In this episode, Tim is accompanied by Will Papper, the Co-Founder of Syndicate. Syndicate is a decentralized investing protocol and social network that's transforming how the world creates value. Simply put, Will’s DAO knowledge is second to none. His DAO story began with him investing $10, which he got for signing up to Coinbase, into the Ethereum presale. And he has been fascinated with DAOs ever since.

During the course of the discussion, Tim and Will chat about the history of DAOs and their science fiction underpinnings, why invested DAOs are performing well despite the bear market, and why collaboration should be prioritized over voting in DAOs. Plus, Grindery Co-Founder, Marc Dangeard, joins to go through the specifics of setting up an investment DAO.

To find out how Grindery is building a Swiss army knife for existing DAO frameworks, head to grindery.io.

Transcript

Tim - 00:00:01: This is Tim Delhas and you are listening to DAO Talks Podcast. Over the last couple of years, we've seen DAOs go through a roller coaster ride from being nowhere to everywhere. But what exactly are DAOs or decentralized autonomous organizations? And how can we use them as a lens to view the wider world? What is happening to them now in the beer market? Is at the end of it? Or are we just normal hype cycle? All of that and much more is what we want to find out together.

Tim - 00:00:30: Today, I'll be talking to Will, one of the co-founders of Syndicate. Will invested his first $10 that he got from Coinbase for signing up into the Ethereum presale. He was one of the investors in the original DAO, and he's been fascinated with DAOs ever since. And that's how they built Syndicate. We're going to be talking about DAOs and if they are really dead and networking, as many say today. And we look into very specific examples on how to set up an investment DAO on Syndiacte.io. Let's get right into it. Hey, Will. How are you?

Will - 00:01:17: Hey there Tim, great to be here.

Tim - 00:01:19: Good to have you. Where are you right now? Where did you slide into the new year?

Will - 00:01:24: Yeah, at this moment, I'm in Houston, but I was just in Miami and then heading back to the Bay Area pretty soon.

Tim - 00:01:30: All right, very good. Listen, let's jump right into it. You're obviously one of the co-founders of Syndicate. You've been around and in and on top and beside DAOs and specifically investment DAOs. And recently I've seen you launched a new product around collective. So you're one of the few people that is really in the center of helping others to build DAOs. And if we look back maybe to the beginning of 2022, I remember everything was DAOs. Everybody was like, DAOs, DAOs, DAOs, DAOs, DAOs. Like DAOs everywhere. They're going to be everywhere. They're going to change everything. The last conversations I had in December was a lot of them surprisingly agreed or not saying DAOs failed. They don't work. They don't get us anywhere. They're not needed. What do you say to that?

Will - 00:02:22: Yeah, so I think that we all have seen that Hype cycle graph before of a technology where you start out in the early stages and there's some people playing around with it, and then at some point, it hits this huge increase where people think it would completely change the world and revolutionize everything. And then it falls back down to a steady state. And that study state is one where people realize that it does trade offs. It's good for some things and it's bad for others, and people start to really see how to apply that technology. So I think if we look at the history of DAOs, it's important to remember that DAOs as a concept didn't exist until a book called Daemon by Daniel Suarez. And that was written in 2006. So DAOs were science fiction then. DAOs as an implementation didn't really exist until the DAO and Ethereum in 2016. So it took only a decade for it to go from science fiction to reality. But now we're barely half a decade into Taoist, so we're still very, very early in the world of DAOs . I think that DAOs , in my mind, are a very good technology. When you want resiliency, when you want a structure that can last for a very long time, that can make decisions deliberately and thoughtfully, that can take input from a wide variety of people. DAOs are not a good structure when you want efficiency, when you want to make decisions quickly, or when the cost of making a bad decision is very low, you probably don't need a DAO. You probably can use a traditional corporation. I think the reason why people are saying that DAOs failed is because as we hit that peak of the hype for DAOs , people weren't thinking about what DAOs were good for or bad for. They were thinking about DAOs for everything, including things that frankly don't need DAOs because they need to operate very quickly, and the cost of bad decisions is very low. Now that things have settled down, I think that people are seeing what DAOs are good for. In my mind, I mean, of course, I'm dedicating my every day to working on this, so I certainly have a point of view on it. But in my mind, DAOs are excellent for investing. We're making a very small number of decisions, and the cost of making a bad decision is reasonably high. DAOs are also very good for stewardship. For example, had constitution DAOs succeeded, I think that we would have been able to steward the constitution in a way that would be very community driven and more resilient than being owned by one individual archive, for example, Ark IBE. Is very much a spiritual successor to that kind of mission. And DAOs are also very good for cultivating communities where you want a wide variety of people to be involved and to have a sense of participation and in some cases, of science of ownership. Now our DAO is going to replace corporations. Probably not. Probably not for a very long time. Maybe it'll be decades, maybe it won't happen at all. Our DAO is going to start to replace different subsets of uses that were previously centralized. Like investing, like stewardship of cultural assets? I certainly think so, and I think that that's already happening. So have DAOs failed to replace all types of organizational structures? Yes, most certainly. And there was a point in 2000 and 22,021 when people thought that would happen. Have DAOs failed on the things that they're really well suited for? No. I mean, at Syndicate, most of our growth has come in the bear market. We see DAOs increasing significantly for the use cases they're very good for the more long term, less speculative use cases. I think DAOs are really powerful there. Good.

Tim - 00:05:54: And obviously with syndicate you are working on investment DAOs or DAOs for investment, and you set yourself history of DAOs and implementation goes back to the DAO. I know you come from background, I think a computer science as well as an art. You have an arts major philosophy.

Will - 00:06:14: My covenant studied studio art. So philosophy, computer science, studio art, all in one cofounder pair. It's quite interesting.

Tim - 00:06:20: It's a good mix going back and I'm kind of curious and would love you to talk through it. Were you involved with the DAO back then? So tell a bit about the founder story and background and how you actually got involved in DAOs .

Will - 00:06:34: Yeah, absolutely. So I'll start a bit with my entry into crypto and then talk about the DAO and then talk about how those ideas directly inspired syndicate. So I first got exposure to the cryptocurrency space in 2013. I was working on mesh networking software one summer at the MIT Media Lab. And at the time the big decentralized technologies were Mesh Networks, Bitcoin and Tor. I was working at Mesh Networks, I wasn't working on cryptocurrencies, but through Mesh Networks I got exposed to cryptocurrencies and I dove down the Bitcoin rabbit hole from there, started doing some all side projects, and I saw how difficult it was to do things on top of Bitcoin because of its lack of programmability. It was essentially the difficulty levels for creating a token was the same as creating an entirely new blockchain. So I saw that Bitcoin was somewhat limited in what it could do. And then I heard about the Ethereum presale and I took the $10 I got in for free as a sign up bonus from Coinbase. I didn't have much money to invest at the time, but I put those $10 into the Ethereum presale. If I'd put $100 in, I could have bought a house with it, but hindsight 2020 from there. I started tracking the Ethereum ecosystem very closely from the presale onwards, and I believe my very first smart contract interaction actually was the DAO in 2016. So the DAO in 2016 really captured people's imagination in the Ethereum ecosystem at the time. It had this very utopian optimistic spirit of let's start essentially an investment DAO for the Ethereum ecosystem. It attracted, I believe, 11% of all Ethernet existence, more or less. That and in dollar terms today, it would have been a fund worth tens of billions of dollars, if I recall correctly. But the DAO as an investment DAO for the Ethereum ecosystem was hacked. That led to the split between Ethereum, Ethereum classic and from there we never got to see the DAO’s vision realize. And there's this really interesting thing that happened post 2016, post the DAO, which is that no one really revived it for the next three years. There were certainly DAO initiatives going on. Aragon, open law, gnosis to some extent, and some unchanged governance in 2018 through compound governor and such. But no one really revived the idea of this very open, very participatory investment DAO that anyone can participate in. That idea wasn't revived, and it's clear that this on chain activity would become people's reputations, where it would become about what you had done rather than what you said. And it was clear that The DAO in 2016 and the emerging crypto venture ecosystem at the time was really capturing people's imaginations. But it was surprising to us that this wasn't being taken forward. And it was only until 2020, in DFI summer, when Ian and I looked around at the ecosystem and looked at each other, and we were like, I think that the world is ready for something like Syndicate now. So then we decided to found Syndicate in January 21. Since then we've created over 32,000 investment DAOs, and in addition, there's over 1400 collectives, essentially investment communities. And in total there's well over 300,000 members of our investment protocols. And we've seen the investment DAO space grow from a small handful of investment DAOs to literally tens of thousands in the span of essentially just two years. So it's been really incredible to watch. And I think that the investment DAO space is one that will continue to be resilient in the bear market, because investment DAOs tend to be a bit longer term and less speculative than some other DAO types.

Tim - 00:10:29: And I think you said earlier that during the bear market you actually seen somewhat of either continuous or accelerated growth of investment DAOs. Can you speak to that? And what is your understanding or hypothesis why that is the case? Like what's happening there? To give you an example, I've been talking with people with other DAO platforms, they've seen activity collapse by 99%, right? And yes, it might be NFT collecting DAOs. And there's all sorts of very obvious reasons and context in the market that, you know, allow you to build a hypothesis why this is the case now in your case with Syndicate, maybe talk a little bit more about the specific numbers over the last twelve months, and we would be very interested in hearing what your hypothesis is. What's happening with investment doubts during the bear market?

Will - 00:11:27: Yeah, so in general, as a rule of thumb, most crypto usage is correlated with the price. So if the price is down 75%, usage is probably down 75% or more for us. Of our 32,000 investment DAOs, the vast, vast majority were recruited over the past twelve months. Only a very small portion were created before then. We're also in private beta in 2021 and then public beta in 2022. So it's not the perfect segmentation between the bowl and the bear market. But for us, investment DAOs in many ways are. Yes, there is part of it where it is in line with other crypto cycles, where as more people are interested in investing in crypto, more people would be interested in investment DAOs. Sure, that makes sense. But there's another element of it which is very interesting that's countercyclical, where as crypto prices go down, investment DAOs start to become more appealing. I think they start to become more appealing for two reasons. One is that people who might have had substantial buying power as individuals in the bull market might want to aggregate their buying power as a group, buy valuable NFTs without involving anyone else in the bear market. Maybe they want to diversify more or maybe they want to bring in more capital. So I think there is one element of that whereas prices go down, the desire to collaborate goes up and the other element that is interesting is that the more speculative use cases in crypto, interest in them increases as the price increases, everything's going up, we're all going to make it, et cetera, et cetera. It kind of becomes this I don't want to go far as to say speculative mania I think that 2021 was not a speculative mania I think it was probably accelerated expectations, but not unreasonable ones. 2017 was much more of a speculative mania when L1s for dentists were taking off and things like that. But in 2022 with investment DAOs, I think that there is an element of a lot of these assets are at very appealing prices right now assets that are down 90%, that have really good fundamentals to them, those assets are now more appealing to buy. So, like, yes, there is less overall interest in investing in crypto because a lot of that is correlated with price. But at the same time, for high quality assets that people want to own for a long time and own with groups of people, I think that investment DAOs become more appealing in the bear market in a way that's unique among DAO types.

Tim - 00:13:46: I want to pick up on that a little bit more, which is the conversation about the question who actually sets up or participates in this investment DAOs? Like, what have you learned about the profile of people, be it age or professional background or who participates and what is the most common use case? What are people investing in? And then I want to actually go in, if you don't mind, and talk about a specific use case on the bring on. Marc, a friend of mine, a business partner, who is in the process of setting up an investment fund through a program through the Founders Institute, which is called VC Labs. And I would love him to ask you a few questions why or why not he should set up a DAO or not? Okay, so let me just bring him on.

Will - 00:14:41: Yes, absolutely. And great at that. Marc, I'm excited to dive in. So in terms of users, one thing that we tend to see is, first of all, they need to know how to interact with smart contracts to use syndicate that does create a certain barrier to entry. The vast majority of crypto users are using exchanges directly. The very small percentage of say, holders of ether have actually used Ethereum on chain. Many of them are holding it in centralized exchange accounts. As we've seen, centralized exchange accounts are less than ideal for a wide variety of reasons. And I think that we might see more and more activity move on, chain as time goes on, but because you have to know how to interact with smart contracts. I do want to point out that investment DAOs, as a result already are targeting a significantly smaller market than all crypto users and a significantly more skilled one. Essentially the users tend to be crypto savvy and they tend to want to hold assets for the long term. We don't see highly speculative users, we tend to see much more long term oriented users, people who are deeply researched in the space, who are dedicating a lot of time to it, who aren't just going to leave when the price goes down. And in general I'd say that tend to be people who are very knowledgeable, experienced with self custody and then the amount of capital they have to invest varies widely. So in some cases, for example, it might be people are just starting their investing journey. One group, the Symmetrical for example, they are a group of gen z investors who are operating on top of syndicate and a lot of them can build up a track record and reputation for what the investments are making thanks to investment DAOs. Some DAOs have much more capital to invest and are more traditional. Outliers for example is a venture fund running about 80% of their operations entirely on top of syndicate and they are a traditional venture fund that converted to a DAO and then there are also traditional venture institutions that have DAO elements to them. I'd say that all are experiential self custody, crypto native, less speculative, deeply researched where there is no commonality is the amount of capital to invest. It can be everything from a very small amount to many many millions and it can be anywhere along those spectrums.

Tim - 00:16:56: Perfect shows a very clear understanding from your profile of users and what is the most common activity like what do your investment DAOs invest in and what do you know about the activities.

Will - 00:17:09: Yeah, so in terms of total holdings, what we know is what's available on chain and of course NFT and token purchases are very common. We tend to see buy and hold activity, we tend to see less trading activity. Investment DAOs look at decision making structure are not as good for trading activity but they are much better for buy and hold decisions. And then we also see a lot of investments in startup equity. I'd say that's the most common asset type besides tokens and NFTs startup equity where they're collecting funds on chain and then investing in an asset off chain. We've done that internally at Syndicate for investments by team members into companies that we work with. We have groups that are investing in startup equity frequently. So I'd say that it's hard to get an AUI breakdown because we don't know the total value of the startups that people are investing in. But my intuition is that NFTs are the largest holding by frequency, but startup activity is likely the largest investments by amount of assets.

Tim - 00:18:05: I know that you guys obviously support very uniquely this ability to kind of run dual, to be on chain and to incorporate an entity and you try to make this extremely easy for the members and creators of the Syndicates. The investment DAOs. What's the core problem that you've seen there that you've been trying to solve and how have you solved it? So how does this model, specifically when you're talking about investing into startups actually work? And how does that go from like on chain to the real world with real legal ramifications?

Marc - 00:18:41: Yeah, so we're not in the world where DAOs are able to operate with real world assets ease, yet unfortunately, the rest of the traditional world will still need to catch up to the ideas that they have to represent. So there are cases where you have to bridge back to the traditional world and one is with corporate entities, particularly for startup equity investments. So we've set up legal document templates that essentially allow people to really easily spin up a corporate entity where the ownership of the corporate entity is linked to the DAO. That's very key and that's something that a lot of groups that talk about legal entities, you always need to dive into whether it's truly linked between the two because sometimes that's not the case and that's very bad. So what essentially it is that if you choose to add a corporate entity, which is optional but makes sense for some asset types like startup equity, the ownership of the DAO tokens is the same as ownership of the captain of the corporate entity. So if you own 10% of the DAO tokens, you also own 10% of the corporate entity. It's one and the same. And by linking those two, you end up with something very powerful which is that you can have this bridge back to the real world assets with very, very little effort, which is really nice. You don't need to maintain two cap tables. The DAO is able to get legal recognition with very little overhead. Anything that deals with corporate entities and government and regulatory filings are always going to be a bit more expensive and a bit more time consuming. So of course you can set up on chain DAO with Syndicate in seconds for pennies on polygon or dollars on mainnet. But setting up a corporate entity will take anywhere between 48 hours and a couple of weeks and will be a few hundred dollars. So the corporate entity is really useful for certain asset types, is also really useful in groups where you want more legal certainty and some liability reduction. Let's say you don't know your group that well and you're worried about potential disputes. Adding a legal entity is a really good way to protect yourself against that and to keep the group protected. But yeah, it's definitely a structure that it's really key for the DAOs that leverage it to be able to have that kind of ability. It makes sense for a subset of asset types, but for the asset types it's necessary for makes a big difference.

Tim - 00:20:56: So let's go into this a bit more hands on, and I want to bring Marc here on stage. So Marc is part of a program called the VC Lab by the Founder Institute and they're incubating VC funds. And as I understand and Marc can talk a little bit more about it, there's over 100 people in there. There's going to be dozens and dozens of funds created. They're going to be created over the next few months and everyone is setting up traditional structures. And I think Mark can talk to that, that he's really deeply looking into it using a DAO structure. And what I'm particularly interested in is should he do that or should he not do that? And Marc, you can bring more to that on the table. 

Marc - 00:21:44: And I can, sure there's lots of questions, actually, when you think of going into a practical case, questions of geolocation. I mean, you mentioned corporate entities. In your experience, is this mostly us at this point or outside of the US. There's definitely an impact here. The types of investors you mentioned, people that are familiar with crypto, does that mean you cannot bring LPs or just traditional LPs, but interested in Web3 as a way to change the world somehow? And then the investment decisions. I'm curious about how you manage the difference between you mentioned owning 10% of DAO and does that mean you have 10% of the voting capabilities or do you have structure where you can have investment decisions separate from the table somehow or how much people have invested in the DAO?

Will - 00:22:37: Absolutely. Yeah, I'm happy to dive into all that. I think first, it's probably most relevant to start with essentially, like why a DAO should this be a DAO? So the first things that we always start with when we're helping groups set up investment tasks is essentially two questions. One is who is your community? And two is how will they contribute? Some examples of what that could look like. So sometimes that community is, for example, a scout network where people will be sourcing investments from many scouts and then they contribute by providing that deal flow to the DAO. And then they could be compensated in, for example, carrying that deal. The percentage of the DAO tokens very easily. Maybe that community is a community that will be jointly managing funds so instead of scouts who are surfacing deals that a manager decides to approve, maybe everyone is putting money in jointly and everyone is making decisions jointly. Sometimes that community is a bit more hands off in a fund structure. For example, maybe a community is deferring to a manager and maybe they are contributing via analysis or research or helping startups. And when they help portfolio companies, they receive some carry. So there's many, many different options. But I'm curious about who you have in mind for your community and how you think they'll contribute.

Marc - 00:23:51: So at this stage, we're looking more at venture studios. So the idea is to identify infrastructure startups that are important to build the ecosystem. And so that's what we want to identify and help. In terms of investors, it's anybody who is interested in Web3 as a way to change the world.

Will - 00:24:12: Excellent, that's really helpful. So let's say I want to contribute to your DAO. What's the best way for me to contribute? Am I contributing by surfacing infrastructure startups for you? Am I contributing by helping provide feedback to those infrastructure startups? Am I more of a community of enthusiasts, supporters, where you're telling me, great news that's happened in the portfolio community and I'm celebrating that.

Marc - 00:24:35: So I would say all of these above, actually, that's the idea is to go after and create a community that includes all stakeholders, including the builders, and including people who are not necessarily technically savvy, but would like to participate and contribute through funding, for example, or through coaching of startups.

Will - 00:24:56: Right? Yeah. This is a fantastic use case for a DAO because I think that the best cases for DAOs are ones that involve both funds and contributions. If it's only funds, then it starts to be a bit less clear about why it should be a DAO over a traditional venture fund. And if it's only contributions, that's certainly relevant, but then it's harder to give people ownership, it's harder to give people upside. So combining both is fantastic. So I could talk a little bit about common structures that we see that I think might be relevant. So one way you could structure this, for example, is via a series of special purpose vehicles where anyone can propose a deal to the DAO. The DAO takes a certain allocation of that deal and then that allocation is made available to either DAO members or supporters of the DAO. Maybe that's other investors, maybe that's angel investors, things along those lines. And running these as separate special purpose vehicles is really nice because you can give Carry in individual deals where if the deal is profitable for listeners who might not be familiar with Carry, if the deal is profitable, a percentage of the profits can go back to the person who sourced the deal. So that's one option. And that option is very interesting because you're not managing a pot of funds and deciding how to allocate it. But you're instead acting as more of a curator and you're deciding what to fleck for the community and what to surface. The other option, of course, is a more traditional fund structure where you do in fact raise funds and you do manage those funds directly. And then people who help portfolio companies could carry in the fund and the more they help the portfolio companies, the more carry they get. So in both cases, whether it's one off investment vehicles that are sourced by the community or a combined investment vehicle that community members have ownership in, we see both of those structures on top of syndicate and both are very interesting. And I'm curious which one stands out to you as intriguing or more appealing? And we can dive in on that.

Marc - 00:26:56: So, from what I understand, there would be a concept of a pod for each startup and then people would contribute to a pod. Is that the idea for individual vehicles for each startup?

Will - 00:27:10: Yes. That's a really nice structure because that lets you figure out how much you want to give out for contributors much more easily. So, for example, you could, with a special person vehicle, reserve 10% of the carry for the person who sourced the deal and reserve, say, another 10% of the performance fees to people who help support that deal. Then you don't have to figure out how much did someone contribute to the overall portfolio, but you can just figure out did someone meaningfully help this particular company? If you have a combined fund, people will get more diversified ownership when they help out the portfolio, which is great, but it's also harder to measure contributions. So different tradeoffs in both approaches.

Marc - 00:27:48: Interesting. Yeah, I see value in both, actually, because there's a bit of a lottery ticket with startups. Right. I mean, sometimes they work, sometimes they don't, and it's hard to predict what will work and what will not because you don't control the market. So having pods makes you run the risk of getting involved with something that is not going to be the lottery ticket. Is there a way to do a combination of both where you get a bit of the pod, but some of that is also part of the pools?

Will - 00:28:16: Yeah, you definitely can. So, in that case, the way it's structured is you'd have these special purpose vehicles where a percentage of the carrier, percentage of the profits are going back to the people you select, and maybe a percentage goes directly to the person who sourced the deal. But then maybe a percentage goes back to a fund structure, and then that fund is shared by all contributors.

Tim - 00:28:35: Well, one question and can you do this all on chain, on syndicate, or do you have to rely on off chain and legal papers to do this structured?

Will - 00:28:45: Yeah, that's a great question. So that's the benefit of linking the DAO tokens to the legal entity is that all of this. Is fully transparent on chain and all of this is essentially fully open to the community as you see fit. So you need to set up these legal documents initially to link the ownership of these entities to the members. And you need to, for example, specifying the legal documents that some of the carry might be given away and how much of it will be given away, et cetera. But then once you set up that initial legal work, the rest can be managed on chain, which is fantastic. So if you want to add, for example, 50 people and change their contribution amounts and give them slightly more tokens over time, or maybe they get slightly fewer, maybe you're issuing new tokens every season for new contributors, et cetera. You can run very sophisticated token structures on chain because at the end of the day, as long as those tokens get into the hands of the contributors, then they have ownership of the corporate entity too. So for example, let's say you want to have seasons where every season you have a certain percentage of tokens to give away and then you generate new tokens the next season to give those away as well. Maybe those seasons are quarterly, maybe those seasons are yearly. As long as you've linked the on chain entity to the legal entity and as long as you've confirmed under the jurisdiction that you're in that your token distribution is compliant, you can run that entirely on chain, which is fantastic.

Marc - 00:30:13: So how easy is it for an LP to then put the money into crypto so that it can be run through a DAO? What's your experiencing that?

Will - 00:30:22: Yeah, so this is usually what we tell groups is if a majority of the investors in your vehicles are comfortable handling crypto then syndicate is likely a good fit. If the majority of limited partners are not comfortable handling crypto then syndicate is likely not a good fit. It would be a lot more work than using a traditional option. The reason why is that when you move on chain you get so much benefits in terms of what you can do with automation of a lot of these administrative features, transparency reporting that being on chain provides a ton of time savings and makes administration significantly smoother. But if you're taking a lot of funds off chain and you're disturbing a lot of funds off chain, then you start to lose some of those administrative benefits. So you can take funds from limited partners off chain. You can also invest in startups off chain. It's just a lot more manual. So if it's a handful of them, if it's for example 60, 70% on chain, then the benefit you get from being on chain may outweigh the manual work. If it's 60% to 70% off chain you might be duplicating your workload. So you can take funds off chain, you can invest funds off chain, but if a majority of your funds will be off chain, then investment DAOs, at least at this point, are likely not a good fit until it literally becomes as easy as using, say, the Coinbase app. We're very far from that right now. Over the next three or five years we might be a lot closer.

Marc - 00:31:48: How about the accounting because there's money coming in and out and so the accounting part of it is taken care of or is it something that needs to be plugged into other solutions?

Will - 00:32:01: Yeah, that's a massive, massive benefit of being on chain is that because all of the funds are being tracked on chain, accounting becomes much simpler and much more transparent. So a lot of the traditional, for example, are reporting and disclosure requirements where, for example, you need to calculate the value of your assets. If all of your assets are on chain and all of your funds have been taken on chain and all of your distributions are on chain, then that's fully automated and that's always available to limited partners at any time they want. If you're holding off chain assets, then you'll have some more accounting requirements. And if you're frequently entering or exiting positions, the accounting requirements will be fully automated, but you'll start to have a bit more overhead when you're filing the taxes for it. So the bottom line is that the more on chain you are, the simpler the accounting is, the more off chain you are, the more traditional sites look and the more of those benefits you start to lose.

Tim - 00:32:51: Well, it's evident that the more blockchain usage is there, the more investments happen online, the more the regulatory environment moves hand in hand with what we are all developing here, the lower the administrative overhead right, because of the transparency and the reporting and the accounting. And I think that's very clear. The things that came to my mind is too, it seems to me from my interpretation, from what you said, is that investment DAOs have a great competitive edge because they can distribute carry as incentive in many different ways, right. So you can find new ways of deal sourcing and you can find new ways of providing support to develop the assets, right, whatever that is, be it startups and so on. And that seems to be the most compelling argument about why you want to move on chain because you can build better structures. The flip side to the coin is that and I think this is a statement from 20 years ago from Warren Buffett where journalists asked him and said, how many people do you ask when you take big investment decisions? Okay? And I think he said, as little as possible because the more you ask, the more average that decision becomes and the average the return becomes. And it seems to me that in this investment DAOs these two things somehow get into conflict, right? So while I could see the benefit of the incentive and carry and support for sourcing, the decision making on the community level will tend out to be more average because you have more people involved.

Will - 00:34:37: So investment DAOs are very much a community for a structure, and that community for structure has a lot of benefits in terms of how ownership can be distributed and how more people can be involved and how the investments you make can be supported in much more depth than before. Of course, that is a downside. It's a whole lot harder to run a 100 person community than it is to run a 10% community, and it's a whole lot harder to run a ten person community than it is to run a one person investment fund. So the way I describe it is that DAOs at the end of the day are a community structure. If you want to involve a community, DAOs are excellent. If you don't want to involve a community, a traditional structure is probably better. But you can choose with DAOs where that community is involved. So maybe that community is involved in sourcing deals, but not decision making for deals. Maybe they aren't making the investment decisions depending on the regulatory structure you're choosing, but they are surfacing ideas that you can invest in. Some of our DAOs operate that way, especially the more traditional, venture focused ones. There's one brand of thinking in the DAO space that's very, very governance focused, and it's the idea that DAO is defined by the fact that everyone votes, in particular, everyone votes on chain. This is false. If you look at Daemon, the science fiction that invented DAOs, it didn't even have on chain voting. It instead had collaboration. There wasn't voting. There was just people would decide how to collaborate and when to collaborate. And the protocol would essentially aid that collaboration and help automate features of it. So I do think that if you have everyone voting jointly, your returns will look closer to the average than a small number of people making decisions. Some groups want that they like the essentially downside protection you get of this kind of joint decision making. And some groups don't want that. They want the outsized returns you can get from one person's bold bet that everyone else thinks is a bad idea until five years later they're proven right. So you can have both structures and DAOs. At the end of the day, DAOs need a community, but DAOs do not need everyone to vote on every decision that's optional, and it depends on the structure you choose.

Tim - 00:36:37: Will, that was a good closing and summary. Appreciate very much your time. This was very interesting.

Will - 00:36:44: It was so great to brainstorm on it. Absolutely anyone listening can feel free to email me at will@syndicate.io or I'm just @willpapper on Twitter if these structures sound interesting to you. Absolutely follow up.

Will - 00:36:56: All right, thank you, guys.

Marc - 00:36:58: Thanks so much.

Tim - 00:36:58: Thank you.

Tim - 00:36:59: DAO Talks is brought to you by Grindery if you enjoyed this podcast, consider subscribing to dial talks on Apple Podcast, Spotify, Google or any other platform you fancy. To find out more about Grindery, visit grindery.IO. Thanks for joining me. Tim out.