Practical Lessons from Building a DAO
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Let’s talk about what it’s actually like to build a DAO (decentralized autonomous organization) from scratch.
I’ve been building Odyssey DAO over the past six months with a community of 6,000+ members. Together, we have:
Created web3, NFT, and DAO guides that have been read 200,000+ times.
Built an audience that reaches 15,000+ members.
Secured top web3 sponsors and Product Hunt’s best education award.
In this post, I want to share 7 practical lessons from building a DAO. By the end, you may realize that “decentralized autonomous organization” may not be the best name for what actually happens.
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Here are my 7 lessons from building a DAO:
1. Define a clear mission and set of values
DAOs can attract quality contributors with a clear mission and set of values.
Odyssey’s contributors are united by our mission to onboard one million people to web3. Our growth lead Adrie, for example, is a single mom who wants to use education and on-chain proof of work to help people find the best web3 jobs.
Having shared values is also important. Odyssey values “quality over quantity” in our content and a community that “pays it forward.” These values apply to everything that we do - from keeping our guides concise to organizing free community bootcamps.
2. Build a strong core team
DAOs can execute better with a strong core team.
Although Odyssey’s community has 5,000+ members, a core team of 10 people drives most of the work.
Think of it this way - If you’re leading a startup with limited resources, would you hire 5,000 part-time contributors to work on 20 projects at once?
Whether at a startup or a DAO, it’s hard to build shared context and forward momentum without a core team.
I think other DAOs are similar - that’s why many have full-time job listings.
But wait, you may be wondering, how is this decentralized?
3. Decentralize through small, empowered teams
DAOs can decentralize through “two pizza” teams that have clear charters.
Some DAOs have a bounty board with a list of tasks that any member can work on to earn tokens. I don’t think this actually works in practice. Consider a task to write a blog post. If any member can take this task:
It’s unclear if they’re actually qualified to write about the topic.
They might put in work only to have their post be scrapped.
Instead, I think DAOs should decentralize slowly through empowered “two pizza” teams. Consider this example from Odyssey:
Mark is our community lead. He kicked off a free 3-week bootcamp using our intro to web3 guide.
Mark announced the bootcamp in our community and a team of 7-10 contributors volunteered to teach the sessions.
Over 300 people joined the bootcamp and a subset of them are now our most active contributors.
This bootcamp couldn’t have happened without Mark’s leadership and a small team of contributors stepping up to do the work.
4. Choose your owners wisely
DAOs should take the time to find the right people to own their tokens.
Odyssey’s first crowdfund sold out in 24 hours and raised $100K+. That success was quickly clouded when some token owners started showing up to ask “when liquidity?”
In hindsight, we should’ve prioritized finding owners who:
Care about the mission. It’s fine to not sell out for weeks if it helps weed out people who only want to make a quick profit. Tools like Premint help founders use allow lists to avoid speculation.
Are active contributors. We reserved 80% of our governance tokens to reward people who contributed to the DAO instead of only those who can afford to buy the tokens.
5. You don’t have to reinvent the wheel
DAOs don’t need to reinvent the wheel in how people get work done.
In some ways, a DAO is like a company that’s more open, remote-first, and flat. Therefore, many company best practices apply even more to DAOs:
Great written communication. Since DAOs are remote, they need people who can write clear and concise updates to keep people aligned.
Influence without authority. Since DAOs are flat, they need people who can inspire others to work on a project together.
Effective decision-making. Since DAOs are open, they need people who can balance decision-making speed with accuracy. In particular, type 2 decisions (those that can be easily reversed) usually don’t need a governance vote.
6. Do everything you can to retain talent
DAO onboarding mostly sucks so do everything possible to retain great people.
The promise of DAOs is that they can democratize access to work. A person from Indonesia could join a DAO, design a website, and earn crypto while building an on-chain resume for her next opportunity (true story for Wenda, our product lead).
However, DAO onboarding is hard. At Odyssey, we’ve tried:
Dedicated Discord onboarding channels
Personally replying to people’s comments
Weekly onboarding calls and bootcamps
I’d be lying if I said that we’ve figured it out. Because DAO onboarding mostly sucks, it’s even more important to retain great people in your DAO. For example:
Alan joined Odyssey’s Discord and started sharing quality writing on DeFi.
We convinced him to draft our entire DeFi path and teach the DeFi sessions of our bootcamp. We compensated him using our DAO treasury.
Alan is now part of Odyssey’s core team.
7. Remember why your DAO exists
DAOs shouldn’t let processes get in the way of delivering value to the customer.
DAOs, like companies, should exist to:
Create useful products and services for customers.
Be a great place to work for community members.
Build a sustainable business.
Everything else - tokens, governance votes, treasury management, etc - should simply be a means toward the goals above.
To recap, here are my 7 lessons from building a DAO:
Define a clear mission and set of values
Build a strong core team
Decentralize through small, empowered teams
Choose your owners wisely
You don't have to reinvent the wheel
D everything you can to retain talent
Remember why your DAO exists
As you can see, many of these lessons apply to building a company as well. A DAO is not some magical entity. It all still comes down to great people working together to achieve a shared mission.
📣 Speaking of which, we’re creating a course to give you hands-on web3 experience (NFTs, DeFi, and DAOs). If interested, please fill out this short 10 question survey so that we can build an amazing course just for you.
There is still an inherent problem with finding the right person for the right job and incentivizing them in the decentralized world even if you use small, empowered teams. There is no way for them to showcase externally their DAO contribution and no way for DAOs to identify individuals who have done real work in DAOs.
I think that there is a point in all, and I'm very agree on all the line here, I have just one questions about the crow-founding and this is it:
if the best investors are the one that believe in the project, and only them, not who expect liquidity, how to found the project? Will it be enough to find only the people that want to be part of the project?
Also there is a sentence that said that 80% of token should be allocated to whom is contributing the project, in this case how the 20% can found the project? Does this mean that if you want to start the project you need to have the majority of the found? If not, what's in for the investors?
Is something that really bugging me , can't understand if there is nothing in for the investors, why should they invest in the first place?