Learn on SubDAO — What is An Investment DAO? Should I Start One?

SubDAO Protocol
4 min readJan 14, 2023

Decentralized Autonomous Organizations (DAOs) are gaining popularity in tandem with cryptocurrency and blockchain technology. Simply put, a DAO is an organization; however, unlike today's traditional organizations, DAOs are run with collective decision-making.

We know that traditional organizations have an essential hierarchy that influences decision-making, with the higher-ranked members having leverage to make decisions on behalf of everyone else. However, DAOs are run differently.

Indeed, a DAO may have a founder or pioneer members; however, even the most recent members have a say, as everyone is expected to reach a consensus before making any organizational decision.

What is An Investment DAO?

An investment DAO (Otherwise called a Ventures DAO) is a decentralized organization where multiple people come together to pool mutual capital to invest (in startups, fungible and non-fungible crypto assets, as well as other off-chain assets).

Together, they manage their portfolio, and with a bigger pool of funds, the investments can yield a much better return than if each investor wanted to go solo. Hence, we can see that the main purpose of an investment DAO is to generate profits; hence, all the DAO members usually engage in democratic processes to propose potential investments and also vote for the investment they feel will be beneficial.

An investment DAO could build its standalone infrastructure, i.e., smart contracts and blockchain dApps, where all members can participate in on-chain decision-making. Also, those who don’t have the finances or structure or want to save time can fit in existing SubDAO infrastructures which are created mainly to aid the creation of Decentralized Autonomous Organizations.

For example, the SubDAO protocol is a multi-chain DAO infrastructure that allows the creation of Venture DAOs via the Ethereum, Polygon, BSC, or MoonBeam networks. Similarly, members can join the DAO and claim equity in the Venture by pooling funds from each of the networks mentioned above.

Why Are Investment DAOs Created?

As mentioned earlier, the most obvious reason people pool funds together is to have better investment power made possible via a fatter treasury. However, amid that, investment DAOs also exist for:

  1. Easy diversification of assets: Simply put, splitting a joint $100,000 investment into 10 places is easier than splitting a solo $100 investment into 10. Transaction fees are split in a pooled investment, while a solo investor may use a huge part of their profits to pay transaction fees.
  2. Lower Risk: Pooling funds help investors to reduce risk since every member of the DAO has a share of the profits or possible losses. More importantly, a single loss won’t wipe out the treasury, and even in the event of a loss, there are enough fallback funds to invest with and cover the losses.
  3. Joint Learning: Perhaps the most underrated aspect of an investment DAO is that it helps each member be better individual investors. Joint decision-making with several proposals and debates helps members to learn from one another, and in the end, gaining a bit of knowledge from everyone increases each individual’s experience.

Should I Create an Investment DAO?

Before creating an investment DAO, it is essential to ask yourself these two questions:

  1. Do you have an existing community?
  2. Do you have social proof?

The success of any investment DAO is based on a community, as it requires several people to pool funds together; hence, if you are vocal on Telegram and Discord communities, where you offer value, you could reach out to a few people and let them know about your decision to create a DAO. If you have proven valuable, they could join you and invite others to join. In the end, everybody wins.

However, not all DAO starts from social communities; some DAOs are created with investment initiatives that transcend friendly groups, such as those who intend to bootstrap projects as angel investors. Hence, several intending angel investors can come together to pool funds, co-invest, share ideas, and distribute their resources across several startups; this shields investors from a single point of failure, as they can avoid the risk of putting all their investment in a failing company.

Of course, to co-invest as an angel investor, you need to show proof of funds or, at least, proof of existing success as an angel investor; hence, even if you aren’t with the fattest equity share, being highly knowledgeable can earn you a seat at the table.

More than these examples, many other investment DAO forms exist; however, the important thing to note is that to create a DAO, you must:

  • Have a clear mission
  • Have an existing community of like-minded people
  • Have social proof (of funds, knowledge, or remarkable success).

No Infrastructure? No Problem

Do you intend to create a DAO but are concerned about building your infrastructure of dApps, smart contracts, and everything you need for on-chain decision-making?

Why worry? Visit the SubDAO protocol, and create a DAO with our existing infrastructure FOR FREE!

It’s simple to use and operate, so you and your community members or co-investors can flexibly set DAO terms, carry out on-chain decision-making, and win together!

About SubDAO

SubDAO is a DAO infrastructure that helps manage digital assets through middleware, multi-sig, and other decentralized features. SubDAO has completed multi-million dollar financing from dozens of institutions, including Messari founder Ryan Selkis, Hypersphere Ventures, OKX Ventures, Huobi Ventures, CMS Holdings, Divergence Ventures, FBG, Signum Capital, NGC Ventures, Kenetic Capital, Gate.io Labs, etc.

Follow Twitter https://twitter.com/subdao_network

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SubDAO Protocol

SubDAO is a DAO infrastructure that helps manage digital assets through middleware, multi-sig, and other decentralized features.