Startup Aims to Give Crypto Investment Clubs a Web3 Makeover

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People are teaming up all over crypto, but, according to the founders of Syndicate Protocol, investors lack web3 native ways to do so. 

“I’ve been an investor for eight years in the crypto and fintech space, and I’ve come to realize that investing literally builds the world,” Ian Lee, co-founder of Syndicate, told The Defiant in a phone call. 

If it’s too expensive to get an investing group started or if the tools are too cumbersome, that friction will prevent people from getting involved who otherwise might have done so. “If this is the next internet, we need more people to participate in investing and building that internet for the world,” Lee said.

Investment Risk

To that end, Syndicate released its first product on Tuesday: A platform for easily and simply setting up an investment club in a web3-native way. It is designed to keep track of all the club’s accounting and compliance needs while giving members around the clock visibility to its performance.

Syndicate announced a $20M investment round led by a16z and a slew of other investors, including Electric Capital, Coin Fund and Variant, at the end of August.

Investment clubs are a well-established way for people to share investment risk as well as ideas and market strategy. They  can be semi-informal groups that don’t charge members for participating. The group manages the investment collectively, like a club. They have been around for ages, but Syndicate believes it has put the right set of tools together to run them in a way that works for blockchain natives.

Lee argued that the core primitive for investment clubs in this era is the decentralized autonomous organization (DAO), but as advanced as that idea is, the tooling is very makeshift at the moment.

“People are doing this, right now, where they are basically throwing crypt into a multi-sig or a Gnosis safe and they are running all of these things as a spreadsheet on the side. It’s really painful, there’s a lot of errors.” Lee said.  “What syndicate does, it’s a DAO protocol that snaps all that stuff in, the legal and financial stuff really simply and affordably.”

Lee says that to set up an investment club using the available tools will cost a minimum of $80,000, but it could go much higher, depending on many factors. Syndicate enables them to get started for nothing more than the cost of gas for using Ethereum.

Peace of Mind

The company has collaborated with the global lawl firm, Latham & Watkins, to have basic legal documents for getting started. It’s working with doola for basic compliance services.

“It’s our belief that part of the problem that DAOs in particular need to solve is providing DAOs and members of those DAOs the peace of mind in terms of compliance and legal,” Lee said.

Obviously there’s a strong crypto-libertarian bent in this space, but Syndicate is nudging investors to follow the rules of their jurisdiction.

Returns for Investors

In the first version, membership in the DAO is governed by a non-transferrable ERC-20 that corresponds to the investors’ contribution to the DAO. This follows the model Balaji Srinivasan (an investor in Syndicate) proposed with the Mirrortable, a web3 cap table.

Syndicate doesn’t have a business model for establishing Syndicates. Like many startups, its first product is establishing a beachhead in the market, with later features or products to drive returns for investors.

The platform has been running in beta already, with 12 groups that are either live or in the process of going live, including investment clubs from Global Coin Research, VectorDAO and ChapterOne.

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