Before elaborating on the differences between traditional VC and investment DAOs, let us understand how traditional venture capital works.A venture capital fund is founded and managed by general partners . GPs are responsible for sourcing investment opportunities, performing due diligence and closing investments in a portfolio company.
Traditional venture capital has been a successful model that has catalyzed the growth of the internet, social media and many of the Web2 giants over the past three decades. Yet, it is not without its frictions and it is these that the Web3 model promises to address.As effective as the VC model has been, it still has its issues. They are not very inclusive and decision-making is quite centralized. VC is also considered a highly illiquid asset class by institutional investors.
This often can be a limitation not only to investing globally but also to being able to identify hyperlocal opportunities in the last mile of the world. A centralized team can only offer so much in terms of originations and deployment capabilities across the world.The other key issue with traditional VC is that it is an illiquid asset class. Capital deployed into these funds is often locked in for years.
Deal sourcing can be decentralized, just like governance. Imagine running a fund focused on technology for coffee farmers across the world. Having community members from Nicaragua to Indonesia certainly helps in sourcing the best last-mile investment opportunities. This allows investment vehicles to be more specialized, more global and yet highly local.
In offering this functionality, investment DAOs offer returns similar to those of traditional VCs, albeit with a lesser liquidity risk. This makes them a better investment vehicle just based on the risk-return profile.Every opportunity has its risks and vice versa; investment DAOs are no exceptions. Despite their structural superiority to traditional VCs, there are still areas that remain unclear.
Same can be done by VCs with the adaption of DAO technologies and some fundamental rules reorganisation.
VCs invest to make profit, DAOs invest to build the future. This is exactly the case with BitDAO, and it's exactly why VCs should either join DAOs or get out of their ways. Out with VC money, and in with community contributions.
🇧🇷 The Brazilian Agribusiness Cryptocurrency🐂 Cattle Raising + Blockchain + NFTs $AGROBR AgroCoin Telegram:
DAOs are taking over the market and this year was only the beginning, and bitDAO is partially responsible for the rise of DAOs since its funding entities like zkDAO, eduDAO, game7DAO, AfricaDAO...
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mevrtoken
FreeRossDAO
they are gona be the final capitulation mechanism... the moment they need to sell their ETH/reserves its gona be wild
For anyone intrigued by investment DAO’s I highly suggest you check out $CULT DAO. They are trying to be the most decentralized investment DAO possible.