A New World of Investment Using NFTs: Coin Choice and DAOLaunch Pt 1
A New World of Investment Using NFTs: Coin Choice and DAOLaunch Pt 1
DAOLaunch’s CEO Sakuro Imayama recently sat with Coin Choice and discussed DAOLaunch’s unique concept at length. There are a lot of informational nuggets that our community will find helpful and we would like you to have a read.
Hen: Distributed venture capitalism is probably the first attempt in the industry, can you tell us what led to DAOLaunch’s development and how it came to being?
Sakuro Imayama (hereinafter, Mr. Imayama): As you know, from last year, decentralized finance (DeFi) and Initial DEX Offerings (IDO) have created a trend in which anyone can freely list their own currencies on a Decentralized Exchange, and launchpads such as Polkastarter have begun to appear a lot.
The basic launchpad styles, venture capitals (VCs) which are famous in the crypto world inject capital into private sales, and it has become a form in which general investors compete for a small allocation by means of getting into a whitelist. At this point, the investment advantage between VC and general investor is different. I first thought about branding it as a crypto VC so that I’m can make investments from a better standpoint.
However, if you look around, there are many people complaining about these methods of raising funds in a closed position and then selling them to general investors. To begin with, crypto was initially created with the aim to bring about a freer competitive, and democratic revolution in the closed financial markets that ruled the world, even though I think it is common in the stock market. If crypto becomes closed, it would be a big mess.
There were already several approaches to democratizing startup investment, such as the Fairlaunch method. However, it has not become the mainstream of startup investment – I think that private investment by a VC is still common.
I think there is a reason for this trend as well. In fact, when it comes to investing in VCs, they don’t just provide capital. It also provides a great deal of support from various networks, exchanges, marketing, and more. It would be difficult to expect this support from the average investor.
VCs are branded as investors, and because they actually give a lot of value to startups, they get favorable investment conditions. Startups are also asking for private help from VCs. In fact, we also felt that way in our round of funding.
However, I think there is a lot demand for democratization and free competition in startup investment. So I thought it would create a buzz if individual investors around the world could freely brand themselves as investors like VCs and create a platform that allows them to negotiate favorable investment conditions on-chain… I started DAOLaunch because I thought that if any investor in the world could develop a VC business as a decentralized VC, startup investment would become freer to competition and bring great profits to this industry.
Hen: What exactly is DAOLaunch’s decentralized venture capital platform? There are various funding platforms such as crowdfunding and IDO, but what is different from them?
Mr. Imayama: All startup funding will be on-chain. For example, in the case of stock investment-type crowdfunding, most of them cannot be recovered (Exit) or listed. However, in the case of crypto, if we define a listing where anyone can buy and sell tokens at a fluctuating price by using an automated market maker (AMM) such as Uniswap, anyone can go public without any big cost or hassle.
On DAOLaunch, the method of collateralizing the Exit with a smart contract is adopted. To be precise, before investing, detailed exit information such as how much of the collected funds will be added as liquidity, how long the added liquidity will be locked, and at what price it will be listed is visible. This is already implemented in the beta app we have released. Being able to negotiate investment terms on-chain according to investment performance is another step.
Secondly, another one of DAOLaunch’s differences compared to other IDO platforms is that they do not have the utility of the DAL, the native token to “secure investment (allocation)”.
Usually, the launchpad token utility model is to secure the allocation of the upcoming projects. However, current IDO projects need to increase the return of investment (ROI) of the projects listed to attract customers, and the total amount of funding as a platform is less than that of common funding platforms such as Indiegogo.
This has a major disadvantage in the structure of the business model. Many launchpads use 1% to 5% of the amount of funds raised as a commission as their main business model, but the smaller the total amount of funds raised, the less profitable it is.
I also believe that the current IDO revolution has greater potential. We believe that the technology of providing liquidity and pricing without the intervention of a third party will revolutionize all startup financing.
What we are trying to do is to bring the VC business onto the blockchain and bring more free competition to start-up funding. Regarding token utilities, we are focusing on the fact that we can mint (issue) DVC-NFTs for investors to negotiate favorable investment conditions.
DVC-NFT is an abbreviation of “Decentralized Venture Capital NFT”, and you can secure an investment limit by voting for the projects you support. All projects are ranked by several evaluations from DAOLaunch according to their progress and market evaluation, and the better the evaluation performance of the projects invested in the past, the more favorable investment conditions can be negotiated on-chain on DAOLaunch increase.
Currently, VC’s business model is to brand itself based on the investment performance and portfolio to secure good investment conditions. They use the added value of networks, marketing, human resources, etc. that can be provided to startups as a bargaining factor to negotiate better investment conditions, therefore continuing to achieve successful investment results.
In order for a general investor to brand themselves as an investor similar to a VC, it is necessary to provide an incentive from a VC-like perspective to support the project in which he/she has invested. Therefore, as with the current VC business model, we are envisioning a mechanism on DAOLaunch to secure better investment performance on-chain for investors who have achieved a great investment performance.
You can see the demo movie (Main1.0) of the app here.
Hen: When crowdfunding becomes possible in a decentralized environment, fraudulent projects may occur. Is fraud protection sufficient? Also, are there any measures you are taking at DAOLaunch?
Mr. Imayama: First of all, since the Exit is secured by smartcontract, the startup cannot change the liquidity provision ratio and the lock period later. Also, by using the token creation function and token sale creation function on our platform, anyone can create tokens and hold token sales, but by default, we have introduced a mechanism that does not show it to unauthenticated users.
In addition, we have implemented a “distributed due diligence function” that picks up the most voted projects using the investor voting system. While project due diligence is centralized on all launchpads and exchanges, DAOLaunch is ideally positioned for decentralized due diligence through a decentralized venture capital.
However, not all are decentralized, so basically, DAOLaunch management will meet and conduct due diligence with the project and pick it up to take sufficient measures against fraud. Also, after one project is picked up by decentralized due diligence, the advisory board team, including the operations, will make a final check to see if it is a fraudulent project.
Stay Tuned For Part 2!
DAOLaunch connects challenging entrepreneurs and individuals directly on the blockchain to support investors, allowing anyone across national borders to seamlessly create and support new financial products.
We are interested in start-up companies that are considering alternative fundraising methods. DAOLaunch will provide marketing support up till and after you complete your fundraising rounds. We will also provide marketing services on your behalf through our new and exclusive “NFT Farm” Function.