Hundreds of Y Combinator alumni join crypto collective to back web3 startups – TechCrunch

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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 TechCrunch 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 TechCrunch. “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.”



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