Former Polychain GP unveils $125M crypto fund with DAO governance ambitions

  • March 23, 2022

The fund will invest in blockchain projects specializing in L1 solutions, privacy technology, DeFi, gaming, NFTs and crypto social.

Former Polychain Capital general partner Tekin Salimi has launched a new blockchain-focused investment fund that will eventually be converted into a founder-owned decentralized autonomous organization (DAO), offering a novel way for startup leaders to be rewarded for their contributions. 

The $125 million fund, known simply as “dao5,” will invest in blockchain and cryptocurrency projects in their pre-seed and seed stages. In the startup world, a pre-seed round usually helps company founders get their operations running. The seed stage is the first official equity funding round.

The fund will invest primarily in projects specializing in layer-1 blockchain infrastructure, privacy technology, decentralized finance (DeFi), DAOs, gaming, nonfungible tokens and crypto-oriented social platforms.

Unlike traditional venture capital funds where company owners simply receive direct funding from venture capitalists, dao5 will give recipients a grant of governance tokens that will comprise the fund’s future DAO. Employees and advisers of dao5 will also receive governance tokens.

The fund is expected to begin its formal transition into a DAO — and hence achieve an appropriate level of decentralization — sometime around 2025.

By pursuing a DAO governance structure, dao5 is attempting to provide project founders with a certain degree of risk diversification as all the grant recipients will have exposure to all other projects in the portfolio. The company says this will incentivize founders to collaborate and maximize their chances of success.

“The goal of dao5 is to explore a new model to bootstrapping a DAO by focusing first on talent and capital acquisition through venture investing, and second on growing the treasury value through leveraging the collective talent of the dao5 community,” said founder Tekin Salimi.

Salimi served as a general partner to Polychain Capital — one of crypto’s biggest venture funds — for over four years. His term at the company ended in February.

Related: Legal DAOs: Why is the Marshall Islands betting on a decentralized future?

Proponents of decentralized autonomous organizations view this mode of governance as a major innovation in how organizations and systems should run. A DAO’s mandate could apply to all sorts of governance schemes where the principal-agent problem exists. As Cointelegraph reported, the Republic of the Marshall Islands has taken a bold step in normalizing decentralized corporate governance by officially recognizing DAOs as legal entities.