More on Entrepreneurship/Creators
SAHIL SAPRU
3 years ago
Growth tactics that grew businesses from 1 to 100
Everyone wants a scalable startup.
Innovation helps launch a startup. The secret to a scalable business is growth trials (from 1 to 100).
Growth marketing combines marketing and product development for long-term growth.
Today, I'll explain growth hacking strategies popular startups used to scale.
1/ A Facebook user's social value is proportional to their friends.
Facebook built its user base using content marketing and paid ads. Mark and his investors feared in 2007 when Facebook's growth stalled at 90 million users.
Chamath Palihapitiya was brought in by Mark.
The team tested SEO keywords and MAU chasing. The growth team introduced “people you may know”
This feature reunited long-lost friends and family. Casual users became power users as the retention curve flattened.
Growth Hack Insights: With social network effect the value of your product or platform increases exponentially if you have users you know or can relate with.
2/ Airbnb - Focus on your value propositions
Airbnb nearly failed in 2009. The company's weekly revenue was $200 and they had less than 2 months of runway.
Enter Paul Graham. The team noticed a pattern in 40 listings. Their website's property photos sucked.
Why?
Because these photos were taken with regular smartphones. Users didn't like the first impression.
Graham suggested traveling to New York to rent a camera, meet with property owners, and replace amateur photos with high-resolution ones.
A week later, the team's weekly revenue doubled to $400, indicating they were on track.
Growth Hack Insights: When selling an “online experience” ensure that your value proposition is aesthetic enough for users to enjoy being associated with them.
3/ Zomato - A company's smartphone push ensured growth.
Zomato delivers food. User retention was a challenge for the founders. Indian food customers are notorious for switching brands at the drop of a hat.
Zomato wanted users to order food online and repeat orders throughout the week.
Zomato created an attractive website with “near me” keywords for SEO indexing.
Zomato gambled to increase repeat orders. They only allowed mobile app food orders.
Zomato thought mobile apps were stickier. Product innovations in search/discovery/ordering or marketing campaigns like discounts/in-app notifications/nudges can improve user experience.
Zomato went public in 2021 after users kept ordering food online.
Growth Hack Insights: To improve user retention try to build platforms that build user stickiness. Your product and marketing team will do the rest for them.
4/ Hotmail - Signaling helps build premium users.
Ever sent or received an email or tweet with a sign — sent from iPhone?
Hotmail did it first! One investor suggested Hotmail add a signature to every email.
Overnight, thousands joined the company. Six months later, the company had 1 million users.
When serving an existing customer, improve their social standing. Signaling keeps the top 1%.
5/ Dropbox - Respect loyal customers
Dropbox is a company that puts people over profits. The company prioritized existing users.
Dropbox rewarded loyal users by offering 250 MB of free storage to anyone who referred a friend. The referral hack helped Dropbox get millions of downloads in its first few months.
Growth Hack Insights: Think of ways to improve the social positioning of your end-user when you are serving an existing customer. Signaling goes a long way in attracting the top 1% to stay.
These experiments weren’t hacks. Hundreds of failed experiments and user research drove these experiments. Scaling up experiments is difficult.
Contact me if you want to grow your startup's user base.
Woo
2 years ago
How To Launch A Business Without Any Risk
> Say Hello To The Lean-Hedge Model
People think starting a business requires significant debt and investment. Like Shark Tank, you need a world-changing idea. I'm not saying to avoid investors or brilliant ideas.
Investing is essential to build a genuinely profitable company. Think Apple or Starbucks.
Entrepreneurship is risky because many people go bankrupt from debt. As starters, we shouldn't do it. Instead, use lean-hedge.
Simply defined, you construct a cash-flow business to hedge against long-term investment-heavy business expenses.
What the “fx!$rench-toast” is the lean-hedge model?
When you start a business, your money should move down, down, down, then up when it becomes profitable.
Many people don't survive the business's initial losses and debt. What if, we created a cash-flow business BEFORE we started our Starbucks to hedge against its initial expenses?
Lean-hedge has two sections. Start a cash-flow business. A cash-flow business takes minimal investment and usually involves sweat and time.
Let’s take a look at some examples:
A Translation company
Personal portfolio website (you make a site then you do cold e-mail marketing)
FREELANCE (UpWork, Fiverr).
Educational business.
Infomarketing. (You design a knowledge-based product. You sell the info).
Online fitness/diet/health coaching ($50-$300/month, calls, training plan)
Amazon e-book publishing. (Medium writers do this)
YouTube, cash-flow channel
A web development agency (I'm a dev, but if you're not, a graphic design agency, etc.) (Sell your time.)
Digital Marketing
Online paralegal (A million lawyers work in the U.S).
Some dropshipping (Organic Tik Tok dropshipping, where you create content to drive traffic to your shopify store instead of spend money on ads).
(Disclaimer: My first two cash-flow enterprises, which were language teaching, failed terribly. My translation firm is now booming because B2B e-mail marketing is easy.)
Crossover occurs. Your long-term business starts earning more money than your cash flow business.
My cash-flow business (freelancing, translation) makes $7k+/month.
I’ve decided to start a slightly more investment-heavy digital marketing agency
Here are the anticipated business's time- and money-intensive investments:
($$$) Top Front-End designer's Figma/UI-UX design (in negotiation)
(Time): A little copywriting (I will do this myself)
($$) Creating an animated webpage with HTML (in negotiation)
Backend Development (Duration) (I'll carry out this myself using Laravel.)
Logo Design ($$)
Logo Intro Video for $
Video Intro (I’ll edit this myself with Premiere Pro)
etc.
Then evaluate product, place, price, and promotion. Consider promotion and pricing.
The lean-hedge model's point is:
Don't gamble. Avoid debt. First create a cash-flow project, then grow it steadily.
Check read my previous posts on “Nightmare Mode” (which teaches you how to make work as interesting as video games) and Why most people can't escape a 9-5 to learn how to develop a cash-flow business.
Sanjay Priyadarshi
3 years ago
A 19-year-old dropped out of college to build a $2,300,000,000 company in 2 years.
His success was unforeseeable.
2014 saw Facebook's $2.3 billion purchase of Oculus VR.
19-year-old Palmer Luckey founded Oculus. He quit journalism school. His parents worried about his college dropout.
Facebook bought Oculus VR in less than 2 years.
Palmer Luckey started Anduril Industries. Palmer has raised $385 million with Anduril.
The Oculus journey began in a trailer
Palmer Luckey, 19, owned the trailer.
Luckey had his trailer customized. The trailer had all six of Luckey's screens. In the trailer's remaining area, Luckey conducted hardware tests.
At 16, he became obsessed with virtual reality. Virtual reality was rare at the time.
Luckey didn't know about VR when he started.
Previously, he liked "portabilizing" mods. Hacking ancient game consoles into handhelds.
In his city, fewer portabilizers actively traded.
Luckey started "ModRetro" for other portabilizers. Luckey was exposed to VR headsets online.
Luckey:
“Man, ModRetro days were the best.”
Palmer Luckey used VR headsets for three years. His design had 50 prototypes.
Luckey used to work at the Long Beach Sailing Center for minimum salary, servicing diesel engines and cleaning boats.
Luckey worked in a USC Institute for Creative Technologies mixed reality lab in July 2011. (ICT).
Luckey cleaned the lab, did reports, and helped other students with VR projects.
Luckey's lab job was dull.
Luckey chose to work in the lab because he wanted to engage with like-minded folks.
By 2012, Luckey had a prototype he hoped to share globally. He made cheaper headsets than others.
Luckey wanted to sell an easy-to-assemble virtual reality kit on Kickstarter.
He realized he needed a corporation to do these sales legally. He started looking for names. "Virtuality," "virtual," and "VR" are all taken.
Hence, Oculus.
If Luckey sold a hundred prototypes, he would be thrilled since it would boost his future possibilities.
John Carmack, legendary game designer
Carmack has liked sci-fi and fantasy since infancy.
Carmack loved imagining intricate gaming worlds.
His interest in programming and computer science grew with age.
He liked graphics. He liked how mismatching 0 and 1 might create new colors and visuals.
Carmack played computer games as a teen. He created Shadowforge in high school.
He founded Id software in 1991. When Carmack created id software, console games were the best-sellers.
Old computer games have weak graphics. John Carmack and id software developed "adaptive tile refresh."
This technique smoothed PC game scrolling. id software launched 3-D, Quake, and Doom using "adaptive tile refresh."
These games made John Carmack a gaming star. Later, he sold Id software to ZeniMax Media.
How Palmer Luckey met Carmack
In 2011, Carmack was thinking a lot about 3-D space and virtual reality.
He was underwhelmed by the greatest HMD on the market. Because of their flimsiness and latency.
His disappointment was partly due to the view (FOV). Best HMD had 40-degree field of view.
Poor. The best VR headset is useless with a 40-degree FOV.
Carmack intended to show the press Doom 3 in VR. He explored VR headsets and internet groups for this reason.
Carmack identified a VR enthusiast in the comments section of "LEEP on the Cheap." "PalmerTech" was the name.
Carmack approached PalmerTech about his prototype. He told Luckey about his VR demos, so he wanted to see his prototype.
Carmack got a Rift prototype. Here's his May 17 tweet.
John Carmack tweeted an evaluation of the Luckey prototype.
Dan Newell, a Valve engineer, and Mick Hocking, a Sony senior director, pre-ordered Oculus Rift prototypes with Carmack's help.
Everyone praised Luckey after Carmack demoed Rift.
Palmer Luckey received a job offer from Sony.
It was a full-time position at Sony Computer Europe.
He would run Sony’s R&D lab.
The salary would be $70k.
Who is Brendan Iribe?
Brendan Iribe started early with Startups. In 2004, he and Mike Antonov founded Scaleform.
Scaleform created high-performance middleware. This package allows 3D Flash games.
In 2011, Iribe sold Scaleform to Autodesk for $36 million.
How Brendan Iribe discovered Palmer Luckey.
Brendan Iribe's friend Laurent Scallie.
Laurent told Iribe about a potential opportunity.
Laurent promised Iribe VR will work this time. Laurent introduced Iribe to Luckey.
Iribe was doubtful after hearing Laurent's statements. He doubted Laurent's VR claims.
But since Laurent took the name John Carmack, Iribe thought he should look at Luckey Innovation. Iribe was hooked on virtual reality after reading Palmer Luckey stories.
He asked Scallie about Palmer Luckey.
Iribe convinced Luckey to start Oculus with him
First meeting between Palmer Luckey and Iribe.
The Iribe team wanted Luckey to feel comfortable.
Iribe sought to convince Luckey that launching a company was easy. Iribe told Luckey anyone could start a business.
Luckey told Iribe's staff he was homeschooled from childhood. Luckey took self-study courses.
Luckey had planned to launch a Kickstarter campaign and sell kits for his prototype. Many companies offered him jobs, nevertheless.
He's considering Sony's offer.
Iribe advised Luckey to stay independent and not join a firm. Iribe asked Luckey how he could raise his child better. No one sees your baby like you do?
Iribe's team pushed Luckey to stay independent and establish a software ecosystem around his device.
After conversing with Iribe, Luckey rejected every job offer and merger option.
Iribe convinced Luckey to provide an SDK for Oculus developers.
After a few months. Brendan Iribe co-founded Oculus with Palmer Luckey. Luckey trusted Iribe and his crew, so he started a corporation with him.
Crowdfunding
Brendan Iribe and Palmer Luckey launched a Kickstarter.
Gabe Newell endorsed Palmer's Kickstarter video.
Gabe Newell wants folks to trust Palmer Luckey since he's doing something fascinating and answering tough questions.
Mark Bolas and David Helgason backed Palmer Luckey's VR Kickstarter video.
Luckey introduced Oculus Rift during the Kickstarter campaign. He introduced virtual reality during press conferences.
Oculus' Kickstarter effort was a success. Palmer Luckey felt he could raise $250,000.
Oculus raised $2.4 million through Kickstarter. Palmer Luckey's virtual reality vision was well-received.
Mark Zuckerberg's Oculus discovery
Brendan Iribe and Palmer Luckey hired the right personnel after a successful Kickstarter campaign.
Oculus needs a lot of money for engineers and hardware. They needed investors' money.
Series A raised $16M.
Next, Andreessen Horowitz partner Brain Cho approached Iribe.
Cho told Iribe that Andreessen Horowitz could invest in Oculus Series B if the company solved motion sickness.
Mark Andreessen was Iribe's dream client.
Marc Andreessen and his partners gave Oculus $75 million.
Andreessen introduced Iribe to Zukerberg. Iribe and Zukerberg discussed the future of games and virtual reality by phone.
Facebook's Oculus demo
Iribe showed Zuckerberg Oculus.
Mark was hooked after using Oculus. The headset impressed him.
The whole Facebook crew who saw the demo said only one thing.
“Holy Crap!”
This surprised them all.
Mark Zuckerberg was impressed by the team's response. Mark Zuckerberg met the Oculus team five days after the demo.
First meeting Palmer Luckey.
Palmer Luckey is one of Mark's biggest supporters and loves Facebook.
Oculus Acquisition
Zuckerberg wanted Oculus.
Brendan Iribe had requested for $4 billion, but Mark wasn't interested.
Facebook bought Oculus for $2.3 billion after months of drama.
After selling his company, how does Palmer view money?
Palmer loves the freedom money gives him. Money frees him from small worries.
Money has allowed him to pursue things he wouldn't have otherwise.
“If I didn’t have money I wouldn’t have a collection of vintage military vehicles…You can have nice hobbies that keep you relaxed when you have money.”
He didn't start Oculus to generate money. His virtual reality passion spanned years.
He didn't have to lie about how virtual reality will transform everything until he needed funding.
The company's success was an unexpected bonus. He was merely passionate about a good cause.
After Oculus' $2.3 billion exit, what changed?
Palmer didn't mind being rich. He did similar things.
After Facebook bought Oculus, he moved to Silicon Valley and lived in a 12-person shared house due to high rents.
Palmer might have afforded a big mansion, but he prefers stability and doing things because he wants to, not because he has to.
“Taco Bell is never tasted so good as when you know you could afford to never eat taco bell again.”
Palmer's leadership shifted.
Palmer changed his leadership after selling Oculus.
When he launched his second company, he couldn't work on his passions.
“When you start a tech company you do it because you want to work on a technology, that is why you are interested in that space in the first place. As the company has grown, he has realized that if he is still doing optical design in the company it’s because he is being negligent about the hiring process.”
Once his startup grows, the founder's responsibilities shift. He must recruit better firm managers.
Recruiting talented people becomes the top priority. The founder must convince others of their influence.
A book that helped me write this:
The History of the Future: Oculus, Facebook, and the Revolution That Swept Virtual Reality — Blake Harris
*This post is a summary. Read the full article here.
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Will Lockett
3 years ago
The World Will Change With MIT's New Battery
It's cheaper, faster charging, longer lasting, safer, and better for the environment.
Batteries are the future. Next-gen and planet-saving technology, including solar power and EVs, require batteries. As these smart technologies become more popular, we find that our batteries can't keep up. Lithium-ion batteries are expensive, slow to charge, big, fast to decay, flammable, and not environmentally friendly. MIT just created a new battery that eliminates all of these problems. So, is this the battery of the future? Or is there a catch?
When I say entirely new, I mean it. This battery employs no currently available materials. Its electrodes are constructed of aluminium and pure sulfur instead of lithium-complicated ion's metals and graphite. Its electrolyte is formed of molten chloro-aluminate salts, not an organic solution with lithium salts like lithium-ion batteries.
How does this change in materials help?
Aluminum, sulfur, and chloro-aluminate salts are abundant, easy to acquire, and cheap. This battery might be six times cheaper than a lithium-ion battery and use less hazardous mining. The world and our wallets will benefit.
But don’t go thinking this means it lacks performance.
This battery charged in under a minute in tests. At 25 degrees Celsius, the battery will charge 25 times slower than at 110 degrees Celsius. This is because the salt, which has a very low melting point, is in an ideal state at 110 degrees and can carry a charge incredibly quickly. Unlike lithium-ion, this battery self-heats when charging and discharging, therefore no external heating is needed.
Anyone who's seen a lithium-ion battery burst might be surprised. Unlike lithium-ion batteries, none of the components in this new battery can catch fire. Thus, high-temperature charging and discharging speeds pose no concern.
These batteries are long-lasting. Lithium-ion batteries don't last long, as any iPhone owner can attest. During charging, metal forms a dendrite on the electrode. This metal spike will keep growing until it reaches the other end of the battery, short-circuiting it. This is why phone batteries only last a few years and why electric car range decreases over time. This new battery's molten salt slows deposition, extending its life. This helps the environment and our wallets.
These batteries are also energy dense. Some lithium-ion batteries have 270 Wh/kg energy density (volume and mass). Aluminum-sulfur batteries could have 1392 Wh/kg, according to calculations. They'd be 5x more energy dense. Tesla's Model 3 battery would weigh 96 kg instead of 480 kg if this battery were used. This would improve the car's efficiency and handling.
These calculations were for batteries without molten salt electrolyte. Because they don't reflect the exact battery chemistry, they aren't a surefire prediction.
This battery seems great. It will take years, maybe decades, before it reaches the market and makes a difference. Right?
Nope. The project's scientists founded Avanti to develop and market this technology.
So we'll soon be driving cheap, durable, eco-friendly, lightweight, and ultra-safe EVs? Nope.
This battery must be kept hot to keep the salt molten; otherwise, it won't work and will expand and contract, causing damage. This issue could be solved by packs that can rapidly pre-heat, but that project is far off.
Rapid and constant charge-discharge cycles make these batteries ideal for solar farms, homes, and EV charging stations. The battery is constantly being charged or discharged, allowing it to self-heat and maintain an ideal temperature.
These batteries aren't as sexy as those making EVs faster, more efficient, and cheaper. Grid batteries are crucial to our net-zero transition because they allow us to use more low-carbon energy. As we move away from fossil fuels, we'll need millions of these batteries, so the fact that they're cheap, safe, long-lasting, and environmentally friendly will be huge. Who knows, maybe EVs will use this technology one day. MIT has created another world-changing technology.
Olga Kharif
3 years ago
A month after freezing customer withdrawals, Celsius files for bankruptcy.
Alex Mashinsky, CEO of Celsius, speaks at Web Summit 2021 in Lisbon.
Celsius Network filed for Chapter 11 bankruptcy a month after freezing customer withdrawals, joining other crypto casualties.
Celsius took the step to stabilize its business and restructure for all stakeholders. The filing was done in the Southern District of New York.
The company, which amassed more than $20 billion by offering 18% interest on cryptocurrency deposits, paused withdrawals and other functions in mid-June, citing "extreme market conditions."
As the Fed raises interest rates aggressively, it hurts risk sentiment and squeezes funding costs. Voyager Digital Ltd. filed for Chapter 11 bankruptcy this month, and Three Arrows Capital has called in liquidators.
Celsius called the pause "difficult but necessary." Without the halt, "the acceleration of withdrawals would have allowed certain customers to be paid in full while leaving others to wait for Celsius to harvest value from illiquid or longer-term asset deployment activities," it said.
Celsius declined to comment. CEO Alex Mashinsky said the move will strengthen the company's future.
The company wants to keep operating. It's not requesting permission to allow customer withdrawals right now; Chapter 11 will handle customer claims. The filing estimates assets and liabilities between $1 billion and $10 billion.
Celsius is advised by Kirkland & Ellis, Centerview Partners, and Alvarez & Marsal.
Yield-promises
Celsius promised 18% returns on crypto loans. It lent those coins to institutional investors and participated in decentralized-finance apps.
When TerraUSD (UST) and Luna collapsed in May, Celsius pulled its funds from Terra's Anchor Protocol, which offered 20% returns on UST deposits. Recently, another large holding, staked ETH, or stETH, which is tied to Ether, became illiquid and discounted to Ether.
The lender is one of many crypto companies hurt by risky bets in the bear market. Also, Babel halted withdrawals. Voyager Digital filed for bankruptcy, and crypto hedge fund Three Arrows Capital filed for Chapter 15 bankruptcy.
According to blockchain data and tracker Zapper, Celsius repaid all of its debt in Aave, Compound, and MakerDAO last month.
Celsius charged Symbolic Capital Partners Ltd. 2,000 Ether as collateral for a cash loan on June 13. According to company filings, Symbolic was charged 2,545.25 Ether on June 11.
In July 6 filings, it said it reshuffled its board, appointing two new members and firing others.
Max Parasol
3 years ago
Are DAOs the future or just a passing fad?
How do you DAO? Can DAOs scale?
DAO: Decentralized Autonomous. Organization.
“The whole phrase is a misnomer. They're not decentralized, autonomous, or organizations,” says Monsterplay blockchain consultant David Freuden.
As part of the DAO initiative, Freuden coauthored a 51-page report in May 2020. “We need DAOs,” he says. “‘Shareholder first' is a 1980s/90s concept. Profits became the focus, not products.”
His predictions for DAOs have come true nearly two years later. DAOs had over 1.6 million participants by the end of 2021, up from 13,000 at the start of the year. Wyoming, in the US, will recognize DAOs and the Marshall Islands in 2021. Australia may follow that example in 2022.
But what is a DAO?
Members buy (or are rewarded with) governance tokens to vote on how the DAO operates and spends its money. “DeFi spawned DAOs as an investment vehicle. So a DAO is tokenomics,” says Freuden.
DAOs are usually built around a promise or a social cause, but they still want to make money. “If you can't explain why, the DAO will fail,” he says. “A co-op without tokenomics is not a DAO.”
Operating system DAOs, protocol DAOs, investment DAOs, grant DAOs, service DAOs, social DAOs, collector DAOs, and media DAOs are now available.
Freuden liked the idea of people rallying around a good cause. Speculators and builders make up the crypto world, so it needs a DAO for them.
,Speculators and builders, or both, have mismatched expectations, causing endless, but sometimes creative friction.
Organisms that boost output
Launching a DAO with an original product such as a cryptocurrency, an IT protocol or a VC-like investment fund like FlamingoDAO is common. DAOs enable distributed open-source contributions without borders. The goal is vital. Sometimes, after a product is launched, DAOs emerge, leaving the company to eventually transition to a DAO, as Uniswap did.
Doing things together is a DAO. So it's a way to reward a distributed workforce. DAOs are essentially productivity coordination organisms.
“Those who work for the DAO make permissionless contributions and benefit from fragmented employment,” argues Freuden. DAOs are, first and foremost, a new form of cooperation.
DAO? Distributed not decentralized
In decentralized autonomous organizations, words have multiple meanings. DAOs can emphasize one aspect over another. Autonomy is a trade-off for decentralization.
DAOstack CEO Matan Field says a DAO is a distributed governance system. Power is shared. However, there are two ways to understand a DAO's decentralized nature. This clarifies the various DAO definitions.
A decentralized infrastructure allows a DAO to be decentralized. It could be created on a public permissionless blockchain to prevent a takeover.
As opposed to a company run by executives or shareholders, a DAO is distributed. Its leadership does not wield power
Option two is clearly distributed.
But not all of this is “automated.”
Think quorum, not robot.
DAOs can be autonomous in the sense that smart contracts are self-enforcing and self-executing. So every blockchain transaction is a simplified smart contract.
Dao landscape
The DAO landscape is evolving.
Consider how Ethereum's smart contracts work. They are more like self-executing computer code, which Vitalik Buterin calls “persistent scripts”.
However, a DAO is self-enforcing once its members agree on its rules. As such, a DAO is “automated upon approval by the governance committee.” This distinguishes them from traditional organizations whose rules must be interpreted and applied.
Why a DAO? They move fast
A DAO can quickly adapt to local conditions as a governance mechanism. It's a collaborative decision-making tool.
Like UkraineDAO, created in response to Putin's invasion of Ukraine by Ukrainian expat Alona Shevchenko, Nadya Tolokonnikova, Trippy Labs, and PleasrDAO. The DAO sought to support Ukrainian charities by selling Ukrainian flag NFTs. With a single mission, a DAO can quickly raise funds for a country accepting crypto where banks are distrusted.
This could be a watershed moment for DAOs.
ConstitutionDAO was another clever use case for DAOs for Freuden. In a failed but “beautiful experiment in a single-purpose DAO,” ConstitutionDAO tried to buy a copy of the US Constitution from a Sotheby's auction. In November 2021, ConstitutionDAO raised $47 million from 19,000 people, but a hedge fund manager outbid them.
Contributions were returned or lost if transactional gas fees were too high. The ConstitutionDAO, as a “beautiful experiment,” proved exceptionally fast at organizing and crowdsourcing funds for a specific purpose.
We may soon be applauding UkraineDAO's geopolitical success in support of the DAO concept.
Some of the best use cases for DAOs today, according to Adam Miller, founder of DAOplatform.io and MIDAO Directory Services, involve DAO structures.
That is, a “flat community is vital.” Prototyping by the crowd is a good example. To succeed, members must be enthusiastic about DAOs as an alternative to starting a company. Because DAOs require some hierarchy, he agrees that "distributed is a better acronym."
Miller sees DAOs as a “new way of organizing people and resources.” He started DAOplatform.io, a DAO tooling advisery that is currently transitioning to a DAO due to the “woeful tech options for running a DAO,” which he says mainly comprises of just “multisig admin keys and a voting system.” So today he's advising on DAO tech stacks.
Miller identifies three key elements.
Tokenization is a common method and tool. Second, governance mechanisms connected to the DAO's treasury. Lastly, community.”
How a DAO works...
They can be more than glorified Discord groups if they have a clear mission. This mission is a mix of financial speculation and utopianism. The spectrum is vast.
The founder of Dash left the cryptocurrency project in 2017. It's the story of a prophet without an heir. So creating a global tokenized evangelical missionary community via a DAO made sense.
Evan Duffield, a “libertarian/anarchist” visionary, forked Bitcoin in January 2014 to make it instant and essentially free. He went away for a while, and DASH became a DAO.
200,000 US retailers, including Walmart and Barnes & Noble, now accept Dash as payment. This payment system works like a gift card.
Arden Goldstein, Dash's head of crypto, DAO, and blockchain marketing, claims Dash is the “first successful DAO.” It was founded in 2016 and disbanded after a hack, an Ethereum hard fork and much controversy. But what are the success metrics?
Crypto success is measured differently, says Goldstein. To achieve common goals, people must participate or be motivated in a healthy DAO. People are motivated to complete tasks in a successful DAO. And, crucially, when tasks get completed.
“Yes or no, 1 or 0, voting is not a new idea. The challenge is getting people to continue to participate and keep building a community.” A DAO motivates volunteers: Nothing keeps people from building. The DAO “philosophy is old news. You need skin in the game to play.”
MasterNodes must stake 1000 Dash. Those members are rewarded with DASH for marketing (and other tasks). It uses an outsourced team to onboard new users globally.
Joining a DAO is part of the fun of meeting crazy or “very active” people on Discord. No one gets fired (usually). If your work is noticed, you may be offered a full-time job.
DAO community members worldwide are rewarded for brand building. Dash is also a great product for developing countries with high inflation and undemocratic governments. The countries with the most Dash DAO members are Russia, Brazil, Venezuela, India, China, France, Italy, and the Philippines.
Grassroots activism makes this DAO work. A DAO is local. Venezuelans can't access Dash.org, so DAO members help them use a VPN. DAO members are investors, fervent evangelicals, and local product experts.
Every month, proposals and grant applications are voted on via the Dash platform. However, the DAO may decide not to fund you. For example, the DAO once hired a PR firm, but the community complained about the lack of press coverage. This raises a great question: How are real-world contractual obligations met by a DAO?
Does the DASH DAO work?
“I see the DAO defund projects I thought were valuable,” Goldstein says. Despite working full-time, I must submit a funding proposal. “Much faster than other companies I've worked on,” he says.
Dash DAO is a headless beast. Ryan Taylor is the CEO of the company overseeing the DASH Core Group project.
The issue is that “we don't know who has the most tokens [...] because we don't know who our customers are.” As a result, “the loudest voices usually don't have the most MasterNodes and aren't the most invested.”
Goldstein, the only female in the DAO, says she worked hard. “I was proud of the DAO when I made the logo pink for a day and got great support from the men.” This has yet to entice a major influx of female DAO members.
Many obstacles stand in the way of utopian dreams.
Governance problems remain
And what about major token holders behaving badly?
In early February, a heated crypto Twitter debate raged on about inclusion, diversity, and cancel culture in relation to decentralized projects. In this case, the question was how a DAO addresses alleged inappropriate behavior.
In a corporation, misconduct can result in termination. In a DAO, founders usually hold a large number of tokens and the keys to the blockchain (multisignature) or otherwise.
Brantly Millegan, the director of operations of Ethereum Name Service (ENS), made disparaging remarks about the LGBTQ community and other controversial topics. The screenshotted comments were made in 2016 and brought to the ENS board's attention in early 2022.
His contract with ENS has expired. But what of his large DAO governance token holdings?
Members of the DAO proposed a motion to remove Millegan from the DAO. His “delegated” votes net 370,000. He was and is the DAO's largest delegate.
What if he had refused to accept the DAO's decision?
Freuden says the answer is not so simple.
“Can a DAO kick someone out who built the project?”
The original mission “should be dissolved” if it no longer exists. “Does a DAO fail and return the money? They must r eturn the money with interest if the marriage fails.”
Before an IPO, VCs might try to remove a problematic CEO.
While DAOs use treasury as a governance mechanism, it is usually controlled (at least initially) by the original project creators. Or, in the case of Uniswap, the venture capital firm a16z has so much voting power that it has delegated it to student-run blockchain organizations.
So, can DAOs really work at scale? How to evolve voting paradigms beyond token holdings?
The whale token holder issue has some solutions. Multiple tokens, such as a utility token on top of a governance token, and quadratic voting for whales, are now common. Other safeguards include multisignature blockchain keys and decision time locks that allow for any automated decision to be made. The structure of each DAO will depend on the assets at stake.
In reality, voter turnout is often a bigger issue.
Is DAO governance scalable?
Many DAOs have low participation. Due to a lack of understanding of technology, apathy, or busy lives. “The bigger the DAO, the fewer voters who vote,” says Freuden.
Freuden's report cites British anthropologist Dunbar's Law, who argued that people can only maintain about 150 relationships.
"As the DAO grows in size, the individual loses influence because they perceive their voting power as being diminished or insignificant. The Ringelmann Effect and Dunbar's Rule show that as a group grows in size, members become lazier, disenfranchised, and detached.
Freuden says a DAO requires “understanding human relationships.” He believes DAOs work best as investment funds rooted in Cryptoland and small in scale. In just three weeks, SyndicateDAO enabled the creation of 450 new investment group DAOs.
Due to SEC regulations, FlamingoDAO, a famous NFT curation investment DAO, could only have 100 investors. The “LAO” is a member-directed venture capital fund and a US LLC. To comply with US securities law, they only allow 100 members with a 120ETH minimum staking contribution.
But how did FlamingoDAO make investment decisions? How often did all 70 members vote? Art and NFTs are highly speculative.
So, investment DAOs are thought to work well in a small petri dish environment. This is due to a crypto-native club's pooled capital (maximum 7% per member) and crowdsourced knowledge.
While scalability is a concern, each DAO will operate differently depending on the goal, technology stage, and personalities. Meetups and hackathons are common ways for techies to collaborate on a cause or test an idea. But somebody still organizes the hack.
Holographic consensus voting
But clever people are working on creative solutions to every problem.
Miller of DAOplatform.io cites DXdao as a successful DAO. Decentralized product and service creator DXdao runs the DAO entirely on-chain. “You earn voting rights by contributing to the community.”
DXdao, a DAOstack fork, uses holographic consensus, a voting algorithm invented by DAOstack founder Matan Field. The system lets a random or semi-random subset make group-wide decisions.
By acting as a gatekeeper for voters, DXdao's Luke Keenan explains that “a small predictions market economy emerges around the likely outcome of a proposal as tokens are staked on it.” Also, proposals that have been financially boosted have fewer requirements to be successful, increasing system efficiency.” DXdao “makes decisions by removing voting power as an economic incentive.”
Field explains that holographic consensus “does not require a quorum to render a vote valid.”
“Rather, it provides a parallel process. It is a game played (for profit) by ‘predictors' who make predictions about whether or not a vote will be approved by the voters. The voting process is valid even when the voting quorum is low if enough stake is placed on the outcome of the vote.
“In other words, a quorum is not a scalable DAO governance strategy,” Field says.
You don't need big votes on everything. If only 5% vote, fine. To move significant value or make significant changes, you need a longer voting period (say 30 days) and a higher quorum,” says Miller.
Clearly, DAOs are maturing. The emphasis is on tools like Orca and processes that delegate power to smaller sub-DAOs, committees, and working groups.
Miller also claims that “studies in psychology show that rewarding people too much for volunteering disincentivizes them.” So, rather than giving out tokens for every activity, you may want to offer symbolic rewards like POAPs or contributor levels.
“Free lunches are less rewarding. Random rewards can boost motivation.”
Culture and motivation
DAOs (and Web3 in general) can give early adopters a sense of ownership. In theory, they encourage early participation and bootstrapping before network effects.
"A double-edged sword," says Goldstein. In the developing world, they may not be fully scalable.
“There must always be a leader,” she says. “People won't volunteer if they don't want to.”
DAO members sometimes feel entitled. “They are not the boss, but they think they should be able to see my calendar or get a daily report,” Goldstein gripes. Say, “I own three MasterNodes and need to know X, Y, and Z.”
In most decentralized projects, strong community leaders are crucial to influencing culture.
Freuden says “the DAO's community builder is the cryptoland influencer.” They must “disseminate the DAO's culture, cause, and rally the troops” in English, not tech.
They must keep members happy.
So the community builder is vital. Building a community around a coin that promises riches is simple, but keeping DAO members motivated is difficult.
It's a human job. But tools like SourceCred or coordinate that measure contributions and allocate tokens are heavily marketed. Large growth funds/community funds/grant programs are common among DAOs.
The Future?
Onboarding, committed volunteers, and an iconic community builder may be all DAOs need.
It takes a DAO just one day to bring together a passionate (and sometimes obsessive) community. For organizations with a common goal, managing stakeholder expectations is critical.
A DAO's core values are community and cause, not scalable governance. “DAOs will work at scale like gaming communities, but we will have sub-DAOs everywhere like committees,” says Freuden.
So-called holographic consensuses “can handle, in principle, increasing rates of proposals by turning this tension between scale and resilience into an economical cost,” Field writes. Scalability is not guaranteed.
The DAO's key innovation is the fragmented workplace. “Voting is a subset of engagement,” says Freuden. DAO should allow for permissionless participation and engagement. DAOs allow for remote work.”
In 20 years, DAOs may be the AI-powered self-organizing concept. That seems far away now. But a new breed of productivity coordination organisms is maturing.