By: Jihad Esmail & Delleon McGlone
We’ve written about who should start an Investment DAO, but the toughest part is the how. Like any other DAO, Investment DAOs require governance processes that allow for members to make their voices heard and understand the ins and outs of the decision-making process.
With over 1000+ investment clubs launched on Syndicate’s protocol in less than 3 months, we’ve been getting into the weeds with our communities on the best ways to govern their clubs as a DAO. Not only that, but we’re committed to democratizing access to investing for all while sticking within the guidelines for investment clubs from the SEC, adding another dimension to the governance process.
Governance is often the most overlooked aspect of building an investment club. The infrastructure is there, but how should you run it?
For investment clubs, Syndicate’s Gitbook has provided guidelines for addressing and establishing governance within your community. For example, everyone in a club must actively participate in every investment decision.
But there are many other decisions that a club will make that aren’t explicitly defined rules – they’re up to you. These include how to think about adding or removing members, how to split a non-fungible asset if a member decides to leave the club before liquidation, and so much more.
From a club admin’s perspective, one of the biggest challenges is explaining the governance structures to club members. Governance voting can be on-chain using tools such as Tally or off-chain using Snapshot—the preference is up to each investment club and its members.
What involvement looks like is up to you to define!
Oftentimes, investment club members will ratify a “charter.” These are working agreements amongst members that answer questions like:
A club charter doesn’t need to be an extensive contract – just something that is collectively agreed upon to set expectations around the club’s purpose and existence.
Another critical question is around membership. How should a club think about adding members?
There are a few considerations, some purely practical and others with legal implications:
Again, membership is basically all up to you! You could gate access to a club based on ownership of a specific token, an application process, or anything else. Just keep in mind that clubs created on Syndicate cannot publicly solicit investments. Make sure to keep your membership search to colleagues, business partners, friends, family, and people you already have a relationship with—not to the general public.
There are countless ways you could structure voting for a club. Again, so long as everyone is voting, what the voting system looks like is entirely up to you. Some questions to consider include:
Every Syndicate investment club mints non-transferrable “club tokens” for members that represent their stake on the cap table. Given that these are ERC-20 tokens, they can also be used across web3 governance tools! Some structures include:
To enable web3-driven governance, there are quite a few tools you can use. For example:
Starting an investment club on Syndicate is as easy as ever. Start one today here.
We’re developing the investing infrastructure for web3, and we believe web3 investment clubs are a core primitive to allow communities big and small to invest together and win together.