This Thesis was created by André J Guardia, rising senior at Illinois Institute of Technology. I’m a Dorm Room Fund BIT Fellow, Republic VFA and GenZ Scout. This thesis was created during the summer of 2022 for my Internship @Decasonic.

There is a massive opportunity to invest in service-oriented DAOs. Service DAOs are set to revolutionize the way individual service providers organize and complete tasks. There is a clear value proposition for individual recruiters, consultants, marketing experts, attorneys and market researchers, as the middleman is being removed from the equation (by introducing the Decentralized Autonomous Organization component), their earning potential dramatically increases.

“DAO (pronounced dow) is a new kind of organizational structure, built with blockchain technology, that is often described as a sort of crypto co-op. (Or, alternatively, as a “financial flash mob” or a “group chat with a bank account.”)” - New York Times

DAO stands for Decentralized Autonomous Organization. As such, it is the blockchain equivalent of a company, which is formed around a vision and mission, has key activities to perform and employs peers to complete said activities. DAOs are formed by groups of individuals rallied around a common goal, and powered by the innovation of smart contracts.

Before we understand the real meaning of what DAOs can do for Venture Capital, we must understand the technology behind them. Let’s break down the definitions:

Blockchain: “a type of shared database that differs from a typical database in the way that it stores information; blockchains store data in blocks that are then linked together via cryptography.” -Investopedia

Ethereum Blockchain: “At its core, Ethereum is a decentralized global software platform powered by blockchain technology. It is most commonly known for its native cryptocurrency, ether, or ETH. Ethereum can be used by anyone to create any secured digital technology they can think of. It has a token designed for use in the blockchain network, but it can also be used by participants as a method to pay for work done on the blockchain.” -Investopedia

Smart Contracts: “programs stored on a blockchain that run when predetermined conditions are met. They typically are used to automate the execution of an agreement so that all participants can be immediately certain of the outcome, without any intermediary’s involvement or time loss.” -IBM

Governance Token: ”Governance tokens are the first cryptocurrencies to represent voting on a blockchain by distributing the power of making major platform decisions from a centralized structure to an entire community. This is because token holders are not only users, but also owners of the protocol.” -Decrypt

Here’s the basics:

• The rules for the functioning of DAOs are coded into a smart contracts, often deployed on the Ethereum Blockchain.

• DAOs members communicate through invite-only chats on centralized platforms like Discord and Telegram.

• When an individual purchases a governance token for a particular DAO, their liquidity is rewarded with voting rights in key decisions the DAO must partake in.

• The members then enforce their voting rights through the governance token on platforms like Snapshot.

Key Takeaway - Tokenholders get to directly participate in the decision-making process by purchasing governance tokens.

Exhibit 1: Market, Growth Rate and AUM

• In 2021, DAOs surprassed 1.6 million in membership, up 130x from 13k on Jan 2021 according to DeepDao

• As of June 2022, there are approximately 3.6 M Governance Token holders , with a 1.9M increase just last month.

• As of June 2022, there are approximately 673.5k Active voters and proposal makers, with a 54.5k increase in the past month

• Incubation DAOs started to emerge, providing further value add to investment DAOs. Through Incubation DAOs, ideation programs are held and projects are pre-launched.

Based on these key insights and the Assets Under Management for each one of these sectors (in descending order), it is clear to see that DAOs have seen a spike in both interest and funding, and according to the sources cited in the AUM Table, it seems like this growth is not slowing down. Venture dollars are still flowing to blockchain projects at increasing rates and token holders are increasing by the millions, even in the current bear market lanscape (as of June 2022).

Service DAOs have the potential to further disrupt value add systems in web3. As projects hire service DAOs to perform key operational activities, in exchange for a % of the project’s token supply/equity or direct payment. According to 1kx, we can expect improved services for lowered pricing, thus improving upon the efficiency and unit economics of existing offerings.

If Service DAOs can improve upon the efficiency and unit economics of the services they are providing to small protocols, could they work with bigger clients?

Exhibit 2: Rough market sizing and growth rates for online business development services

The industries presented above are focused on providing intangible services to other firms through an internet connection. Given Service DAOs can greatly improve the services provided to the firms at better efficiency, Service DAOs are set to revolutionize the way individual service providers organize and complete tasks. There is a clear value proposition for individual recruiters, consultants, marketing experts, attorneys and market researchers, as the middleman is being removed from the equation (by introducing the Decentralized Autonomous Organization component), their earning potential dramatically increases.

• DxDAO - Type: Incubation - Members: 529

• 1Hive - Type: Incubation - Members: 19

• Strider DAO - Type: Incubation, Game Developer - Members: 931

• Song Camp - Type: Incubation, Record Label - Members: 3319

• YGG - Type: Incubation, Game Developer - Members: 62545

• Macro DAO - Type: Recruiting, Auditing - Members: 597

It is important to note that the early adopters of these technologies will be web3 - native firms in search for recruitment, consulting, legal and market research services. As these DAOs scale to greater numbers of members and bigger treasuries, bigger clients will begin to take notice.

• Poor infrastructure: According to Signvm, given the decentralized nature of DAOs, they often lack the right tools to engage with their communities in an efficient manner. Many DAOs have to design their tools and infrastructure. There is a lot of work to be done with existing infrastructure providers. Solutions are starting to take shape in the form of:

  • SyndicateDAO

  • Snapdragon

  • Aragon

  • DAOstack

  • DAOhaus

• Recruitment and Retention Risk: there is great issue with proper recruitment practices. DAOs must find ways to ensure and enforece proper recruitment objectives are met, so the right peers join the community. The successful DAOs of the future will manage this risk by imposing well-designed, balanced recruitment and incentive models. This must be done to ensure the most active peers are the ones being rewarded the most, thus increasing retention.

• Complex DAO Governance Schemes: there is great risk of overcomplication in organizational structures. According to Layer3, as DAOs scale, their governance structures are getting increasingly complex. This is a factor that, in conjunction with poor infrastructure, will significantly hinder the growth of the Investment DAO sector.

• Legal Compliance: Given DAOs are purely decentralized without a particular domicile, the laws governing them are unclear. DAOs are currently battling with regulatory issues such as:

Given the problems presented above, it is clear that the Service DAOs that will succeed in the long term have most if not all of the following traits:

• Improved Infrastructure: Given current DAOs are at most building their own infrastructure to operate, the user experience can more often than not be clunky and un-interactive. The successful DAOs of the future willl be characterized by the simplest UI possible, to maximize tokenholder engagement and thus improve the DAOs outcomes. This problem is currently being addressed by DAOs like SyndicateDAO, DAOhaus, etc.

• Proper Incentive Mechanism Design: Directly addressing free-rider, retention and recruitment problems. Further research can be done to design a proper inventive mechanism for future DAOs.

• Simplified DAO governance: As true as it is with any other emerging technology, they key to mass adoption is simpllicity. The future winners in the Investment, Incubation and Service DAO space will be characterized by their ease of governance and eas e of onboarding new members.

• Full Legal Compliance: As with most emerging technologies, there are regulatory hurdles that must be maneuvered around if DAOs are to expand in a true global capacity. The future winners in this space will be those who are legally compliant, and are legally allowed to own and operate both on-chain and off-chain assets.

• Investment DAOs (1st Gen) were the first major use case of DAOs, and initiated a massive disruption in the Service Economy.

• Incubation DAOs followed the development of Investment DAOs (2nd Gen), with improved community dynamics and a more solid value addition to projects they invested in.

• Service DAOs (3rd Gen) are set to profoundly disrupt the VC service offer, with the potential to expand their improved efficiency and enhanced unit economics to major services markets

• The initial markets set to be disrupted by widely scalable Service DAOs are:

  • Online Recruitment

  • Online Management Consulting

  • Online Marketing Services

  • Online Legal Services

  • Online Market Research Services

• There is a clear value proposition for individual recruiters, consultants, marketing experts, attorneys and market researchers, as the middleman is being removed from the equation, earning potential is set to dramatically increase. Thus driving mass adoption

• For DAOs to reach their full potential, they must directly address the following issues

  • Poor Infrastructure

  • Recruitment and Retention Risk

  • Complex Governance Schemes

  • Legal Compliance

1. Connect with me on Twitter

2. Connect with me on LinkedIn

3. Subscribe to my mirror.xyz newsletter

4. Read the Disclaimer below

This Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained on this site constitutes a solicitation, recommendation, endorsement, or offer by me or any third party service provider to buy or sell any securities or other financial instruments in this or in in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

Go-to-Market in Web3: New Mindsets, Tactics, Metrics

Frameworks for thinking about web3 go-to-market strategy, community building, organizational structure, and token economics.

future.com

404 - Page not found

The page you are looking for doesn’t exist or has been moved.

www.forthewin.ventures

New Crypto Venture Fund Raises $125 Million With Plan To Become A DAO In 2025

The fund, named dao5, will invest in seed and pre-seed stage protocols and companies across Layer 1 infrastructure, DeFi, gaming and other verticals. But its plan to become a DAO still lacks a firm roadmap.

www.forbes.com

Top VC Crypto Investment Funds | Crowdcreate

If you’re a cryptocurrency investor that hasn’t been listening to podcasts, then you’re absolutely doing it wrong. Podcasts are a treasure trove of information that can not only provide lucrative next steps, but can explain what you are investing in and why. These best crypto investment funds are th…

crowdcreate.us

Crypto venture capital firms see surging assets under management

Filings with the SEC revealed venture capital firms focused on crypto such as Paradigm, Andreessen Horowitz, Sequoia Capital and others have billions in assets under management.

cointelegraph.com

Unbundling the unit economics of venture capital via DAOs

Service DAOs, Incubation DAOs, Investment DAOs

medium.com

Will DAOs Replace Crypto Venture Capital?

Amid backlash over venture capital firms, decentralized autonomous organizations are emerging as a community-bootstrapped way to fund crypto projects.

www.coindesk.com

Adapt or die: Venture capital vs. crypto, blockchain, DAOs and Web 3.0

Web 3.0 will enable innovative ways for people to pool capital that goes way beyond the rigid structures of the current venture capital landscape.

cointelegraph.com

DAOs: An Alternative to Venture Capital | Ledger

DAO protocols offer a vehicle for community investment, without relinquishing shares to one major corporation.

www.ledger.com

The Era of Legally Compliant DAOs

OpenLaw releases its first vertical OpenLaw DAO to enable the creation and deployment of “limited liability DAOs” in minutes. Creating a…

medium.com

This Thesis was created by André J Guardia, rising senior at Illinois Institute of Technology. I’m a Dorm Room Fund BIT Fellow, Republic VFA and GenZ Scout. This thesis was created during the summer of 2022 for my Internship @Decasonic.

There is a massive opportunity to invest in service-oriented DAOs. Service DAOs are set to revolutionize the way individual service providers organize and complete tasks. There is a clear value proposition for individual recruiters, consultants, marketing experts, attorneys and market researchers, as the middleman is being removed from the equation (by introducing the Decentralized Autonomous Organization component), their earning potential dramatically increases.

“DAO (pronounced dow) is a new kind of organizational structure, built with blockchain technology, that is often described as a sort of crypto co-op. (Or, alternatively, as a “financial flash mob” or a “group chat with a bank account.”)” - New York Times

DAO stands for Decentralized Autonomous Organization. As such, it is the blockchain equivalent of a company, which is formed around a vision and mission, has key activities to perform and employs peers to complete said activities. DAOs are formed by groups of individuals rallied around a common goal, and powered by the innovation of smart contracts.

Before we understand the real meaning of what DAOs can do for Venture Capital, we must understand the technology behind them. Let’s break down the definitions:

Blockchain: “a type of shared database that differs from a typical database in the way that it stores information; blockchains store data in blocks that are then linked together via cryptography.” -Investopedia

Ethereum Blockchain: “At its core, Ethereum is a decentralized global software platform powered by blockchain technology. It is most commonly known for its native cryptocurrency, ether, or ETH. Ethereum can be used by anyone to create any secured digital technology they can think of. It has a token designed for use in the blockchain network, but it can also be used by participants as a method to pay for work done on the blockchain.” -Investopedia

Smart Contracts: “programs stored on a blockchain that run when predetermined conditions are met. They typically are used to automate the execution of an agreement so that all participants can be immediately certain of the outcome, without any intermediary’s involvement or time loss.” -IBM

Governance Token: ”Governance tokens are the first cryptocurrencies to represent voting on a blockchain by distributing the power of making major platform decisions from a centralized structure to an entire community. This is because token holders are not only users, but also owners of the protocol.” -Decrypt

Here’s the basics:

• The rules for the functioning of DAOs are coded into a smart contracts, often deployed on the Ethereum Blockchain.

• DAOs members communicate through invite-only chats on centralized platforms like Discord and Telegram.

• When an individual purchases a governance token for a particular DAO, their liquidity is rewarded with voting rights in key decisions the DAO must partake in.

• The members then enforce their voting rights through the governance token on platforms like Snapshot.

Key Takeaway - Tokenholders get to directly participate in the decision-making process by purchasing governance tokens.

Exhibit 1: Market, Growth Rate and AUM

• In 2021, DAOs surprassed 1.6 million in membership, up 130x from 13k on Jan 2021 according to DeepDao

• As of June 2022, there are approximately 3.6 M Governance Token holders , with a 1.9M increase just last month.

• As of June 2022, there are approximately 673.5k Active voters and proposal makers, with a 54.5k increase in the past month

• Incubation DAOs started to emerge, providing further value add to investment DAOs. Through Incubation DAOs, ideation programs are held and projects are pre-launched.

Based on these key insights and the Assets Under Management for each one of these sectors (in descending order), it is clear to see that DAOs have seen a spike in both interest and funding, and according to the sources cited in the AUM Table, it seems like this growth is not slowing down. Venture dollars are still flowing to blockchain projects at increasing rates and token holders are increasing by the millions, even in the current bear market lanscape (as of June 2022).

Service DAOs have the potential to further disrupt value add systems in web3. As projects hire service DAOs to perform key operational activities, in exchange for a % of the project’s token supply/equity or direct payment. According to 1kx, we can expect improved services for lowered pricing, thus improving upon the efficiency and unit economics of existing offerings.

If Service DAOs can improve upon the efficiency and unit economics of the services they are providing to small protocols, could they work with bigger clients?

Exhibit 2: Rough market sizing and growth rates for online business development services

The industries presented above are focused on providing intangible services to other firms through an internet connection. Given Service DAOs can greatly improve the services provided to the firms at better efficiency, Service DAOs are set to revolutionize the way individual service providers organize and complete tasks. There is a clear value proposition for individual recruiters, consultants, marketing experts, attorneys and market researchers, as the middleman is being removed from the equation (by introducing the Decentralized Autonomous Organization component), their earning potential dramatically increases.

• DxDAO - Type: Incubation - Members: 529

• 1Hive - Type: Incubation - Members: 19

• Strider DAO - Type: Incubation, Game Developer - Members: 931

• Song Camp - Type: Incubation, Record Label - Members: 3319

• YGG - Type: Incubation, Game Developer - Members: 62545

• Macro DAO - Type: Recruiting, Auditing - Members: 597

It is important to note that the early adopters of these technologies will be web3 - native firms in search for recruitment, consulting, legal and market research services. As these DAOs scale to greater numbers of members and bigger treasuries, bigger clients will begin to take notice.

• Poor infrastructure: According to Signvm, given the decentralized nature of DAOs, they often lack the right tools to engage with their communities in an efficient manner. Many DAOs have to design their tools and infrastructure. There is a lot of work to be done with existing infrastructure providers. Solutions are starting to take shape in the form of:

  • SyndicateDAO

  • Snapdragon

  • Aragon

  • DAOstack

  • DAOhaus

• Recruitment and Retention Risk: there is great issue with proper recruitment practices. DAOs must find ways to ensure and enforece proper recruitment objectives are met, so the right peers join the community. The successful DAOs of the future will manage this risk by imposing well-designed, balanced recruitment and incentive models. This must be done to ensure the most active peers are the ones being rewarded the most, thus increasing retention.

• Complex DAO Governance Schemes: there is great risk of overcomplication in organizational structures. According to Layer3, as DAOs scale, their governance structures are getting increasingly complex. This is a factor that, in conjunction with poor infrastructure, will significantly hinder the growth of the Investment DAO sector.

• Legal Compliance: Given DAOs are purely decentralized without a particular domicile, the laws governing them are unclear. DAOs are currently battling with regulatory issues such as:

Given the problems presented above, it is clear that the Service DAOs that will succeed in the long term have most if not all of the following traits:

• Improved Infrastructure: Given current DAOs are at most building their own infrastructure to operate, the user experience can more often than not be clunky and un-interactive. The successful DAOs of the future willl be characterized by the simplest UI possible, to maximize tokenholder engagement and thus improve the DAOs outcomes. This problem is currently being addressed by DAOs like SyndicateDAO, DAOhaus, etc.

• Proper Incentive Mechanism Design: Directly addressing free-rider, retention and recruitment problems. Further research can be done to design a proper inventive mechanism for future DAOs.

• Simplified DAO governance: As true as it is with any other emerging technology, they key to mass adoption is simpllicity. The future winners in the Investment, Incubation and Service DAO space will be characterized by their ease of governance and eas e of onboarding new members.

• Full Legal Compliance: As with most emerging technologies, there are regulatory hurdles that must be maneuvered around if DAOs are to expand in a true global capacity. The future winners in this space will be those who are legally compliant, and are legally allowed to own and operate both on-chain and off-chain assets.

• Investment DAOs (1st Gen) were the first major use case of DAOs, and initiated a massive disruption in the Service Economy.

• Incubation DAOs followed the development of Investment DAOs (2nd Gen), with improved community dynamics and a more solid value addition to projects they invested in.

• Service DAOs (3rd Gen) are set to profoundly disrupt the VC service offer, with the potential to expand their improved efficiency and enhanced unit economics to major services markets

• The initial markets set to be disrupted by widely scalable Service DAOs are:

  • Online Recruitment

  • Online Management Consulting

  • Online Marketing Services

  • Online Legal Services

  • Online Market Research Services

• There is a clear value proposition for individual recruiters, consultants, marketing experts, attorneys and market researchers, as the middleman is being removed from the equation, earning potential is set to dramatically increase. Thus driving mass adoption

• For DAOs to reach their full potential, they must directly address the following issues

  • Poor Infrastructure

  • Recruitment and Retention Risk

  • Complex Governance Schemes

  • Legal Compliance

1. Connect with me on Twitter

2. Connect with me on LinkedIn

3. Subscribe to my mirror.xyz newsletter

4. Read the Disclaimer below

This Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained on this site constitutes a solicitation, recommendation, endorsement, or offer by me or any third party service provider to buy or sell any securities or other financial instruments in this or in in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

Go-to-Market in Web3: New Mindsets, Tactics, Metrics

Frameworks for thinking about web3 go-to-market strategy, community building, organizational structure, and token economics.

future.com

404 - Page not found

The page you are looking for doesn’t exist or has been moved.

www.forthewin.ventures

New Crypto Venture Fund Raises $125 Million With Plan To Become A DAO In 2025

The fund, named dao5, will invest in seed and pre-seed stage protocols and companies across Layer 1 infrastructure, DeFi, gaming and other verticals. But its plan to become a DAO still lacks a firm roadmap.

www.forbes.com

Top VC Crypto Investment Funds | Crowdcreate

If you’re a cryptocurrency investor that hasn’t been listening to podcasts, then you’re absolutely doing it wrong. Podcasts are a treasure trove of information that can not only provide lucrative next steps, but can explain what you are investing in and why. These best crypto investment funds are th…

crowdcreate.us

Crypto venture capital firms see surging assets under management

Filings with the SEC revealed venture capital firms focused on crypto such as Paradigm, Andreessen Horowitz, Sequoia Capital and others have billions in assets under management.

cointelegraph.com

Unbundling the unit economics of venture capital via DAOs

Service DAOs, Incubation DAOs, Investment DAOs

medium.com

Will DAOs Replace Crypto Venture Capital?

Amid backlash over venture capital firms, decentralized autonomous organizations are emerging as a community-bootstrapped way to fund crypto projects.

www.coindesk.com

Adapt or die: Venture capital vs. crypto, blockchain, DAOs and Web 3.0

Web 3.0 will enable innovative ways for people to pool capital that goes way beyond the rigid structures of the current venture capital landscape.

cointelegraph.com

DAOs: An Alternative to Venture Capital | Ledger

DAO protocols offer a vehicle for community investment, without relinquishing shares to one major corporation.

www.ledger.com

The Era of Legally Compliant DAOs

OpenLaw releases its first vertical OpenLaw DAO to enable the creation and deployment of “limited liability DAOs” in minutes. Creating a…

medium.com