MetaCartel Reimagines Venture Capital for a DeFi Future

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When I joined MetaCartel Ventures’ weekly meeting online earlier this month I didn’t know what to expect. 

The outfit’s bare-bones website looks like something university students would cook up on an all-nighter, with low-rez GIFs and, strangely, an embedded mp3 of Evanescence’s hit “Bring Me to Life.” Its whitepaper features images reminiscent of playing cards from Magic: The Gathering, a fantasy game. 

MCV’s white paper conveys technical details with a swords & sorcerers vibe.

And yet MetaCartel Ventures, one of the arms of MetaCartel, a self-styled ecosystem and community, is emerging as one of the more formidable investors in DeFi startups. Its portfolio includes splashy platforms Rarible and Reflexer Finance, and the firm counts influential players such as Aave’s Stani Kulechov among its investors. Alex Van de Sande,  a well-known developer connected to the Ethereum Foundation, is a member.   

A Venture DAO

Most importantly, MCV is not a traditional venture capital firm but rather a decentralized autonomous organization – a venture DAO. 

The DAO, of course, is a revolutionary new type of organization that originated on the Ethereum blockchain in 2016. These digital cooperatives are designed to replace hierarchical management with more consensual decision-making. They use computer programs called smart contracts to implement rules, manage funds, and fulfill their goals. Some are social clubs while others have a business purpose or a charitable mission, and still others foster new technologies.

Venture DAOs are a particularly unusual variation because they’re trying to fuse the egalitarian ethos of DAOs with the more top-down approach of venture capital. 

For decades, traditional VCs have shaped the tech industry with their influence and cash. They raise investment funds from public pension plans, university endowments, and rich people. Then they deploy that capital in startups organized around a theme, such as fintech or biotech. VCs often take seats on the boards of their portfolio companies and even help handpick management. Through it all is one constant — the senior partners in VC firms call the shots. 

In contrast, MetaCartel Ventures, or MCV, has flattened its organizational structure — there are no managing partners, no executive committee, and no investment committee. It’s the DAO’s members themselves who vote on investments, source deals, conduct due diligence, and propose new ideas and strategies for the fund. In a nod to their swords & sorcerers vibe, MCV has dubbed its members Mages. Yet it’s not too touchy-feely — unlike most DAOs, MetaCartel is a for-profit venture.

“Taking money from us is like getting almost a hundred individual angel checks in one transaction.”

Victor Rortvedt

So far, MCV, has invested about $6M across more than 40 investments in the Web 3.0 space. In addition to raising money from Mages, the DAO has attracted funds from blockchain-based projects like The Graph, a data querying venture, and SpankChain, an adult entertainment system. While no one’s saying that MCV and its ilk are about to disrupt the VC industry in any major way, using a DAO as a venture fund could blaze an important new trail for DeFi development.

In essence, MCV functions like an alliance of angel investors. “Taking money from us is like getting almost a hundred individual angel checks in one transaction,” Victor Rortvedt, MCV member and co-founder of the interest-to-charity DeFi app, Spendless, told me. “Instead of having to pitch to 80 different people and 80 different projects and try to get a small allocation from everyone you can get connected to all these people in one transaction.” 

As the meeting got rolling, I watched the Mages swing into action. First up was an MCV-backed founder who updated the collective on his project. Some members asked about technical specifics and others suggested potential partnerships. There was classic networking, too, with Mages promising to connect the founder to their contacts on another project. (MCV asked that specific projects not be named as a condition of attending the meeting. MCV is one of The Defiant’s investors).

The conversation then shifted to the ins and outs of a potential investment. And at some point member Rolf Hoefer steered the discussion to the merits of a 48-year-old academic paper called “The Strength of Weak Ties,” a treatise on social networks published long before the invention of the World Wide Web. 

The Fringes of Crypto

That level of esoteric discourse is right in character for a project that wants to unearth surprising experiments as much as straight-up business opportunities.  “MCV’s edge is investing on the fringes of crypto when things aren’t so certain,” says Peter Pan, MCV member and investor at 1kx, an early-stage token fund. 

Case in point: Axie Infinity, an NFT-based online video game, which MCV backed earlier this year. Axie’s AXS token was trading for less than a dollar in January and broke the $20 mark last week.

As DeFi entrepreneurs themselves, the Mages are steeped in the flow of Web 3.0, the next generation of the Internet. When they like a project, they tend to kick it around for a while. 

Peter
Peter Pan is a Mage and investor at 1kx, an early stage growth fund.

“We sometimes have soft polls to figure out how much we want to potentially invest, whether we want to invest in the first place but usually we do a fair bit of social coordination,” Rortvedt says. “It’s a lot more in Discord and the social layer.”  

While your typical VC firm may operate out of plush offices on Sand Hill Road in Menlo Park, California, or London’s Mayfair neighborhood,  MCV runs on a set of smart contracts called Moloch, which also happens to be the name of a Balrog-like deity with the head of a bull and a belly full of fire. Coded by MCV member and SpankChain founder Ameen Soleimani, the code’s Github README.md file posits that “our design represents a Minimally Viable For-Profit DAO.” It’s suitable for venture funds, hedge funds, and investment banks. 

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Moloch is a smart contract supporting MCV’s funding operation.

Joining MetaCartel’s DAO, which lies at the heart of the community, is pretty straightforward — you have to share what you would contribute to the build-out of the Web 3.0 ecosystem and explain why you want to join the venture, plus pony up a minimum of 10 ETH (or 50 if you’re an organization). To encourage women to get involved, MetaCartel will accept a 5 ETH optional pledge from female applicants. 

The membership proposals thread is a pretty revealing window on the ebb and flow of DeFi culture at the moment. It’s loaded with project proposals and endorsements from existing members. One applicant emphasizes experience in product design, project management, and UI/UX.  “I was a professional magician, and a Shakespearean actor, I also love mushrooms,” the prospective member adds. 

Goblins

For those members who want to quit MCV, Moloch features a function called RageQuit. The function is coded with a grace period so if a DAO member disagrees with a particular proposal enough to want to leave the group, they can claim their funds before it passes. 

“What it is is the right to free, easy exit,” Rortvedt says. “I think that’s a pretty important cultural value inside of crypto.”

Victor
Victor Rortvedt, a Mage, builds DeFi apps.

The DAO does enforce some basic rules to ensure it fulfills a major goal: making money. Members can jettison slackers who fail to contribute. Yet even in this decentralized organization, some are more equal than others — accredited investors, aka “Goblins,” cannot be expelled for failing to meet participation requirements. 

Utopian Ideal

There is one value that MetaCartel shares with conventional VCs — its members want to change the world, and they have no doubt they will.  In its manifesto, MetaCartel, MCV’s parent, envisions a DeFi-led liberation, and sees itself in the vangurd of this movement. 

“​​In the year 2035, our physical, local communities will be comprised of communally-run, revenue generating DAOs,” says MetaCartel’s  Web 3.0 manifesto. “Individuals will be able to invest and participate in the governance of their local infrastructure and community businesses.”

A utopian ideal? Perhaps, but that’s what’s propelled technology, for better or worse, since the advent of microchip.

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