Securing funding is crucial for maintaining a healthy treasury, running operations, and achieving the goals that a Decentralized Autonomous Organization (DAO) is established for. DAOs operate as communities incentivized to govern, coordinate, and co-own a shared pool of value. This value may consist of governance tokens or assets that are either liquid or illiquid. Here, we explore various funding strategies tailored to different types of DAOs, ensuring they can sustain and grow.

Issuing Tokens

One of the primary methods for DAOs to raise funds is by issuing governance tokens. These tokens can be bought or earned by members who actively contribute to the DAO. Issuing tokens typically distributes voting power and ownership among members, fostering a decentralized governance structure.

Methods of Token Issuance:

  • Initial DEX Offerings (IDOs): Similar to an Initial Coin Offering (ICO), IDOs allow a project’s native token to be launched via a decentralized exchange.
  • Decentralized Autonomous Initial Coin Offerings (DAICOs): Introduced by Vitalik Buterin, DAICOs combine the principles of DAOs and ICOs, giving investors control over funds post-ICO and the ability to vote for refunds if project milestones are not met.

Venture Capital (VC) Backing

Some DAOs attract capital from venture capital funds. An example is Syndicate DAO, which secured funding from Andreessen Horowitz and Carta. However, it is crucial to limit the influence of VCs to prevent them from owning a significant portion of governance tokens, thus preserving the DAO’s decentralized nature.

Investment DAOs

Investment DAOs function similarly to venture capital funds but operate in a decentralized manner. They pool resources to invest in various projects, with returns benefiting the DAO’s treasury. Prominent examples include Moloch DAO, MetaCartel, and Raid Guild. These DAOs enable anyone to buy tokens and participate in investment decisions, resembling a crowdfunding model.

Types of Investment DAOs:

  • DAO + Fund: Establishes an external VC fund that garners additional members and focuses on legal compliance and investment decisions.
  • Syndicate: Creates sub-DAOs for each investment, allowing members to join specific sub-DAOs and participate in individual investment projects.

NFTs

Non-Fungible Tokens (NFTs) offer multiple avenues for DAOs to raise funds. DAOs can launch NFT collections, collect NFTs, or use Intellectual Property NFTs (IPNFTs) to generate revenue. For instance, UkraineDAO raised funds by issuing NFTs, while Gen.Art sold membership passes. IPNFTs, which involve selling NFT rights to intellectual property, are popular in research-focused DAOs like VitaDAO.

Grants and Crowdfunding

Public goods DAOs often rely on grants and crowdfunding to raise funds. Platforms like Gitcoin facilitate grant funding, while protocols such as Juicebox enable crowdfunding campaigns. ConstitutionDAO exemplifies how a DAO can mobilize a community around a specific cause, using crowdfunding to achieve its goals.

Real-World Assets

Investing in real-world assets provides DAOs with opportunities to diversify their treasuries and generate yield. MakerDAO’s investment of $500 million in real estate, US Treasury, and corporate bonds illustrates this strategy. Integrating traditional assets with DeFi practices helps DAOs mitigate counterparty risks and stabilize their financial foundation.

Conclusion

Choosing the right funding strategy depends on the type of DAO and its objectives. Whether it’s through token sales, VC backing, investment DAOs, NFTs, grants, crowdfunding, or real-world assets, a combination of methods often works best. Central to all these strategies is the role of the community, as DAOs thrive on collective effort and shared purpose.

By leveraging these diverse funding options, DAOs can build robust treasuries, sustain operations, and drive their missions forward. As the DAO landscape evolves, so too will the ways they fund their innovative and decentralized ventures.


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