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We can easily recognize the bias in traditional venture capital fundraising. All-female startups received just 1.9% of all VC money last year — a drop from 2021 — while Black founders raised just 0.43% of capital in Q3. 

The solutions to systemic discrimination, however, are harder to identify. As a result, Web3 hopefuls may look to decentralized autonomous organizations (DAOs) as a more transparent and democratic form of fundraising. Given their permissionless nature and generally friendly “vibes” — such as voting on deals with Discord emojis — DAOs are an intriguing case study in alternative funding models.

As BFF explored this week, successful DAOs require structure, governance and social vetting. While these realities are not forms of gatekeeping in and of themselves, they do invite human discernment and decision-making around how capital is managed. 

Contributing to an investment DAO also requires investing knowledge, along with enough disposable income to take calculated risks. As we know, the demographic most likely to fulfill these prerequisites is —  in the words of financial educator Berna Anat — both male and pale.

So will investment DAOs democratize the VC world and make more funding available for historically marginalized groups? Here’s our TLDR:

• Yes, DAOs are democratic in that they value transparency and participate in collective governance through a variety of on-chain and off-chain tools.
• However, “democratic” is  not automatically synonymous with “inclusiveness” or even prosocial — the latter part must be intentionally baked into the fabric of the community. 
• Case studies of DAOs founded upon prosocial principles include UnicornDAO, Big Green DAO, PleasrDAO and GitcoinDAO. (What are your favorites? Share with us!)‍
• While DAOs are indeed permissionless, investment DAOs vet individual members based on multiple factors, including shared interests and values, business credentials, social connections and professional backgrounds.
• Investment DAOs need both soft skills and hard skills. As VC3 DAO cofounder Jules Miller said in this week’s Twitter Space, the DAO vetting process is often about making sure contributors have “the same shared values and the same general philosophies on venture.” If you're a full time VC, says Miller, that's great, but a good investment DAO cares deeply about “making a safe space [where] people feel comfortable sharing information.” 
• Now is a good window of time to build relationships with friends and peers embedded within the Web3 world who can serve as helpful sounding boards, allies and collaborators.

So go out there and get your DAO on! Learn, ask questions, make connections and discover how investors are pooling together capital to fund the initiatives they believe in most.

Still hungry for more? Listen to last week’s Twitter Space with Jules Miller of VC3 DAO and Kyall Walker of UpsideDAO and read this article from the vault: Building Culture-Shifting Communities With DAOs. 

Catch Up Quick

The Zillow of the metaverse. A new startup raised $3 million in seed funding to build the spatial web’s real estate sales platform.

Bitcoin reaches 4-month high. It’s not yet giving bull run, but BTC did climb 5% and reach its highest valuation since September this week. 

DOJ goes after the little guy of money launderers. U.S. authorities built suspense before announcing their arrest of Bitzlato founder Anatoly Legkodymov in Miami. The Russian national was charged with money laundering. 

‍Yuga Labs takes a stance on creator royalties. The blue-chip NFT creator blacklisted zero-royalty marketplaces for its latest Sewer Pass mint.

Moonpay acquires Web3 creative agency. The creative agency, Nightshift, will rebrand to Otherlife after a recent acquisition by Moonpay, a crypto onramp startup.  

‍No grace for Avi. The U.S. Securities and Exchange Commission has filed parallel charges to the CFTC and accused Avraham Eisenberg of stealing $116 million and manipulating the Mango Markets platform. 

✨ BFF Updates

This week, we celebrate BFF’s first birthday. 🎉 Wow, it’s been a year!

Since our inaugural launch event with tens of thousands in attendance, we’ve grown so much as founders, as a team and as a community. Together, we’ve braved a turbulent market, all the while remaining curious, optimistic and committed to learning about the opportunities in Web3.

Read The Full Memo From Our Cofounders

BFF Events

BFF Clubs

Thanks for reading! We’d love to hear from you. Feel free to let us know what you think of this newsletter and what you’d like to see from it in the future by emailing hello@mybff.com.

🚨 This newsletter and all the information in it does not constitute financial advice. If you don’t want to invest money or time in Web3, you don’t have to. As always: Do your own research.