There has been a sharp increase recently in the adoption of cryptosystems such as DeFi and NFTs for investments and payments. More recently, decentralized autonomous organizations (DAOs) have also gained increasing acceptance. DAOs, when initially introduced in 2016, faced some problems with acceptance. They are now seeing a resurgence.
Now, DAOs are available in different forms. It is expected that DAOs will have the most influence on the mode of operation of VC funds. VC funds will have to change their business models and how they invest after DAOs become vehicles for investment. Web 3.0 will also alter the way investment opportunities are accessed by democratizing the investment process.
VC Investments in Web 3.0
VC investments in Web 3.0 will be different from the traditional VC approach. The investments will be directed to specialized crypto funds and to blockchain ecosystems. Web 3.0 projects will attract a larger number of investors steered by a DAO run by the community. Opposed to the previous mode of investments, behind closed doors, investments on Web 3.0 will be publicly made. In addition to merely providing capital, VC funds can also participate in the governance of their portfolio investments through community engagement.
Increasingly, VC funds, in addition to investing in DAOs, are becoming DAOs themselves. Stacker ventures is an example of such a VC fund. Venture capital is essentially a process of coming together as a community to invest with a common investment thesis. Web 3.0 enables newer ways in which people can come together and pool funds to invest.
VC funds have no option but to be cognizant of these developments and adapt to the changes. VC funds will have to move towards taking on the DAO structure to democratize their investment activities and make it community-driven.
VC funds, if they are to remain relevant in the Web 3.0 era, will need to change from their existing structures.