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Resolute Ventures backs DAO investing in web3 startups

Illustration of a collage of circles made of money forming a decentralized web.

Illustration: Shoshana Gordon/Axios

Early-stage VC firm Resolute Ventures is betting on the wisdom of the crowd — or at least, the wisdom of its portfolio — by committing $5 million to a DAO of founders it has backed to source and invest in pre-seed startups.

Why it matters: The Resolute DAO will be an early test of how effective these types of investment-by-committee projects can be.

Details: Resolute Ventures gathered more than 40 portfolio founders to participate in the DAO, which will source and vote on the opportunity to invest in early-stage web3 startups.

  • "What I saw in some other DAOs is that it looks like an investment club with a bunch of high-net-worth angel types pooling their capital together and making decisions. We wanted to take this in a different direction," Resolute Ventures' Raanan Bar-Cohen says.
  • To do that, Resolute Ventures is fronting the money and relying on founder participants to bring the deal flow.
  • "DAO members are bringing the investment opportunities, not putting in their own capital but collectively running the governance — the pitch process, the decision process, and support after the investment," Bar-Cohen says.

How it works: The DAO will be able to write checks of up to $150,000 for each startup, which will result in more than 30 investments from the initial $5 million commitment.

  • For a deal to be approved, the DAO will need a third of its members to show up for a vote to have a quorum, and would then need a majority of those voting to back the investment.
  • Alternatively, the DAO has a steering committee that can approve an investment with a majority vote, or five of the nine committee members.
  • On the back end, "the DAO will take 20% of the profits and then the rest goes back to the LPs, who get their capital back and then the lion's share of returns," Bar-Cohen says.

Yes, but: It's still unclear how those proceeds will be split between DAO participants; that's one detail that will probably be decided by the members themselves, according to Bar-Cohen.

  • "Instead of codifying everything and building an overly elaborate system, we're giving some basic guidelines but a lot of the details are TBD and are going to be decided by the DAO itself," he says.

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