Venture Capital, for the longest time, has been the mainstay of startup support, be it in the form of capital, networking, mentorship, and strategic guidance. Q1 of 2025 alone has seen nearly $113 billion in VC funding globally, with a large chunk (over 50%) of it going toward AI startups.
While the VC model has powered many success stories, its limitations are hard to ignore. Founders often find themselves trading their long-term vision for their VC’s chase toward inflated valuation exits.
So, what if there were a way to raise capital without giving up control or chasing trends? The answer lies in Investment Decentralised Autonomous Organisations (DAOS); a blockchain-based investment medium where funds are allocated based on the consensus of all parties involved. Unlike VCs, a DAO’s incentives are toward benefiting all members of its community, which is directly linked to the overall quality and sustainability of the project.
If you are a founder looking for startup options, this post is for you. It will break down investment DAOs vs VCs in simple terms–how they work, where each model fits, to help you decide what would work better for you.
Investment DAOs: In a Nutshell
Investment DAOs are communities built upon blockchain technology with the sole purpose of funding projects and initiatives. They raise funds by creating and selling “governance tokens,” which give each holder equal voting rights on decisions.
Unlike traditional early-stage venture capital firms, this model limits decision-making power to key stakeholders rather than concentrating it in a centralized group.
These organizations run on smart contracts that are self-operating pieces of code. They are designed to execute decisions based on rules set with the common consensus of every token holder.
Here is a detailed breakdown of DAOs vs VCs that will explain how this model of funding is gaining an edge:
- Broader access to funding: Venture Capital “How to invest (and where)” decisions are often limited to their networks or hot sectors. DAOs, on the other hand, open the doors to backers globally who are free to invest if they see potential in your idea.
- Greater control over the startup’s roadmap: In VC models, you gain funding, trade equity, and a large portion of autonomy over decision making. With DAOs, capital comes from a collective, as do the decisions, with the added benefit of aligned agendas.
- Faster Funding Cycles: Smart contracts in DAOs skip all the red tape that comes with a VC model. Funding is released the moment certain set conditions are met.
- Built-in transparency: Since DAOs are built on blockchain technology, every action and transaction recorded is transparent and secure.
DAOs are also gaining an edge over the VC model due to two major pain points:
- Unrealistic growth targets: VC firms expect aggressive scaling, sometimes at the cost of thoughtful development and innovation.
- High-pressure timelines: You might feel forced to hit milestones that look good on paper, even if they are not right for your stage or market.
Real-World Examples of Successful Investment DAOs
Now, let’s look at a few examples of DAOs in action to better understand why decentralized investing is gaining such momentum.
The LAO
The LAO (Limited Liability Autonomous Organization) is one of the earliest examples of a venture-style DAO. Since its inception, it has backed over 130 Ethereum-based projects. It allows members to pool funds and collectively decide on investments in early-stage blockchain ventures.
MakerDAO
MakerDAO is one of the earliest and most influential DAOs in the DeFi space. It governs a stablecoin named “DAI” (that they created) that is backed by crypto assets. The entire community then proposes and votes on how and where money should be spent based on DAI’s stability and risk framework.
Aragon
Aragon is a platform that powers the creation and management of DAOs. While it is not a DAO that provides investments, it provides the tools to build and manage decentralized organizations and expertise on running community-based projects.
While some DAOs rely on token-based governance, where voting power is tied to how many tokens you hold. In the spirit of innovation and evolution, some models are reputation-based, where influence is earned by contributing to the community, not just by putting in money (another feather in the cap of DAOs).
What Decentralized Investments Could Look Like in the Coming Years?
As technology surrounding blockchain and DeFi matures, we could see the following changes in the DAO space:
Tokenizing Real-World Assets
Tokenization of real-world assets (RWAs) like real estate, art, or even equity could be the next big thing. Companies like RealT and platforms like Swarm have already gotten the ball rolling in this space, and soon we should see more DAOs backing projects tied to real-world assets.
Connecting Blockchains Seamlessly
As DeFi tools improve, so will the need for cross-chain interoperability. At the moment, most DAOs operate within their individual ecosystems. We could see assets and contracts moving easily across blockchains, making decentralized investing even more accessible.
Letting AI Take the Lead
We’re also starting to see the rise of AI-powered DeFi platforms like Numer.AI and Fyde that can analyze market trends, automate strategies, and even help DAOs make smarter investment decisions.
Welcoming Institutions to the Table
As regulations become clearer, we might see traditional investors using venture DAO models to diversify their portfolios; a move that possibly brings in more investments and credibility to the niche.
Better Safety Nets For Investors
As all of the above advancements take better shape, we should also see improvements in DeFi insurance and security protocols to protect the sanctity of the DAO ecosystem.
Final Thoughts on DAOs Vs VCs
Investment DAOs are making funding faster, more democratic, and more founder-friendly. As an increasingly viable model, opting to go down this route can be more than just an option; it could be that strategic move that could give you an advantage.
That said, if you are building something bold and need funding without compromising on your vision, Kreatorverse can help. We work with founders navigating the Web3 space and provide insight and support.
Get in touch to know what else we can do for you.
FAQs
1. How is an Investment DAO different from a traditional venture capital firm?
Unlike traditional VC firms, where a few hold the power of the purse and, as a result, make the decisions, a DAO is decentralized. Here, each member of the community holds funds and has an equal vote in the decision-making process.
2. Can Investment DAOs really replace VCs?
As they are now, no, DAOs cannot fully replace VCs, at least until the framework and regulations mature fully. They can, however, complement VCs to help you retain more control over your equity.
3. Which is better: DAOs or VCs?
That depends on your goals. DAOs are ideal if you want community-driven backing and more control. VCs may suit you better if you need expert guidance, structured support, and access to their network.
4. Are Investment DAOs legal?
Yes, in many regions, but it comes down to local laws. Some DAOs register as LLCs or foundations to operate within existing frameworks. Always get a legal consultation when in doubt.
5. Which are some popular platforms to launch your DAO?
Popular platforms, such as Aragon, Syndicate, and Kreatoverse, can help with everything you need to get your DAO up and running smoothly.
