What is an Investing DAO? Who Should Start One?

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February 3rd, 2022

By Jihad Esmail

DAOs are eating the world. As new web3 infrastructure, tools, and applications emerge, DAOs are quickly becoming one of the most exciting design spaces for the future of organizations, work, and capital. 

At Syndicate, we believe that the world-changing potential for DAOs lay in their transformative ability to coordinate humans and capital natively on the internet together at scale. This will have dramatic implications, particularly with respect to capital formation and allocation—in other words, investing. After all, a DAO isn’t a DAO without a treasury, and that treasury must be invested to serve the DAO’s higher level mission.

Missions of DAOs, like organizations, can widely vary—from publishing media, to developing a protocol, to providing services, to funding new creators, to growing communities. We’re just at the beginning, and there’s no telling where DAOs will go next or what they’ll achieve. But DAOs are here—and here to stay—and they’ll only grow in terms of their popularity and impact in society the months and years ahead.

Syndicate is focused on one type of DAO today: Investing DAOs.

What is an Investing DAO? Why Start One?

An Investing DAO leverages smart contracts to enable members to collectively pool capital, invest (e.g., in startups, tokens, and other on- and off-chain assets), manage the portfolio, and run important community, operational, and governance processes. The core action of an Investing DAO is the pooling and investing of capital with the intention of generating financial and/or social (e.g., philanthropy, grants, social impact) returns.

Investing DAOs can exist as standalone entities or fit within existing DAO structures via SubDAOs. At Syndicate, we’re working with hundreds of DAOs and web3 communities on the full spectrum of Investing DAOs and their variations. We’re building a wide range of tools that we plan to release in the coming months, but our first tool, Web3 Investment Clubs, recently launched and we believe are the foundation of Investing DAOs.

While Investing DAOs can take many forms, this piece will be focused on Investing DAOs with Investment Clubs at their core. See our announcement of Syndicate’s Web3 Investment Clubs here.

Investment clubs are groups of people who pool their capital to invest together—to share ideas, learn together, increase buying power, share risk, and reduce transaction costs. They invest in stocks, bonds, real estate, art, and collectibles—and these days, startups, tokens, and NFTs.

Bringing investment clubs to web3 makes it possible for communities and groups of friends around the globe to pool capital, invest on- and off-chain, and powerfully manage assets in an easy, efficient, and compliant way. As a result, Syndicate’s Web3 Investment Clubs are a perfect tool to easily launch and run an Investing DAO. 

In our experience, Investing DAOs are launched for three reasons:

  1. See More Deals: Investing DAOs can collectively see and access more investments together, and meet higher minimum thresholds by investing as a group versus individually.
  2. Win More Deals: Investing with a community is attractive to projects and founders, as Investing DAOs greatly increase the number of people who care about their project’s success and can help them in a variety of ways based on the group’s unique networks and skillsets.
  3. Learn, Grow, Win Together: Investment DAOs are community-run, meaning that the members of Investing DAO all learn, grow, and win together. Not only do Investing DAOs democratize investing, but they also democratize knowledge and expertise.

The power of Investing DAOs lies in their ease of accomplishing all three goals simultaneously. While there are other solutions that enable groups of people to co-invest, Syndicate’s Web3 Investment Clubs are built with the full composability of web3, making community-driven investing easier, faster, and more powerful than ever before.

Who Should Start an Investing DAO?

DAOs are community-driven at their core. Before starting, you should evaluate whether your community is aligned (e.g., values, mission, strategy-wise) and ready to take the next step to create an Investing DAO.

Many different types of communities have launched Investing DAOs on Syndicate to date. But here are a few that we’re seeing often:

  • Friend Groups: Ape-ing into NFTs and tokens is more fun together, and Investing DAOs are being formed for this purpose within small friend groups. They often start as small group chats on Telegram or Discord.
  • Mission-Driven Organizations: Allocating capital is one of the most powerful ways to make change and drive a cause forward. Investing DAOs are being formed by advocacy groups and mission-driven organizations to invest in people and projects building toward their shared goals.
  • Angel Investor Collectives: Angel investing can be lonely, but teaming up with other angel investors to co-invest, share deals, and crowdsource diligence and portfolio company support is a huge win for angels and the founders they invest in. 

These are just a few examples, but an Investing DAO can be any community or group of people who would benefit from collectivizing capital and investing in the things they love and care about together.

Your Community is Everything

People often overly focus on the financial aspects of Investing DAOs and forget that it’s actually all about community. Community building is critical to getting your Investing DAO off the ground, running your Investing DAO, and making sure that your Investing DAO is living up to its mission.

Having a pre-existing community—whether a friend group, group chat, or Discord—helps a lot. It ensures that everyone is values-aligned and has a high degree of social trust. It also helps with compliance as investment clubs cannot publicly solicit to maintain their status.

Another key piece of the community-building equation is making sure that everyone is on the same page in terms of commitment. Investment club guidelines require active participation from all members on investment decisions, so passive members might cause your investment club to lose its status and can create significant compliance and legal risks. Vetting members for active participation is a best practice.

Finally, your community should be ideally stacked with a diverse range of skill sets and outlooks. Investing isn’t easy, and you’ll want people who will put the time and effort into sourcing, due diligence, portfolio management, and project support.

Invest Together, Win Together

In the coming weeks, Syndicate will be highlighting some of the most exciting Investing DAOs on our protocol who are pushing the boundaries of the future of investing.

Maybe you’re a group of DJs like Morii Music investing in creators and the future of artist ownership and fandom.

Maybe you’re an angel collective like The Council DAO, We3 DAO, Eve, or Women in VC DAO who are collaborating to create new opportunities for women to build and invest globally.

Maybe you’re a DAO like GCR, Forefront, or SLCF looking to give members of your community the opportunity to invest in ecosystem projects.

Maybe you’re a startup community like South Park Commons looking to enable your ecosystem of founders, alumni, and members to invest in each other.

Maybe you’re a VC like Chapter One, Julia Lipton, or Script Capital looking to push the boundaries and re-invent the venture capital industry with DAOs.

Or maybe you’re a group of friends and degens like DAO Jones or Chad Capital looking to ape into the next big NFT collection together.

Investment DAOs are going to fundamentally change investing forever, and we’re excited to build with the community and go on this important journey together.

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Start a Web3 Investment Club
Read our Gitbook on Web3 Investment Clubs
Follow us on Twitter
Join our Discord
See open positions at Syndicate
See our requests for strategic partners

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**​​Syndicate cannot provide any legal or tax advice, and the contents herein should not be construed as such. Syndicate makes no claims as to the accuracy of the information in this announcement or as to the legality of any activity on the Syndicate platform. Before creating and/or operating a Syndicate, we encourage you to seek advice from an attorney and tax professional licensed in the relevant jurisdiction(s). Failure to comply with the guidelines stipulated for investment clubs or failure to seek legal counsel could lead to regulatory investigations and/or actions.

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