A crypto collective backing web3 startups is seeking new members. The only condition for joining? Applicants must be alumni of the Y Combinator accelerator.
The group, called Orange DAO, is an effort to build out a venture structure which can scout out and back young crypto startups. It was formed this fall with a few dozen YC alums, but has grown in recent weeks to attract more than 1,000 YC founders. The collective wants to use the crypto-native DAO formation to better incentivize its growing network to source deals.
“Orange DAO will help startups apply to, and be accepted into Y Combinator, provide them with pre- and post-YC funding, while helping mentor their leadership and recruit talent, and acquire customers,” Orange DAO’s official charter reads. “And we will do it responsibly and equitably by becoming a DAO governed by its members because our hive mind is greater than any single ape brain.”
The 1,000 founders now in Orange DAO’s Discord chat represent a sizable chunk of the total volume of YC founders — Y Combinator has backed more than 3,300 companies since launch. The effort is co-led by Ben Huh, who has co-founded a handful of startups and helped lead YC’s New Cities initiative back in 2016. Y Combinator is not formally involved in the project, the accelerator tells us.
“It’s crazy to think about an alumni group that becomes its own entity that is for-profit and generates wealth for its members, but that’s exactly the state of the world we’re in,” Huh told TC in an interview. “We think that these groups will serve as a buying power as well as validation… So, if 1,000 YC alumni choose a specific service provider or toolset to use, it must mean that it’s actually quite good because these people build for a living.”
After founders verify themselves by posting their crypto wallet address to their YC-linked HackerNews profile, each member can mint a non-transferable NFT that verifies they are indeed a previous YC founder and are now an NFT-carrying participant of Orange DAO.
Orange DAO isn’t the first effort to build an alumni fund that taps into the networks of well-connected YC founders. Back in 2017 a group of a couple hundred YC alumni helped form the Pioneer Fund, a more traditional venture effort to tap into the expertise of past YC founders to win deals.
DAOs, or decentralized autonomous organizations, are groups that leverage blockchain tech to help multiple users make decisions as a single entity. Throughout the crypto bull market, they’ve become a popular way for users to band together to buy expensive NFTs or other objects. In November, a DAO called ConstitutionDAO generated excitement around its ultimately failed bid to buy an original copy of the U.S. Constitution. DAOs are also used by crypto projects and protocols to create decentralized governance structures to vote on key decisions.
“At the end of the day, DAOs are a collective technology as opposed to an individual one,” Syndicate co-founder Will Papper tells TC. “DAOs are kind of the next evolution of the corporation because they encode both voice and exit into their foundations.”
DAO startup Syndicate helps the groups get off the ground and navigate complex regulatory issues. Papper helped the ConstitutionDAO team navigate the intricacies of their Sotheby’s bid and also helped guide Huh’s efforts in early conversations around Orange DAO.
Orange DAO’s structure is a bit unusual, part of an effort to experiment with the organization type while staying compliant with securities law. The DAO itself is an LLC, while the fund which actually backs startups is a separate legal entity called Orange Fund, which is run by Huh and a couple other general partners. That entity has already closed an initial fund and invested in about 30 startups, including DeFi startup Goldfinch.
“We figured out a way to kind of combine the investing entity structure and then the DAO structure — they’re still separate but they work together,” Huh says “I think where we want to be headed is: do as the smart contract says.”
The DAO itself is run through committees — an effort to organize the 1,000 members into smaller working groups. A fundamental element of Orange DAO’s structure will be finding ways to reward members who do more work on individual deals by awarding them internal governance tokens, Huh says. The group is a bit opaque on how performance from the fund will translate to returns for DAO members, though Orange Fund’s GPs will be contributing their carry in the fund to the Orange DAO’s internal treasury.
The effort was initially branded the “YC Crypto DAO,” but as its ambitions have scaled, the group has taken efforts to adopt its own unique brand leading to its new name and a new mascot — a glasses-adorned pixelated citrus fruit bullishly nicknamed “Juicy Returns.”
