After some experience with starting a few DAOs, being part of a few, seen some collapse, some blossom, recently volunteered to help build another new DAO with a great connected cause so wanted to write up a general yet opinionated framework for starting DAOs, specifically for a more niche non-profit and mission driven DAO in the giant DAO landscape. Here are some questions I thought through and reflected on when starting a DAO along with things learned with strong opinions.
What is the goal of the DAO? Are you starting a DAO for the experience of starting a DAO? Nothing wrong with that, but then you are then looking for a nail with a hammer when the nail might not exist. We first started BZD because we wanted to connect all the best people who love Taiwan and web3 in the same room and see how we can help each other and Taiwan, something easy and relatable to get behind.
What is the mission? Some DAOs are purely investment, fun or social, I’ve been apart of few of those to know it’s not quite worth my time. Mission driven DAO are the more meaningful and attract the right people through market conditions and narrative shifts. Do you have a mission people care about that is tool agnostic? eg. people want to be part of it even without a DAO structure, if the answer is yes, you are in a great position to leverage DAO as a tool, not the goal. We wanted to leverage our resources and bridge Taiwan with the world and think DAO is the best tool for that.
Do you already have a community? DAOs are meant to organize community, what is the existing values and vision for your community, and what brings them together? Build a strong community first before you make it into a DAO.
Does it need to be a DAO? Some “DAOs” are better off as a telegram group chat or a discord server. DAO tooling empowers your infrastructure by allowing on-chain transparency of funds, tokenomics that incentivize the desired behavior that needs to be worked through thoughtfully and get feedback/buy in from your community members to be effective.
What makes your DAO different than others? Starting a DAO kind of feels like building a start up. Trying to do too much and you will end up doing nothing well. Focus on what makes your DAO unique and execute with strong convictions. We started off wanted to be both social and mission, while the two aren’t mutually exclusive - social can be a big part of the mission. We thought there are so many other social DAOs out there already and the reason we were able to rally so many passionate people is because of our mission of bridging Taiwan with the world in web3. You will attract the type of people not based on what you say, but what you do. You host parties, you will attract people who want to party. You host workshops, podcasts, conferences, you will attract a different set of people. Both set are great depending on your goals.
What’s your vibe? You want to serve a purpose and get things done, but DAOs are meant to be fun and lighthearted, that’s part of the web3 culture to not take yourselves too seriously, defining your vibe early on helps build the culture and create the branding. We had a brainstorming session where people wrote down the reason they joined, how they describe the vibes of the community before we landed on fun, friendly, and welcoming to be the vibes and branding of BZD. We pride ourselves in having a ton of fun with each other, but get things done when it comes to business - the culture you set early on is important.
What’s your charter? Getting down to DAO planning, you should have a charter that defines how your DAO operates. Charter should at minimal include your mission, vision, values, focus, membership benefits & requirements, treasury guardrails, spending guidelines, signature board, liquidation, revenue sharing(if any), governance structure, proposal structure, voting quorum, removal of members, code of conduct/ethics, future roadmap and incentive model proposal. Work these out in depth collaboratively with your community before you even consider fundraising. Here’s an example of the Bu Zhi DAO charter we spent months working through before fundraising. Most info is outdated but gives you an idea of how we went about writing it. We organized weekly calls at the same time and allowed anyone interested in our mission to join us in writing each part, a very open, fun and collaborative process.
When to fundraise? Only fundraise when you absolutely have to, something high priority you can’t do without funds. It’s hard to get the timing right, but the more structure, process and consensus you set up before fundraising, the easier everything will be when and after you fundraise. Money changes everything, people got a lot more active in an investment DAO I was in after fundraising and that was amazing to see. Non-investment DAOs you want to be very mindful of when to fundraise. Make sure you have a clear roadmap and spending guidelines in place before any money is received, it’ll make the fundraising easier to when people know how the funds can be spent. Don’t rush it, make it a community event and celebrate it, and make sure every person is clear where the money is going and how it can be spent before kickoff.
How to fundraise? You can use NFTs or tokens to fundraise, each with different trade offs. ERC20 tokens are simple for investment DAOs to maximize amount and minimize effort, NFTs are good for non-investment DAOs to build community but requires a lot more effort (smart contract + art + minting website..etc). Pick your method based on your goals, a mix of both is also an option but make sure the “jobs” and tokenomics for each are crystal clear and separated. We used ERC20 for its simplicity and tools like already built in for it. In retrospect, maybe would have gone with NFTs which would have taken longer and required more resources but is better for building community. We retrospectively airdropped personalized membership NFTs at our first townhall nonetheless.
What’s your tokenomics? Tokenomics is the law of the land, can make or break a DAO. Study other DAOs with similar mission, type and scale for what worked and did not work for them. We studied OrangeDAO closely designing a token that represents governance, reputation and rewards. Here’s was our original IDK token tokenomics proposal. We will have probably done a few things differently from what we learned, such as pre-designing token exhaustion mechanism in relation to DAO perks. If you are using ERC20 tokens, how is the supply controlled and how do they get exhausted? Making them non-transferrable (SBT) is also a great option to keep things simple and move away from monetary value and regulatory risk. SBT worked out great for clarifying our non-profit mission.
What are the incentives? How are people incentivized to contribute to the mission and rewarded for the right behavior? This is more than a web3 problem. Very often, lack of transparency under misaligned incentives is the common death cause of DAOs. With right incentives aligned and transparent communications, value quickly compounds in a non-zero sum manner. Small misalignment and lack of transparency compounds just as quickly if not more into full disasters that I’ve witnessed.
What tools to use? There are many DAO tooling these days, all offer different service and angles. Since no one has quite figured out how to best run a DAO yet, the best tools are ones that do one job best and composable. No one has quite figured out an all in one solution, compose minimally based on what you need is what worked for us. Sometimes the good old web2 tools work just as fine. The best tools are the ones people are willing to use with the least friction. We tried going fancy and ended up always reverting to simplicity. I’ve seen promising DAOs die off after prematurely switching to Discord and gradually lost all engagement. For Bu Zhi DAO we used Telegram for communication, Syndicate.io for fundraising, Snapshot for voting, Gnosis for treasury, Notion for documents/project management.
How web3 are you? People idealistically love being on-chain. The reality is we are still at least 5 years away from a full web3 infrastructure being ready in my opinion. What you can strive for is a web 2.5 solution. Full decentralization can be pure chaos, some structure and guardrails are really helpful specially in the beginning. The end of the day, you are dealing with people, and need human solutions. Find the best trade off for your DAO between decentralization/centralization, transparency/privacy, on-chain voting/speed, consensus/efficiency, and autonomy/accountability. (I can write another essay just on these tradeoffs). The model sometimes is often making sure things work first, then progressively decentralize, that includes empowering and trusting members of your community.
Iterate, iterate, iterate Your shit is not gonna work no matter how much time you spend and how well you design them. The best way to find out what works is do research, come up with a plan with strong conviction and debate if needed, communicate and get feedback constantly from your community. Implement it and observe the results, see what’s not effective, ask for more feedback and iterate, but don’t be afraid to try. We had many 3 hour debates in the beginning that quickly dwindled down with time as we found solutions that takes in best of all worlds and addressed concerns from each unique perspectives.
Have fun and learn! Starting a DAO is a fun and eye opening experience. Not only is a great lesson on DAO structure and tooling, and how to work with different types of people, game theory, and how web3 technology can empower human organization and incentives to be aligned in a trust-less manner. Seeing how many people rallied for our cause and how much progress we made to now hosting Taipei Blockchain Week, I am convinced DAO will be one of the pioneer ways to organize people into decentralized society. But we have so much to build, and so much to learn to get there. Let’s go on this journey and share our learnings. Let me know if this is useful, shoot me a DM or follow me on twitter if you’d love to chat more!
Best of luck, have fun and be safe!