How to raise funds for DAO? 6 common methods in one article

Original article: How DAOs are Funded
Author: Yan Lin Fu
Decentralized Autonomous Organizations (DAOs) are communities incentivized to govern, coordinate, and collectively own a shared pool of value. This value can be determined in two ways: something that the DAO members deem valuable but may not have much value in terms of liquidity, such as governance tokens or DAO shares; or a treasury or management asset that has liquidity in terms of fiat or crypto tokens. Funding your DAO means maintaining a healthy treasury, running operations, and ensuring these communities are achieving the goals of their DAO.
Depending on the design and purpose of the DAO, the funding strategy will vary: it may be raising funds from DAO members, through the issuance of tokens, through venture financing, revenue from decentralized finance (DeFi) protocols, or the sale of non-fungible tokens (NFTs). While we have discussed here various ways to raise funds at the DAO level, it is important to remember that a guild (or subDAO) can also propose plans that feed back into the treasury.
This article will explore several different DAO fundraising strategies.
 Token
One of the most common ways DAOs raise funds is by issuing governance tokens, which can be purchased by or distributed to members who actively contribute to the DAO.
Issuing tokens is the typical first step in raising funds and filling the DAO's coffers. Tokens distribute voting and ownership rights among members. These issuances are done in a variety of ways:
Initial DEX Offerings (IDOs) – These are similar to Initial Coin Offerings (ICOs) and are essentially crowdfunding campaigns where a project’s native token is launched through a decentralized exchange (DEX).
Decentralized Autonomous Initial Coin Offering (DAICO) – The concept of DAICO was first introduced by Vitalik in January 2018. DAICOs are designed to provide funding for specific projects and are designed to protect token holders and give them the option to vote to return their funds if investors are not happy with the progress or direction of the project.
Venture Capital Support
Some DAOs raise money from venture capital (VC) funds. One notable example is Syndicate DAO, which raised money this year from Andreessen Horowitz (A16z) and Carta. But the key is that DAOs do not allow VCs to own more than 10% of community or governance tokens. Giving too much governance power to VCs could threaten the decentralized structure of a DAO, which is key to its operation.
Investment DAO
Another way to fund your DAO is to get money from an investment DAO. Similar to how DAOs are a new form of corporate structure, investment DAOs are a new way to run VCs. Some of the most notable examples include Moloch DAO, Metacartel, Raid Guild, or DAOHaus. These organizations raise funds on behalf of DAO members and invest them into different protocols. So while typically VCs raise investment capital from wealthy founders or larger VCs, investment DAOs work more like crowdfunding - anyone can buy tokens, which are then distributed to projects chosen by the community. The returns from these protocols are used to fill the DAO's treasury. DAOs seeking investment from venture DAOs may also benefit from the mentorship and connections found in the traditional venture capital model.
There are two main types of investment DAOs:
DAO + Fund - Here, a DAO will establish an external sister VC fund. Through this external fund, the investment DAO can get more members. The VC will focus on obtaining external financing from limited partners. In addition, it will ensure compliance with laws, investment decisions, and contract enforcement. Syndication - The main DAO will propose different child DAOs for each investment. At the same time, members of the main DAO can have the opportunity to join the child DAOs and participate in each investment.
As investment DAOs evolve, the structures and frameworks for interacting with them are also changing. The most important aspect to consider when participating in an investment DAO is that the entire space is still unregulated. So, you are building a project with an ambiguous legal structure and receiving funding from another poorly regulated organization. However, it is probably the most web3-native way to fund a DAO.
 NFTs
One way NFTs can be incorporated into a DAO is as an investment asset. Additionally, a DAO can raise funds by launching NFT collections, collecting NFTs and IPNFTs.
Whether launching an NFT collection or issuing NFTs for sale for a specific purpose, these methods allow DAOs to easily raise funds without having to trade off governance. NFT sales can be used to fund project operations, provide benefits to buyers, such as Gen.Art’s membership passes, or fund specific causes, such as UkraineDAO.
Of course, some DAOs will collect NFTs as part of their portfolio. Collecting alone is not necessarily a way to raise funds, but if the price of NFTs rises, it will increase the value of the DAO treasury.
Another way to use NFTs to fund a DAO is through IPNFTs — minting and selling NFTs based on intellectual property (IP). This can continually fund the DAO through royalties and is popular among DAOs created for scientific research, such as VitaDAO.
Grants and Crowdfunding
Many public product DAOs use grants and crowdfunding as a way to raise funds. These may include Gitcoin grants, grant proposals, or protocols that allow crowdfunding. A notable example is Constitution DAO, which was created for a single purpose and used a protocol — in this case, Juicebox — to raise funds. It’s worth noting that with grants and crowdfunding, the DAO needs a project that its members are passionate about and working towards.
In other cases, communities mobilize around specific causes, such as donating to nonprofits. For these, it’s obvious that in order to be able to raise money through grants or crowdfunding, the community needs the right project or cause to support.
Real World Assets
DAOs also use real-world assets, or traditional assets, to diversify their holdings. A major example this year was MakerDAO investing $500 million worth of DAI in real estate, U.S. Treasuries and corporate bonds, invoices, accounts receivable, and most recently, commercial mortgages and business loans.
The adoption of real-world assets provides the opportunity to generate yield and diversify counterparty risk. We believe that as more and more DAOs are expected to invest in these assets, we are really starting to see the connection between real-world assets and the DeFi ecosystem.
 in conclusion
Understanding what you want from a DAO or the type of DAO will change how you choose to fund it. Is it an investment DAO or a social DAO? Or, is it a single purpose DAO like the Constitution DAO? Raising funds and maintaining a healthy financial situation requires combining multiple approaches and finding the one that works best for your project. At the end of the day, community matters. DAOs are built around communities that come together for a common purpose, project, or interest. It is from there that funds can be raised and value coordinated between members.
What new ways of raising funds have you seen? Let us know!