Investment DAO, venture capital club on Web3?

From the dawn of time, the human race has emphasized the need for group decision making, and collective power. From the time of the hunter-gatherers, it was quickly realized that the knowledge of one would not suffice to keep people safe. It took the knowledge of different people and their different expertises and experience for these societies to have a broader understanding of the world and environment around them.

In general, as renowned American entrepreneur and author Keith Ferrazi said aptly, “Power, today, comes from sharing information, not withholding it.” It is with this sentiment that investment clubs thrive, where groups of individuals are able to make collective decisions based on their shared knowledge and expertise. With the diversified scope of understanding, investment clubs are able to make more informed choices in investment decisions. How is investment club related to investment DAO? Read on.

What is an Investment DAO and how do they work?

Investment clubs have now moved into the web3 space with Investment DAO’s, which takes this concept and decentralizes it. Instead of these decisions being made by a small group of individuals, Investment DAO’s scale these processes up, allowing a vast number of people to make decisions in an efficient manner. The matter is simple: form a group of individuals willing to pool money, find and propose investment options, and collectively vote on said options.

These investment options can range from individual stocks, funds, NFT’s, cryptocurrency, layer-1 companies or whatever the DAO decides upon. Monitoring the performance of the funds are up to each organization, and profits will be distributed through staking or airdrops. Other forms of DAO’s, like Collector or Media DAO’s that don’t put profits as their main goals, may use their liquidity pools simply as a manner to participate in the DAO. However, Investment DAOs’ focus is majoritively on profits, thus their liquidity pools and native tokens are especially important.

This access to liquidity is what differentiates Investment DAO’s from Investment Clubs, where liquidity can be an issue and major barrier to entry. These Investment DAO’s can issue tokens which are normally tied to the underlying stocks or investment options, which are then able to be sold via different exchanges.

In Investment Clubs, decisions can be difficult to make as they are not decentralized, and it takes time and effort in order to agree on ideas for investment options, while this problem is alleviated with Investment DAO’s.

Another similar type of DAO is collector DAO. Read our “What is Collector DAO?” article

DAO Landscape created by Cooopahtroopa

How did Investment DAO’s start?

While the origins of the first investment DAO is unsure, there is a wide history of a different, but similar DAO – Venture Capital DAOs. VC DAO’s and Investment DAO’s differ slightly in their methodologies and goals, however Investment DAO’s got their start from VC’s take on the web3 space. Founded in 2018, MetaCartel Ventures is noted to be the first web3 take on Venture Capital DAO’s or Investment style DAO’s, and was created in order to solve issues surrounding the meta-transactions with cryptocurrency.

The inception of cryptocurrency started with major players like ETH, which MetaCartel Ventures wanted to experiment with. Though the company initially started out trying to create dApps among other things, they then evolved into a fund for projects to test out the use cases of ETH. They were able to raise over 1000 ETH that was given to projects to fund their applications of the coin when the crypto world was still up and coming. This is where it gained its initial investor base that still are ‘Mages’ in the DAO today!d

Although they pivoted, it was from there that the structure further exploded to other crypto players. In many twitter profiles, it is not difficult to find someone tagged their own venture capital DAO that would like to support missions like “metaverse development”, “NFT artwork”, “rocket building”, “medicine invention”, “minorities in business”. However, most of them don’t get traction nor capital they need to kick start their VC journey.

BitDAO website. Ref

What defines a top investment DAO?

After cryptocurrency began to take the world by storm, and more DAO’s started popping up, so did investment DAO’s. Two of the top Investment DAO examples are BitDAO (read our article on them here!) and MakerDAO, though many smaller ones with different focuses exist.

Building a top investment DAO is almost the same as building a top investment club or company. What’s the same is that a top investment DAO still needs to have the connection to source good projects, be able to analyze and put money in the best project, then exit at the right timing. The thing that defines top investment DAO is being able to operate in a decentralized manner while the organization and members themselves being autonomous. The traditional finance world could sometimes be a bit of chaos, investing with a decentralized and autonomous organization is nowhere easier. People often get the wrong perception that things are easier on-chain. But no, it isn’t. Building a top investment DAO is as difficult as building a top investment firm in the traditional world.

What investment strategy can an investment DAO use?

Different investment strategies define the type of investment DAO they are. Considering venture capital DAO to be a subcategory of investment DAO, just like the traditional world there could be more. However, due to limited availability of asset types on-chain, for a fully decentralized on-chain investment DAO, not many choices can be made. Currently, most of the fully decentralized investment DAOs are putting their treasury into 1) direct token investment, 2) yield farming in different liquidity pools. Both strategy approaches are quite passive, not many investment DAOs are doing active trading as a result of treasury tools limitation. ADAM Vault is here to solve this problem and expand the blockchain world with more investment DAO examples.

ADAM Vault welcome page
Start Investment DAO on ADAM Vault

ADAM Vault is a decentralized treasury platform built for Investment DAOs. Started by a team of M&A, investment banking, private equity and fintech background experts, ADAM Vault’s system design is carefully thought through to cater institutional needs. The development team is currently serving worldwide top banking clients including UBS, Credit Suisse, DBS, Standard Chartered, Societe Generale. With ISO 27001 certified security standard and quarterly smart contract audit, ADAM Vault is devoted to providing institutional grade solutions.

Investment DAO could take advantage of ADAM Vault’s unique features to maximize their safety and efficiency. “Member Account” utilize self-custody smart contracts, members still hold their assets while granting managing rights to another address. This could comply with the regulatory concern without pulling all the funds together in the same pool like other investment DAOs. “Budget” allows investment DAO members to grant pre-defined scope for treasury spending, like setting percentages for investment, operating, and marketing budget. “Team SBT” also moved team on-chain to facilitate Budget execution by delegating to a specific team recognized by SBT. “Dashboard” on ADAM Vault would also monitor the assets changes, easy for members to analyze and act accordingly.