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The future of startups is community.
Startups have a higher chance of succeeding if they have a community behind them. Having a community is like having a support system with the added bonus of being able to build something together.
Community-driven management of enterprises has transformed from a poorly understood, nominal function into a vital element of business that impacts every step of a well-managed product or service-driven business. The era of C-suite executives is bygoneand for the better.
Blockchain’s capacity for community funding is fundamentally reforming the entrepreneurial journey for blockchain startups. Rather than veteran venture capitalists, developers, experts and perhaps even fellow entrepreneurs who know the realities of the industry are becoming the guiding beacon of unicorn startups across industries.
The challenge with venture capitalists and crypto startups
Blockchain startups and crypto projects have been the frontier of the web 3.0 revolution and have attracted a record high of $30 billion from venture capitalists. According to the Global Startup Ecosystem Report 2021, blockchain technology has emerged as the second fastest-growing startup sub-sector globally with a 121% growth in Series A agreements over five years.
Though the space appears to be loaded with funds, the fact of the matter is that the venture capital paradigm for blockchain ventures is fundamentally dysfunctional. The average lifespan of a blockchain startup is 1.22 years, with a failure rate of over 92%.
The harsh reality that emerges from this fact is that other than capital, most venture capitalists from a non-technical backgroundespecially from a background that is unrelated to blockchain do not add any genuine value to early-stage startups because of the lack of blockchain expertise and ability to identify potential and accord individualized attention from concept to launch.
Therefore, while VC-backed firms have traditionally sought development with the direction and financial backing of a limited pool of veteran investors, in recent times blockchain entrepreneurs have begun to envision what a more democratic, diverse community of advisers could accomplish together. Enter DAOs.
The DAO phenomenon
In the past few years, the boom of blockchain has allowed it to permeate into several fields such as finance, gaming, payments, healthcare and more. Among these, one of the applications of blockchain is the advent of new kinds of decentralized governance structures.
These decentralized governance structures have enabled the creation of a radically novel form of organization that at its core is community-empowered. These are called decentralized autonomous organizations (DAOs).
DAOs are a novel form of organization that are owned and operated by its native governance token holders. DAOs enable a community of individuals to pool capital to pursue a shared objective and claim a share in the value created once those goals are met.
DAOs are radically different from traditional hierarchical governance structures, as the decision-making process is democratic and involves all members of the DAO to vote on a particular decisionthus, allowing for democratic, transparent control and administration. That is what makes DAOs powerful and has enabled the DAO landscape to achieve incredible growth.
In terms of membership, in Q4 of 2021 the total number of DAO members has increased manifold by 133% from August with 1.6 million members spanning 164 organizations. The total value locked (TVL) in DAO treasuries, which is a measure of the sum of all assets staked or deposited in the protocol, has surged from $7 billion in October to over $15.2 billion in Q4 of 2021.
Venture capital DAOs setting up for success and growth
Venture DAOs are investment vehicles where blockchain enthusiasts partake to guide and democratically invest in ventures. These marvels integrate the skillsets, capabilities and support of an entire community and mobilize them as powerful community-led venture capital firms.
Investment DAOs in their rudimentary form foster a hospitable environment to early-stage startups because of the low entry barriers they holdin comparison to the traditional venture capital peers.
For starters, as opposed to expensive and elaborate legal processes associated with traditional VC funds, DAOs provide a flexible and quick way to raise funds without the pain of administrative overheads.
Secondly, investment decisions are well-thought-out and sensible with proper sourcingand due diligence is conducted as opposed to just throwing capital on blockchain startups. Given the fact that blockchain is a young industry, there is much uncertainty around the execution of a project’s roadmap. DAOs can help inventors and entrepreneurs to develop the project’s vision into a viable, successful business.
Thirdly, the number of blockchain developers is infinitesimally small due to the relatively young age of the technology and industry, and sourcing talent and resources to ensure the project’s success can be challenging. Venture DAO members can expertly render technical advice, devise strategies, help with recruitment and provide operational support to set up the venture for success.
Fourthly, given the fact that the blockchain industry hinges on new technological developments and innovative products being rolled out amid an environment of regulatory uncertainty, Venture DAOs can help provide business counsel and expertise on the know-how of the products with their experience in the industry and help the team correctly assess the viability of the project.
Finally, early-stage startups often face obstacles to user adoption and product-market fit. In this sense, venture DAOs offer a platform for early feedback and interaction on the product.
All in all, venture DAOs mediated by blockchain for blockchain can leverage the effectiveness of the community to catalyze the growth of early-stage blockchain startups.
Hatu Sheikh is the co-founder and CSO of DAO Maker, building the future of venture capital. DAO Maker creates growth technologies and funding frameworks for startups, while simultaneously reducing risks for investors.
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The future of startups is community. Startups have a higher chance of succeeding if they have a community behind them. Having a community is like having a support system with the added bonus of being able to build something together. Community-driven management of enterprises has transformed from a poorly understood, nominal function into a vital
The post Can Blockchain’s Capacity for Community Unlock Success for Early-Stage Startups? appeared first on The Daily Hodl.Read MoreHodlXThe Daily Hodl