Learn With SubDAO: Investment Options Available in a Venture DAO

7 min readMay 23, 2022

Venture DAOs, otherwise called “Investment DAOs,” is currently one of the most prominent existing DAO applications. Decentralized Autonomous Organizations (DAOs) are founded on the blockchain network without a central authority. Instead, they are regulated by smart contracts, which are set rules that can be updated via a consensus agreement of all participants.

Venture DAOs provide a way for everyone to pool their funds into several projects to earn handsome profits. Like traditional Venture Capital (VC) firms, multiple people pool funds together to bootstrap or finance a promising project in hopes of massive returns.

Despite the similarities between traditional VCs and DAO ventures, there are many differences, the biggest of all being the centralized nature of traditional VCs, where a few influential people call the shots.

What is a Venture DAO, and How Does it Differ from Traditional VCs?

Venture DAOs work by bringing together contributors for specific projects in a decentralized manner. Unlike traditional VCs, there is no gatekeeping in Venture DAOs; anyone from anywhere can invest their money without having to fight bureaucracy or nepotism. As long as you fulfill the criteria, you can easily join any DAO.

Also, unlike traditional VCs, where decision-making is limited to top guns, there is no hierarchy in DAOs. Anyone can bring up an idea or suggestion, and every other member will vote to accept or reject it. Voting is transparent, and as long as your idea makes sense to the majority, it will be implemented. Hence, you aren’t at the mercy of a CEO or board’s decision.

Lastly, traditional VCs are somewhat limited in investment types. They are primarily involved in investing in start-ups or existing businesses that need funding. However, Venture DAOs are broader and more diverse; hence, there are many more investment options in a Venture DAO, some of which are listed below.

The Different DAO Investment Options: What They Are and How do They Work?

“Venture DAO” can seem like an umbrella phrase to describe different investment options that exist. However, there are several types of Venture DAOs, each with its unique qualities and characteristics. To paint you an idea of your options when investing in a Venture DAO, we’ve divided the various options into three main categories: NFTs, DeFi, and ICOs. Each section describes what it is, how it works, and why it’s useful as an investment option.

Investing in Decentralized Finance (DeFi) Projects

Decentralized Finance (DeFi) provides a wide range of investment options. DeFi refers to all financial activities and services conducted via blockchain technology and peer-to-peer (P2P) networks. As a DeFi investor, you have several options, including:

Bootstrapping a DeFi Project: DAO investors can pull funds together to bootstrap a DeFi project. DAO investors typically look for innovative projects that solve DeFi problems without compromising security on the blockchain. They can finance the DeFi project and help build a business plan. As expected, the DAO investors will earn huge if the project turns out to be successful.
Crypto Lending: DAO investors can pool funds into blockchain-based lending platforms to earn interest from borrowers. The Lending/Borrowing protocol, like every other DeFi service, is automated by smart contracts. The working principle is simple. First, DAO investors can pool funds together in an existing crypto lending platform or even create their own lending platform. Then, users who want to borrow assets (usually stablecoins) will provide some crypto tokens as collateral which are usually worth more than the lending amount. Finally, the borrower will pay back periodical interests according to the smart contract’s agreement, and defaulters will lose their staked collaterals.DAO investors can share the interests generated as periodical dividends among members or diversify the profits into a new project.
DeFi Staking: DAO investors can stake (Lock-up) crypto assets in several DeFi protocols to become major validating nodes.The process involves investors looking out for blockchains with high activities and potentially promising governance tokens; then, they lock up tokens to become validators and earn rewards. Realistically, it may be impossible for a single person to become a validating node across several nodes. However, several people can pool their funds together in a DAO and achieve a mutual goal without fear of assets security.
Providing Liquidity: Liquidity is a significant challenge in decentralized finance, as few investors are willing to participate in open-ended projects. Hence, DAO Investors can provide liquidity through uncollateralized lending by locking a portion of their assets into these protocols. DAO Investors can earn steady passive income via transaction fees in these liquidity pools. Since there are no central authorities in a DeFi protocol, the liquidity providers earn most of the trading fees. Hence, DAO investors who pool huge funds to provide liquidity in a pool with a high trading volume will earn daily income via transaction fees. The downside is that Locking up tokens for an extended period in a liquidity pool may lead to a considerable loss of value, especially in a bear market. However, regardless of market direction, revenue from transaction fees remain unhinged.
DeFi Indexes: Many decentralized finance projects are experiencing a great deal of growth, but there’s still no easy way to invest in them. This can lead to unfortunate situations where investors miss out on potentially lucrative investments because they don’t know about them. Luckily, there are third-party projects that help solve these problems. Example of such platforms are DeFi indexes which help potential investors to track and identify potentially lucrative DeFi investments. DeFi indexes make it easier to participate in new projects as soon as they come online without leaving DAO investors with the burden of doing research or managing multiple accounts. Hence, by investing in a single DeFi index, DAO investors can earn rewards from multiple projects, like a traditional Exchange Traded Fund (ETF).

Investing in NFTs

Non-fungible tokens (NFTs) are a new category of digital assets with value. NFTs often help to classify holders as part of a community. However, it may be difficult for a single individual to buy an NFT to become part of a high-value crypto club.

DAO ventures solve this problem by allowing users to pool funds together to buy NFTs of high-value communities (to sell them later for a profit). With increased interest in the NFT community, the NFT tokens will become in demand, leading to scarcity and a spike in price; so, with proper research, DAO investors can make money from flipping NFTs.

DAO investors who don’t have huge funds to buy high-value NFTs can pool ideas together to invest in undervalued NFT projects with great communities, collect several NFT items, and become major members of the NFT project. Then, with increased community interest and a corresponding price surge, DAO investors can sell the NFTs and invest in new NFT projects.

Investing in ICOs

Initial Coin Offerings (ICOs) are capital-raising operations for blockchain companies/projects. Like traditional start-ups engage in fundraiser events, ICOs are used to raise funds for blockchain-based industries.

Here’s the catch with an ICO. Everyone who invests in an ICO acquires tokens to represent their stake; hence, the higher your stake, the higher your share of the total token allocation. Hence, Venture DAOs can invest in ICOs to ensure that they own a substantial part of a potentially successful company. Typically, it may be challenging for an individual to own 0.1% of a company; however, a group of people in an organization can pool funds together via a DAO to own 10% of a decentralized blockchain project.

In the future, DAO investors can liquidate their tokens for profits, which can be used to invest in new and coming ICOs.

Finally,

DAO investors can also buy and sell existing crypto tokens on exchanges, engage in spot or derivatives trading, or even back a crypto hedge fund. There are many ways to get involved with blockchain-based technologies and cryptocurrencies; these are just a few options.

What is the SubDAO Ventures Template?

At SubDAO, we understand how the world is transitioning towards decentralization, and we are committed to facilitating easy Web 3.0 onboarding for millions of users by developing major building blocks for others to follow, starting with the Ventures DAO Template.

Ventures’ DAO template revolutionizes governance in finance, bringing a new perspective to the future of organizations and investments. With a few clicks, Ventures DAO enables the creation of DAO-based venture capitals and financial institutions that lower the barriers to accessing decentralized VCs.

Members of a Venture DAO under the SubDAO network can divide ownership of portfolio assets into equal amounts, trade them on a platform, and vote on business decisions on how to best grow each asset’s value. Hence, crucial financial and investment decisions like fundraising, asset management, and equity settlements are completed on-chain via smart contracts. Everything is visible and verifiable on the blockchain; no one is cheated or sidelined.

About SubDAO

SubDAO is a multi-chain DAO protocol. It allows any decentralized organization to swiftly create and manage DAOs. We are committed to serving as a Web3.0 entry by providing blockchain-based digital agreement signing, DAO social networking, asset management, and other tools and services.

The founding team of SubDAO is composed of the former Technical Team leader of the IBM Group and many early well-known developers from Polkadot. SubDAO has completed multi-million dollar financing from dozens of institutions including Hypersphere, Huobi Ventures, OKEx Blockdream Fund, as well as investment by Messari founder Ryan Selkis.