a timely basis through discussion amongst members, leaving out customary processes traditional venture capitals require such as buy-side valuation, internal rate of return calculation, due diligence, drafting and marking up contracts, and etc.

Furthermore, Venture DAO has advantages in exits. Web3 companies tend to launch tokens for governance and distribute them to equity investors using the SAFE+Token Warranty. Venture DAO can sell the startups’ tokens on decentralized exchanges (DEX) or centralized exchanges (CEX) as well as sell its shares over the counter. Traditional VCs may face pressure from their LPs to recover investment funds over an extended period.

Reduced time in LP recruitment, due diligence and execution, and exit leads to accelerated cycle of investments for Venture DAOs, creating exponential opportunities for investments.

All deal information in the DAO is stored on-chain to increase transaction transparency. Anyone can verify how all investments were made and votes were conducted, making it the perfect use of blockchain technology. The DAO system will become the ideal Scorecard system, as it constantly seeks and validates new ways and has transparent collaboration processes.

Since 2018, Web3/cryptocurrency VCs/funds have grown by over 40 times, with most of them preferring investment in market proven startups. Web3 founders in the pre-seed or seed stage face difficulties raising funds and often lack sufficient human capital.

In particular, Web3 founders prefer access to Venture DAO's capital and talent pool. Venture DAO contributors are passionate about Web3 and support investment companies in their field of expertise such as research, marketing, development, design, and operations. Web3 companies can access deeper resources and networks through Venture DAOs, and this diversity in the ecosystem will lead to greater product and service innovation.

Comparison between VC and Venture DAO

	Venture DAO	Traditional VC
Decision making	As short as 2 weeks	At least 2+ months
Investment rounds	Pre-seed ~ Series A	Prefers later rounds
Screening of potential investments	Member-driven proposal and screening process	Focus on predetermined investment sectors
Minimum investment amount	Low (relatively small amounts ranging from a few thousand to tens of thousands of dollars)	High (large-scale investments, typically requiring several million dollars or more)
Deal pipeline	Massive, worldwide network Unlimited partners	Limited network 1 partner for 10 companies
Exit	Quick	Slow
Growth support	Effective allocation of talent	Limited allocation of talent