Down the Venture DAO Rabbit Hole

Published in

DeepDAO

4 min readSep 20, 2021

I’ve just fallen into the rabbit hole of researching various VentureDAO projects. Below are my observations.

For context, in 2019/2020, my business partner and I created a thesis-driven crypto portfolio that now includes dozens of the top 100 tokens, with exposure to L1s, L2s, DeFi, gaming, governance, glue and enterprise themes. We didn’t get everything right (we still don’t have an index-based approach to NFTs), but captured enough alpha to nail our investment thesis (i.e. allocate to a medium/large cap portfolio like a tech angel, such that several investments can “return the fund”).

Keeping on top of 100+ crypto projects is time consuming at best and irresponsible at worst. We would like to allocate to the next wave of crypto micro-caps in a capital- and time- efficient manner. Thus, allocating our capital to DAOs that manage assets like an angel or VC investor appears to satisfy this requirement in an efficient way by 1) crowdsourcing/filtering ideas, 2) going broad, and 3) simplifying asset management.

There are three distinct Venture DAO models: Pay-for-Access, Funds, and Secret Societies.

Pay-for-Access VentureDAOs

In this model, you buy X governance tokens and have access to Y% of an “exclusive” deal — these are often initial token offerings or some tranche of a token at discount. Examples include the DuckDAO and the CSPDAO.

Pros: curated deal flow — these DAOs source and filter for interesting projects, which satisfies the time-efficiency requirement. Cons: possible change in deal flow quality over time, questionable long term tokenomics of the DAO governance token, and you still have to allocate/manage underlying investments. Deal size may also be constrained unless you are one of the larger holders of the DAO’s governance token.

VentureDAO Funds

In this model, you contribute some collateral (often ETH or BTC) for a pro rata share of the DAO’s investments. The DAO then invests into new projects and creates rules for asset distribution in various circumstances — rage quitting, dissolution of fund, etc. Examples here include TheLAO and Stacker Ventures.

Pro: your capital gets pooled and deployed across a number of underlying projects, satisfying the capital- and time-efficiency requirements. Cons: many of the heavy hitting, pre-funded VentureDAOs have large buy-ins (>50 ETH) and already capped at 100 investors to keep the SEC happy with 506b exemptions

VentureDAO Secret Societies

These are groups of individuals across all aspects of crypto. They range from open to opaque to closed-to-outsiders. For example, you can participate in the Bacon DAO’s Discord while you probably need to know someone at MetaCartel Ventures to get a seat at the table.

Pros: if you’re in the club, excellent! Contribute, learn & watch numbah go up. Cons: It takes work, capital and networking to get/stay in the club, and the heavier hitting DAOs may be closed at this point.

~~~~~~~

Other notes on VentureDAOs

Some VentureDAO projects have a fund model AND yield farming model. You can earn extra token yield by staking capital with the fund (see Stacker Ventures). Aside from possible SEC-avoidance due to diversification away from unregistered securities, this approach seems to mix objectives and divide focus.

Secondary markets for VentureDAO tokens are thin at best and discourage HODLing. But what else are you going to do if you need liquidity or want to buy in after the DAO’s offering is closed?

The legal side: there is a spectrum of regulatory compliance which influences the VentureDAO landscape. MetaCartel Ventures has graciously open sourced their legal docs and certainly falls into the “ready for the SEC” compliance, which ain’t easy

For the open (i.e. publicly available) VentureDAOs, transparency should be easily visible: what projects are in the DAO’s treasury? what is my share? what are the token addresses, etc? If you can’t find this info, be careful!

Data and Venture DAOs

Just like elsewhere, it’s tough to cut through the crypto Twitter pump and shill noise. Cheers to Deep DAO for their excellent dashboard with real data. That said, the number of DAOs is increasing quickly, so it may be possible that they are constantly seeking to add the long tail of DAOs to their dataset.

For example, Deep DAO maintains a dashboard for MetaCartel Ventures, which tracks total assets in the treasury, asset flows, governance voting and total members. MetaCartel is well-funded, with almost 5k ETH and $3.9MM in USDC in their treasury at the time of writing. MetaCartel’s voting data reveals that the DAO is also becoming less-engaged over time (perhaps since they have more established policies, procedures, and customs). Great context to get a quick overview.