Here are some key issues with using DAOs for your startup.

The DAO in most cases is not a legal entity but rather an unincorporated partnership.

This means the members of the DAO are personally liable for any damages the DAO may cause.

DAOs use a network of people to constitute the DAO rather than a formal hierarchy of leadership.

This means there’s no one person to go to for a decision.

All decisions are made by community votes.

A startup fundraising campaign must be able to engage the community as a whole.

Most DAOs transact with their native token.

This means the value is not tied to a fiat currency such as the dollar and can swing in value drastically.

To fund a startup there needs to be a mechanism for moving the tokens into dollars for the startup to deploy for hard costs such as paying taxes.

Charitable organizations raising funding must also consider that distributing tokens for donations may not qualify as a charitable contribution.

Consider these issues with fundraising through a DAO.  

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

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Disclaimer:
Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.