Should yours be a decentralized autonomous organization?

Startups are taking on new forms on the Web3. Unless you’re the CEO of a company, nowhere gives you more control over what you work on, who you work with, and how you work there than being in a DAO, says Spencer GrahamMain contributor to DAOhaus.

You are therefore a startup founder and the Decentralized Autonomous Organizations (DAO) have caught your attention. Perhaps you wish to avoid a glaring power differential between you and those you work with. Or maybe you’re excited about the emergent value creation made possible by bottom-up decision-making and collective action.

Startups can consider becoming a DAO

Whether you’re a fledgling startup, one that’s been around for a few years, or an established business looking for a change, you’re now poised to ask yourself if becoming a DAO might be the right thing for your project and community.

A DAO is a new way of running an organization, which is no longer led by a central management, but is more focused on a user-centric and community-owned mentality. But what is it to be a DAO Actually train?
As a founder, here are three questions you should ask yourself to determine if your startup should be a DAO.

1. What are you trying to build?

Does the success of your project rely on the strength of your community? To be viable, must it be controlled by its community? Should it be protected against unwanted control by an external entity?

Is it important to you that ownership of what you build is widely distributed? Do you want your project to integrate web3 technologies such as NFTs or DeFi?

If the answer to any of these questions is yes, then a DAO may be right for you.

Some types of organizations that have proven to be well suited to be structured as DAOs are consulting firms, agencies, and law firms. These already have shared ownership – they can become service DAOs. These are DAOs whose members come together to provide their services to clients as a collective. Becoming a DAO gives these organizations greater individual autonomy, leading to better results for clients.

Charities become philanthropic DAOs. nicknamed the the future of giving, these are DAOs creating social responsibility in Web3. Using a DAO structure allows these organizations to attract a more inclusive set of stakeholders, which leads to a more efficient allocation of resources.

Companies that build a product become product DAOs. By adopting a DAO structure, the users of these companies become stakeholders, ensuring that the product will continue to serve them and meet their needs.

2. How will being a DAO help my startup achieve its goals?

Decentralization makes DAOs inherently more community-focused than profit-driven. Overall, people are engaged in what they do when it happens in a more participatory way.

Being a DAO helps you attract better talent. Many workers are leaving the Web2 space for jobs in Web3, attracted by the greater level of autonomy. And unless you’re the CEO of a company, nowhere gives you more control over what you work on, who you work on it, and how you work on it than being in a DAO.

Compared to traditional companies where decisions about things like salaries are made by a privileged few at the top, in DAOs these decisions are governed by all members, creating an inclusive and more satisfying work environment.

Being a DAO helps your startup be more resilient. The bottom-up structure of DAOs reduces points of failure and dependence on individuals. Significant internal changes will not affect contributors. DAOs are also more adaptable. They allow contributors to more quickly explore the maze of ideas by taking several paths in parallel. They can draw conclusions more reliably or generate results in the face of uncertainty.

Being a DAO helps your startup focus. Thanks to the open-source and modular nature of the DAO ecosystem, you can delegate necessary but less important tasks to service DAOs or to the ever-improving DAO toolset.

3. Where to start?

If you are considering becoming a DAO at some point, the best thing to do is to become a DAO from the start. It is much more difficult to distribute power once it is already concentrated than to distribute it from the beginning. Starting early also allows you to create decision-making and action patterns in a non-hierarchical way in a low-risk environment.

If your startup has only a few people, you might want to use a multisig wallet. It is a digital wallet that requires signatures from a group of users to approve a transaction. But if you expect your startup to grow to more than 10-15 people, a multisig will quickly become unwieldy and you will need to migrate to a more scalable DAO structure.

It’s best to switch to a more scalable DAO framework early on. If you’re using a framework that’s flexible enough, you’ll still be able to move fairly quickly in the beginning while still being able to scale without having to migrate to a new framework.

For example, the Moloch DAO framework can mimic a multisig in your early stages, but then grows gracefully with you. Other frameworks include Colony, Aragon, and 1Hive Gardens.

It’s generally a good idea to keep your DAO authorized at first. This allows you to distribute the power away from yourself and other founders while maintaining a high signal environment that you can move around quickly.

Once you have grown and established a solid cultural and governance base, you may wish to loosen the permissions and allow the community to participate in the project without having to be approved by core community members.

Startups: the time has come

Each company launches with slightly different rules, structures, tools, and practices in order to fulfill its mission, create a product, or serve its stakeholders.

In this same sense, each DAO is going to be slightly different. DAOs will use different platforms for tooling, structure their governance in their own way, and create community guidelines separate from their DAO.

Space is still quite early. There is no set structure for how to launch a DAO. There is no well-established playbook or formula to fall back on.

Our opportunity right now is to collectively learn and build shared insights by exploring our own approaches to how DAOs can work for us. The more we practice in this design space, the more best practice data we can gather for how to function as a DAO.

It’s an exciting time – come join us!

About the Author

Spencer Graham is a main contributor to DAOhaus. DAOhaus communities have collectively raised over $50 million and distributed nearly $20 million across the ecosystem to support their various goals.

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All information contained on our website is published in good faith and for general information purposes only. Any action the reader takes on the information found on our website is strictly at their own risk.

Aubrey L. Morgan