Why DAOs Will Have $1 Trillion AUM Within 10 Years: Crypto VCs

• Imran Khan cofounded preseed crypto fund Volt Capital.
• DAOs manage about $11.3 billion in their treasuries, according to blockchain data provider DeepDAO.
• One crypto VC explains why DAOs are good for some use cases, but not all.

JPMorgan Chase, Bank of America, Wells Fargo and Citigroup — top asset managers that have been operating for decades — each had over $1 trillion on their balance sheets in early 2022.

Within the next 10 years, much younger decentralized autonomous organizations, or DAOs, will be managing assets of the same value, industry experts predict. 

Imran Khan, co-founder of the preseed crypto fund Volt Capital and founding member of Web3 accelerator Alliance, says that DAOs will have $1 trillion in AUM by 2032. 

DAOs currently manage roughly $11.3 billion in their treasuries, according to blockchain data provider DeepDAO. Less than a year ago, in May 2021, the total DAO AUM was $926 million. This explosive growth has happened in tandem with the rise of funding in DAO and DAO-related startups from venture-capital firms like Andreessen Horowitz (a16z), which invested in both PleasrDAO and Friends With Benefits (FWB) DAO. 

For the uninitiated, a DAO is a social organizing entity for Web3 – an online community of crypto enthusiasts and investors with aligned incentives. Efforts range from raising money for controversial Wikileaks founder Julian Assange’s legal fees to garnering donations for Ukraine’s war efforts amid Russian invasion. 

Members, known as contributors, own tokens to participate in the DAO and have fractional ownership of its assets, along with the ability to vote in the group’s decision making process. These organizations are the “natural progression to online communities” and “one of the best social coordination tools in the world,” Khan told Insider.  

DAOs have previously mobilized investors to crowdsource funds and bid on a rare copy of the US Constitution for $49 million. Although that initiative failed, others have succeeded: Another DAO purchased the sole existing copy of Wu-Tang Clan’s album “Once Upon a Time in Shaolin” for $4 million.

“DAOs remove the barrier for the five billion internet users to trust and coordinate capital with anyone on the internet,” Khan said. 

Market sectors such as consulting, M&A and startup formation, Khan said, could be disrupted by DAOs because it allows those with the ability to form communities to solve real life problems. 

In April 2020, Khan launched the Web3 accelerato​​r Alliance with former quant trader Qiao Wang and has since had over 200 startups in its program. Former participants include top DeFi projects by market capitalization such as SushiSwap, Olympus DAO, Alpha Finance, and Synthetix. 

Khan said DAOs “ultimately remove centralized platforms and their risks.”

Yury Lifshits, CEO and founder of the DAO creator platform Superdao, said that DAOs will reach a $1 trillion AUM because of their lack of geopolitical restraints. 

“DAOs have the ability to employ people at a global scale” and “exist outside of national legal systems,” Lifshits said. 

Investing in the nascent space has its risks and rewards, Benjamin Cohen, founder of investment firm Web 3 Equities, said. 

“Investing in DAOs can give investors exposure to disruptions that are happening across different business segments,” Cohen said. “More and more talented founders are leaning into building DAOs because the structure can more effectively incentivize early adopters than a traditional startup would.” 

The risk: There isn’t a playbook for DAOs

There are challenges, Cohen said, to functioning as a DAO. 

“This can make things very challenging for leadership to act quickly on important decisions,” Cohen said. “I personally think DAOs are good for some use cases, but not all.”

Khan said the risk in investing is that there isn’t “a playbook on how a DAO should be operated,” specifically with its governance structure and leadership hierarchy. Should they look like corporations that have an executive team or have a flat organizational structure?

“The truth is probably somewhere in the middle, which is both running like an organization with product and monetization strategies,” Khan said. “And over time, thinking about some areas where DAOs can decentralize decision-making processes.”