Why use a DAO structure? - metacartel/MCV GitHub Wiki

MetaCartel Ventures is organised and coordinated as a DAO as opposed to a traditional hierarchical organizational structure for a range of reasons including:

  • Diverse due diligence: MCV will be able to conduct product and technical due diligence by leveraging the DAO members’ varying areas of expertise to provide unique and exclusive insight to investment opportunities (dApp builders, founders and investors).
  • Distributed decision making: MCV’s membership, investment decisions and assets are managed by its members. This contrasts starkly with traditional VC funds, in which passive, non-expert limited partner investors, rarely consult with the small cadre of experts who direct investments on behalf of the firm.
  • Incentivised aggregation of deal flow: MCV’s members will be aligned to contribute exclusive deal flow, resources, and insights to help guide the DAO’s investments. The DAO’s ability to align a greater cross section of the Ethereum ecosystem will allow MCV to drive deals from the fringes of the industry, effectively scaling exposure to early investment opportunities.
  • Low participation risk: Each of MCV’s members are able to leave the DAO at anytime with their pro rata share of the DAO’s assets through the RageQuit functionality. This enables membership dynamics that protects members from governance capture by an adverse majority and obviates traditional legal models for minority protection such as fiduciary duties.

Trade-offs

In light of these advantages, it’s important to recognize that they do come with their own set of trade-offs, including:

  • Asset management: MCV cannot be managed like a traditional hedge fund or venture capital firm as members are able to leave the DAO anytime with their economic interests. Typical firms have lockup and redemption periods, MCV does not.
  • Majority based decision making: Due to MCV’s majority based decision making and ever present possibility of membership RageQuit, it will be difficult to pass controversial proposals that contradict wider consensus.