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Spinning up a cryptocurrency-fueled investment community in the form of a decentralized autonomous organization (DAO) should be as easy as creating a group chat.
That’s according to Syndicate Protocol, a decentralized investment platform tapping into the power of social networks, which announced on Tuesday the beta launch of its first crypto-native investing tool: Web3 Investment Clubs.
The startup, which raised $20 million in the summer of last year, has taken the concept of traditional investment clubs, where groups of people are invited to meet up in town halls, restaurants and the like, to pool their capital and discuss investing in stocks, bonds or real estate – and revamped it for a blockchain age.
Traditional investment clubs are generally not regulated by the U.S. Securities and Exchange Commission (SEC), but there are certain guidelines set out by the regulator. Ultimately it’s up to the individual DAOs that run on top of Syndicate Protocol and use its dashboards to manage those particular organizations in accordance with their jurisdictions.
That said, Syndicate has gone some way towards making it easier to comply with whatever requirements are necessary, explained the protocol’s co-founder, Ian Lee.
“We’ve worked with a number of external partners like law firm Latham & Watkins, who helped advise in the creation of the different legal templates and tools, specifically for investment clubs that are embedded in the product,” Lee said in an interview with CoinDesk.
Lee said Syndicate is also partnering with Doola, a platform that helps incorporate businesses in the U.S. and which will help DAOs become legal entities, open fiat bank accounts and even file taxes and issue K-1s to members, he added.
It’s not the first time an antiquated but essentially sound idea has been made new with the help of blockchains and tokenization; decentralized insurance alternative Nexus Mutual took the idea of community-based mutuals and tailored it to decentralized finance (DeFi).
Lee’s partner, Syndicate co-founder Will Papper, pointed out that investment clubs were quite hard to set up in the past and rather limited in scope. Not so with DAOs, however.
“Translating [investment clubs] to the DAO space will open up the sea change in terms of what the future of capital allocation looks like,” said Papper in an interview. “The end results will be so, so different. It’s like the shift from film and media to YouTube, in terms of its ease of use, cost reduction and distribution.”
Syndicate is already working with a number of Web 3 communities including South Park Commons, Vector DAO, Global Coin Research (GCR), Chapter One, DAO Jones, Awesome People DAO, Eve Investment Club and Morii Music DAO.
Syndicate stalwart GCR has been labeled a disruptor of the traditional VC model; the latter typically means employing a team of full-time staffers and a handful of execs who make a final investment decision, while also relying on a whole ecosystem of people who don’t generally see any upside.
Since last year, when GCR turned itself into a DAO using Syndicate, it has invested some $26 million of funds contributed by its crypto-focused accredited-investor participants, said GCR founder Joyce Yang.
“It feels like we are pushing the forefront of how research is written by the community and also how deals are invested,” said Yang in an interview. “And I think Syndicate has really listened to the community about what new investment styles are developing and then built an MVP [minimum viable product] to see what really sticks with the community.”
Julia Lipton, founder of Awesome People DAO, recalled how she’s been in a WhatsApp group with a bunch of female fund managers for years.
“Now we can spin up on Syndicate, so it doesn’t just have to be talk. Every group chat can become a shared wallet that can become an investment vehicle,” Lipton told CoinDesk. “It’s about having the ability to quickly form a legal investment entity that you can easily put money in and out of, and not worry about having to do the work of a fund manager.”
UPDATE (Jan. 25, 19:30 UTC): Changes headline.