Hydra Ventures, an investment DAO linked to venture capital firm 1kx, has raised $10m to invest in other investment DAOs.
DAOs, or decentralised autonomous organisations, are crypto-native business structures without corporate hierarchy, and often conveniently, without any legal incorporation that could restrict its dealings.
DAOs hold a total of $23.6 billion in their treasuries and vary in purposes, ranging from common functions like maintaining DeFi protocols to more ambitious goals like building a city or exploring the space. Hydra is joining a growing list of more than 40 investment DAOs.
Following the DAO boom in 2021, ill-fated investment DAO Wonderland was by touted by the founder as alternatives to traditional VC firms, echoing a growing rhetoric at the time that DAOs are the people’s alternative to traditional business structure.
“Originally, everyone thought that they would kill VCs,” Peter Yuan Pan, co-founder of Hydra Ventures DAO, told DL News. “Investment DAOs were never going to replace VCs.”
“However, they are going to open up a new layer for collaboration between VCs, investors, builders and industry players.”
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Pan’s Hydra is closely linked to his day job as a partner at global early-stage crypto investment firm 1kx, which recently backed startup Safe’s $100 million round.
1kx is one of the backers behind the $10 million funding round, having backed the venture with a cool $1 million. Other investors include Consensys, Collab+Currency, Wicklow Capital, and Seed Club Ventures.
When asked about the origins behind Hydra Ventures DAO, Pan said that while 1kx has backed industry players in the past, it “would never build a dedicated brand” in-house to invest in investment DAOs.
“It would limit us from collaborating with everyone else in the space that we feel like we want to really work with,” Pan said.
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Pan is adamant that Hydra Ventures DAO is not just 1kx’s new DAO investment arm.
“1kx is a day-one backend supporter and incubator of Hydra. That’s really it,” Pan said, adding that the VC firm will have the same voting rights as every other DAO member.
Currently, the DAO has roughly 70 members, ranging from other VCs, crypto companies, angel investors and other industry players with skin in the game.
“The nerds, the grunts and the grey hairs,” Pan said. He expects more people to join the organisation in the coming months.
But why would it have to be an investment DAO and not just a regular business agreement? After all, it’s hardly uncommon for VCs to collaborate with other investors, be they other VCs, angels or companies.
The answer seems to be one of perception.
“It would be ironic to say that we believe in investment DAOs yet we are not one,” Pan said, adding that launching Hydra Ventures DAO as a DAO where members can operate on an equal footing “is definitely making a statement.”
Pan, who is known in crypto circles under the pseudonym pet3rpan, is no stranger to investment DAOs, having been one of the pioneers behind MetaCartel Ventures, which has 75 members and deployed over $13 million into more than 70 projects, including Arweave and Arbitrum.
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He said Hydra Ventures DAO has learned from some of the mistakes from the previous venture.
Like MetaCartel Ventures, Hydra Ventures will have one foothold in the States through a Delaware limited company for US-member and a Cayman Islands limited company for international members.
Unlike MetaCartel Ventures, investments will not last through perpetuity, but will be fixed to a three-year period after which there will be a fund admin that distributes profits to DAO members, Pan said.
Hydra Ventures DAO will use the capital to back the growing number of investment DAOs “that are both legally wrapped and crypto-native investment organisations,” Pan said.
The startups secured the funding at a time when VC funding into crypto has plunged, due to a combination of skyrocketing interest rates, volatile markets, regulatory crackdowns and a smattering of scandals.
“Everyone involved with investment DAOs quickly committed to Hydra, especially those who wrote the earliest and largest checks,” he said.
“Investment DAOs are still very much an emerging space, so those investors newer to this area did require more time and education, but it produced high-quality members aligned with our mission.”
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The DAO’s main goals for 2023 are to make its first cohort of investments, and incubate at least two investment DAOs.
DAOs normally let you join when you buy their tokens on secondary markets like Uniswap.
But Hydra Ventures DAO will not be open to everyone, operating instead like an invite-only private club. Existing members must vouch for new ones to be accepted.
That means the DAO tokens won’t be tradeable.
Update: This story was updated to clarify the relationship between 1kx and Hydra Ventures DAO, and the difference between the Delaware and the Cayman Island entities.
