Venture DAOs and VCs: Why they’re not at odds

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Hello reader,

In 2021, “non-fungible tokens” (NFTs) first entered my vocabulary. As 2022 gets well underway and interest in Web3 services rises, I’ve learned a new term: “decentralized autonomous organization” (DAO).

According to Wikipedia, DAOs are “organizations represented by rules encoded as a computer program that is transparent, controlled by the organization members, and not influenced by a central government.”

DAOs have certainly been under the spotlight in recent months. Venture DAOs – where investment decisions and assets are managed by all members of the organization instead of just by a small team of professionals – are popping up, and they could change the way venture funding works in the road ahead.

Today we look at:

• Why VCs and venture DAOs could be a match made in heaven
• An Indonesian cloud kitchen startup that won’t be going hungry
• Other newsy highlights such as Swiggy’s investment in a bike-taxi firm and Coins.ph’s new CEO

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Partners in paradise

Image credit: Timmy Loen

As crypto fever sweeps over global venture capital firms, DAOs have been making waves. But what’s the deal with DAOs and where do they stand in the larger story of venture capital? Let’s take a closer look.

• The good: Venture DAOs have several advantages over traditional VC firms. Raising funds from venture DAOs, for example, often comes with lower requirements, and the use of smart contracts streamlines the process significantly. Fundraising via DAOs is also regarded as more transparent than conventional rounds, and the community element involved with DAOs is a key benefit.

• The not so good: However, it’s not all sunshine and rainbows. The origins of funds raised from DAOs could be questionable if proper know-your-customer processes aren’t in place. Traditional VC firms also have established operational capabilities and offer portfolio startups full-time support, while members of venture DAOs tend to have varying levels of commitment and expertise. Crypto scams are another area of concern, as well as the specter of regulatory risk that hangs over DAOs.

• The potential: It’s not necessarily a case of venture DAOs versus VCs. There’s plenty of potential for the two to be complementary. Traditional VCs can benefit from the greater efficiency and large networks that venture DAOs offer, and partnering with VCs might also help venture DAOs find the right structure and comply with regulations, among other potential upsides.

Read more: Venture DAOs and VCs: a match made in heaven

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