How to Invest in AI with DAOs (1)
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How to Invest in AI with DAOs (1)
Investment DAOs will gradually become a force in the investment market, coexisting with VCs in the long term.
Navigating Web3 tides with focused insightsAuthor: Wang Chao
Investment DAOs have strong compliance structures.
Investment DAOs do not have GPs; the essence of a successful investment DAO is a strong member network.
Investment DAOs will not replace VCs, but they will become an important force in the market and occasionally lead it.
A few days ago, I appeared on Web3 101 to talk about how my friends and I organized a DAO for AI investments. After the podcast was released, many people reached out with questions—many of which focused specifically on the details of investment DAOs. So I decided to write this article to share more deeply.
Before diving in, let me emphasize: there are many models for investment DAOs. The one I'll describe is a relatively mainstream approach, but it does not represent the entire market.
If we examine the most influential investment DAOs in the market—such as The LAO, MetaCartel, and Flamingo—we find they follow a similar model:
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Semi-closed structure; no public fundraising.
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Registered legal entity, some with bank accounts.
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Strong regulatory compliance.
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Membership capped at 99 individuals.
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No general partners (GPs), no management fees, no carry.
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Members must contribute capital and complete KYC and Accredited Investor verification.
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No token issuance; DAO rights are legally assigned directly to individual members through a formal legal framework.
The reason this model is common among leading investment DAOs is that investing involves asset ownership, appreciation, and distributions—areas where there is no room to bypass regulation. Compliance is essential to protect both member safety and investment integrity.
Strong compliance naturally means high barriers to entry, which deters most would-be participants. But this isn’t a problem for investment DAOs. This leads us to a factor even more critical than technical compliance—the composition of the member network.
A successful investment DAO isn’t about size—it’s about building a high-quality member network. Legal frameworks limit membership to 99 people, but in practice, no investment DAO reaches that cap. Even the most active ones hover around 60 members, while most operate between 20 and 40.
An investment DAO is an investment vehicle without GPs, meaning every member shares the responsibilities traditionally handled by a GP. Such a group, largely operating part-time, faces real challenges: Can it access sufficient deal flow? Can it make efficient and sound decisions? Will founders want funding from such a decentralized group? How will it support portfolio companies post-investment? How are exit strategies designed and executed? Each of these tests the capabilities of its members.
Simply contributing capital is not enough. Most members need deep passion for the domain and must consistently deliver meaningful contributions. Contributions can include sharing deal flow, spotting opportunities in public markets, applying investment experience to evaluate projects, or bringing specialized expertise that complements others. Ideally, a portion of members should also excel at external communication, amplifying the group’s voice collectively. Top-tier firms like a16z benefit greatly from content output—and investment DAOs are no different.
Take our AI-focused investment DAO as an example. The idea emerged in October 2022, but we didn’t launch until February 2023. During those four months, aside from setting up the proper structure, most of our time was spent curating—selecting the right people. Every invitation went through discussion and in-depth conversations. We currently have around 30 members, including founders from AI projects and game studios, experts from other tech fields, an Emmy Award-winning producer, AI scientists from major tech companies, legal specialists, veterans from the investment DAO space, and even a traditional investor who has backed nearly every space exploration startup. Naturally, those most familiar with DAOs come from the crypto world, so investors from various crypto funds make up the largest segment—about half. Geographically, we’re strongest in the San Francisco Bay Area—the epicenter of the current AI wave—with additional members across the U.S. East Coast, Europe, and Asia. This diverse background has been key to accessing high-quality deals early on.
Of course, curation is a two-way street—you vet them, and they vet you. There were people we really wanted to bring in who ultimately chose not to join, and that’s perfectly normal.
As more investment DAOs begin delivering results, a common question arises: Will investment DAOs replace VCs? My answer is clear—no.
Their positioning and operational models differ significantly. From both market role and capital scale perspectives, investment DAOs cannot replace VCs. That said, I’m far from pessimistic about their future. On the contrary, as investment DAOs continue to produce solid returns and awareness of the concept grows, we’ll see a surge of new DAOs focused on niche domains.
We already see investment DAOs dedicated to zero-knowledge proofs, DeSci, generative art, DeFi, and Web3 gaming—mostly within the crypto space. But investment DAOs aren’t confined to crypto. Our AI-focused DAO has already moved beyond crypto into broader AI investing. We’re not only securing deals, but high-quality ones—proving this model can succeed in traditional investment markets.
In the coming years, investment DAOs will gradually expand beyond the crypto ecosystem into wider investment arenas. Within one or two years, we may see DAOs focused on life sciences, quantum computing, robotics, film, and other verticals. Investment DAOs will grow into a significant force in the investment landscape, coexisting long-term with traditional VCs.
The strengths of investment DAOs lie in thematic focus, collective intelligence, and collective influence. A small, diverse group with sharp insights can, through sustained internal dialogue, make forward-looking judgments and shape market trends through unified messaging.
To be continued—in the next piece, I’ll dive into specific investment processes and the various challenges we’ve encountered. The Web3 101 podcast episode also contains many detailed and interesting stories—feel free to click “read more” to listen.
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