Y Combinator alumni raise $80 million for DAO to back crypto startups
Groups of people looking to invest together have turned to the crypto-native DAO (Decentralized Autonomous Organization) structure for a collective decision-making framework. While an investment DAO can typically only have 100 members in order to stay SEC compliant, Orange DAO has found a way to bring together over 1,000 Y Combinator alumni to support Web3 startups through a associated venture capital fund.
Orange DAO just raised $80 million in funding, primarily from two strategic investors: Layer 1 blockchains Algorand and Near, General Partner Ben Huh told TechCrunch in an interview.
>"They wanted to support our mission to bring more entrepreneurs to web3. For them, working with us and getting exposure to our entrepreneurs is really important because if one of our members builds a DeFi billion dollars, the investment he made in us is insignificant compared to the amount of benefit he gets from there,” Huh said.
The rest of the funding, he added, came from DAO members who became sponsors of the fund itself as well as some institutional investors.
< em>Members of the web3 company of s alumni of Y Combinator collective capital, Orange DAO. Image credits: Orange DAO
TechCrunch last spoke with Huh in January, shortly after the fund launched. At the time, Huh explained the unique structure of the DAO and why it was able to remain compliant despite its large size.
The DAO itself is structured as an LLC, Huh said, while the fund is run as a separate legal entity by Huh and a few other general partners. That way, the fund is far from the SEC's 100-investor cap for a venture capital group, though Huh and the other GPs are leveraging the DAO's hundreds of members to source investment ideas and demonstrate. diligence.
The group originally planned to raise $10 million in funding from investors to support crypto startups, Huh told TechCrunch this week. Since January, the group has grown from 1,000 to 1,300 members and backed 90 startups, up from 30 at the time, Huh said.
According to the group, its portfolio companies include crypto cap table management service Liquifi, decentralized credit platform Goldfinch, and crypto payment tool Spritz. On average, Huh said, the fund sends checks for $100,000 to each company.
As a first-time venture capital fund, Orange DAO cannot rely on its track record to attract new capital, Huh said. Instead, he sees his benefit coming from the network of Y Combinator alumni within the DAO who come together to help GPs create opportunities for diligence.
"By entrusting OrangeDAO with the work of supporting our portfolio companies and providing deal flow, we are reviewing 10 times more deals than we would normally see," said Huh.
p>Legally, the DAO and the fund are separate, but the DAO acts as a “funnel for entrepreneurs to apply for funding,” Huh said. Any carry or profit GPs earn on the fund is plowed back into the DAO's treasury to support new investments, he added.
So what are the benefits of investing through this DAO structure? Huh said members can reap the benefits by becoming members of the DAO and voting on what it does with its cash without needing to be accredited investors in a venture capital firm themselves. For investors outside of Orange DAO, the appeal comes from its strong network and deal flow from connectivity to Y Combinator, although YC officially has no affiliation with Orange DAO.
Orange...
Groups of people looking to invest together have turned to the crypto-native DAO (Decentralized Autonomous Organization) structure for a collective decision-making framework. While an investment DAO can typically only have 100 members in order to stay SEC compliant, Orange DAO has found a way to bring together over 1,000 Y Combinator alumni to support Web3 startups through a associated venture capital fund.
Orange DAO just raised $80 million in funding, primarily from two strategic investors: Layer 1 blockchains Algorand and Near, General Partner Ben Huh told TechCrunch in an interview.
>"They wanted to support our mission to bring more entrepreneurs to web3. For them, working with us and getting exposure to our entrepreneurs is really important because if one of our members builds a DeFi billion dollars, the investment he made in us is insignificant compared to the amount of benefit he gets from there,” Huh said.
The rest of the funding, he added, came from DAO members who became sponsors of the fund itself as well as some institutional investors.
< em>Members of the web3 company of s alumni of Y Combinator collective capital, Orange DAO. Image credits: Orange DAO
TechCrunch last spoke with Huh in January, shortly after the fund launched. At the time, Huh explained the unique structure of the DAO and why it was able to remain compliant despite its large size.
The DAO itself is structured as an LLC, Huh said, while the fund is run as a separate legal entity by Huh and a few other general partners. That way, the fund is far from the SEC's 100-investor cap for a venture capital group, though Huh and the other GPs are leveraging the DAO's hundreds of members to source investment ideas and demonstrate. diligence.
The group originally planned to raise $10 million in funding from investors to support crypto startups, Huh told TechCrunch this week. Since January, the group has grown from 1,000 to 1,300 members and backed 90 startups, up from 30 at the time, Huh said.
According to the group, its portfolio companies include crypto cap table management service Liquifi, decentralized credit platform Goldfinch, and crypto payment tool Spritz. On average, Huh said, the fund sends checks for $100,000 to each company.
As a first-time venture capital fund, Orange DAO cannot rely on its track record to attract new capital, Huh said. Instead, he sees his benefit coming from the network of Y Combinator alumni within the DAO who come together to help GPs create opportunities for diligence.
"By entrusting OrangeDAO with the work of supporting our portfolio companies and providing deal flow, we are reviewing 10 times more deals than we would normally see," said Huh.
p>Legally, the DAO and the fund are separate, but the DAO acts as a “funnel for entrepreneurs to apply for funding,” Huh said. Any carry or profit GPs earn on the fund is plowed back into the DAO's treasury to support new investments, he added.
So what are the benefits of investing through this DAO structure? Huh said members can reap the benefits by becoming members of the DAO and voting on what it does with its cash without needing to be accredited investors in a venture capital firm themselves. For investors outside of Orange DAO, the appeal comes from its strong network and deal flow from connectivity to Y Combinator, although YC officially has no affiliation with Orange DAO.
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