If they are able to balance their tech offerings with the human needs of empathy and belongingness, yes!
In August 2021, India-based blockchain startup Polygon decided to build the country’s first decentralized autonomous organization (DAO)—an organization run by its members, without any leader, on a blockchain. With the DAO, the startup aims to give users decision-making power to influence and even map out the startup’s future. The co-Founder and COO of Polygon, Sandeep Nailwal, explained what inspired the startup to go this route. He said, “So far, the prominent way for humans to interact and communicate has been through centralized institutions, such as banks, companies, government bodies, etc., but this has given rise to a number of instances of malpractice and corruption. DAOs are a radical, paradigm shift where everyone in the organization can participate in decision-making transparently on blockchain.”
As more and more startups consider launching their DAOs, we take a look at what’s in store for them:
DAOs automate business decisions by combining multiple smart contracts, which are self-executing contracts that work in accordance with “if…then” statements. That gives DAOs the ability to handle business processes, ranging from keeping inventory to shipping products. For instance, say there’s an e-commerce startup that sells books. When a person places an order, the smart contract responsible for the inventory browses the DAO and finalizes the order. It also creates the invoice and initiates shipping. This way, the startup can save time and labor costs while ensuring efficiency in their business processes.
Since DAOs are decentralized, they have no governing body, and there is no single leader making decisions for the group. When people buy tokens to become a member of the DAO, they also get voting power that they can use to influence the startup’s decisions. This way, members can rest assured that everyone wins and that no single person’s interests are being catered to. It also reduces the odds of corruption, cheating and more, as everything happens on the blockchain and is public.
As mentioned before, every activity or transaction that happens in the DAO is available for all to see. Additionally, there are built-in treasuries that no one claims ownership too. If anyone wants to access the funds, they will require the group’s approval. Thanks to this, DAOs can prevent people from running away with the startup’s money or duping investors.
For startups, one of the biggest hurdles is scaling their business globally. After all, it’s cost-intensive, and there’s no guarantee of success. DAOs make that process easier. Not only can your startup raise funds from people around the world, but it can also onboard new employees and create teams to oversee the expansion—all over the blockchain. With DAOs, it becomes easier for startups to reach a global audience and boost profits.
Despite its many benefits, DAOs, like most technological advancements, are not free from scrutiny. For one, as a startup, you need to be prepared to give up significant control of your company if you want to succeed as a DAO. Secondly, some, like the COO of Tusk Holdings, Bob Greenlee, believe that the business world has a tendency to be “messy and multivalent”, and DAOs cannot keep pace with that. He says, “From being a part of an organization, we derive a sense of place, and from this sense of place, ultimately a sense of self.” In the years to come, we will find out whether DAOs will succeed in formulating strategies to combat these challenges.
Header Image by Freepik