Thread by @dunkhippo33

I've been thinking a lot about decentralized autonomous organizations (DAOs) lately vs traditional companies/non-profits. And I think we're in the first inning but I'm super bullish on them.

And here's why >>

1) What is a DAO? Here are some great resources to get you started:

https://twitter.com/magdalenakala/status/1439268884520054798?s=20

2) I also wrote a post here on the rise of the decentralized startup and why this is happening:

elizabethyin.com/2021/09/19/the…

3) I think when people think about DAOs they think:

-chaos of so many cooks in the kitchen trying to do stuff; who is in charge?
-overwhelming Discord channels - how can anyone get work done?

But these are all tactical issues that are solvable with new tooling and strategies.

4) At the core of it, these are the key components about DAOs that I like:

-mission driven - almost by definition
-transparent
-alignment of audience with customers / investors
-increase of talent - ppl can be involved even if they have a full-time job

5) Let's talk about mission for moment. As a startup investor, often I see a company that has built a product and is selling it.

And that's commendable -- I love ppl who hustle and just go.

6) But in a world where attention and fight for talent is real, startups now *have* to think about something much bigger -- much bigger than revenue.

Revenue should still be the KPI. But what is the existential end goal? Why does the org exist? Why should ppl work there?

7) When I think about my own company @HustleFundVC, our mission is to democratize wealth through startups.

Investing is a tactic. But ppl join for the mission.

8) In fact, a lot of our more recent hiring has come from our existing @HustleFundVC community (Angel Squad, LPs, founders). People who are already familiar with and love / believe in the mission.

9) And when I think about our portfolio companies who have strong missions, they recruit from their audience too. Users, customers, investors, partners etc.

This is the easiest type of recruitment - recruit from an audience that is already bought into what you are striving for.

10) But too many companies focus on tactics. On what they do not why they exist. It's hard to capture attention (esp in recruiting) around tactics.

Sell the mission.

11) Now let's turn to DAOs. A lot of DAOs that have come up recently are also very mission driven. In part it's because they start out with a like-minded audience of ppl who want to solve the same thing and then figure out the tactics of how they'll do it.

12) IMO, this is one of the best ways to build a business. Get your rabid fans in your corner first. Then figure out tactics later.

The @ConstitutionDAO got 22k+ members in < 1 week. The OpenAccessDAO for science publications has 1k+ members in about a wk.

13) And along the way, these DAOs figure out who is doing what. What things will look like. And what the tactics are.

But at least you know who wants to be a part of the mission.

14) Why do people join? One of the issues with traditional startups and non-profits today is you really have no idea what is happening inside the org.

But the open nature of DAOs makes everything transparent -- even the total chaos of things falling apart!

15) That open nature IMO creates more trust -- even if things are very chaotic. There are no pretenses.

In contrast, if you've ever donated to a non-profit or been an investor in a startup, honestly ask yourself, how often do you *really* know what is happening in the org?

16) Things you should be able to answer if you really know what's happening:

-how is the team specifically spending its time? it's money?
-what is the impact it's having? what are the KPIs? where do they stand?
etc

17) And honestly, in "regular" startups and non-profits, you can probably answer those qs 5% of the time.

In the DAOs I've lurked in / been a part of, you can answer all these qs 95% of the time. There's almost *too much* information!

18) In fact, I'll go out on a limb here and will say that one of the reasons VCs have traditionally invested in warm referrals or relationship-based companies is that startups are so closed.

It's the warm-referral relationship that gives VCs their best shot at transparency.

18) The transparency in DAOs enables ppl to figure out if they want to get involved with time / $$ / network. You can determine this by watching the work that is happening in real time.

19) And I absolutely love that. This transparent format actually gives more projects a shot at being funded because warm relationships are not needed.

Just look at the work. This is GREAT news for everyone who is not well-networked.

20) The other thing I like is the better alignment. In traditional startups, investors are rarely the customers.

In a DAO, the ppl who want to get involved are typically the customers, investors, and workers -- all rolled into one community.

21) E.g. People who want to work on climate change DAOs -- they want to use products, fund projects, and work on solving climate change issues.

22) In a traditional co, if a startup is floundering, investors may not pour more $$ into it. They look strictly at ROI.

But someone who cares about the mission or LOVES the product may put in more $$ even if it's not the best ROI on cash.

23) Lastly, w/ DAOs I LOVE how ppl can work on a few projects. Ppl can create portfolios - like how investors can.

In a traditional startup, if you're just 2 founders, you need focus on 1 startup. But if your DAO has 1000 ppl, you can go fast even if everyone is part time.