Alts going downstream: Access all the way DAOn
The Access Stack
A defining feature of alts going mainstream is the role that investment platforms and infrastructure have played in unlocking access to alts for investors of all types.
A major reason for the rise in alts is the allure of ownership.
People want to own things. The promise of upside from ownership drives involvement, which leads to the creation of engaged, vibrant communities.
Over the past few year, we have come to witness the different pieces of the puzzle of how an increasing number of people now have access to alternative investments.
Access all the way DAOn
Access has come all the way DAOn — from unlocking access for individuals to invest into funds and companies to DAOs.
DAOs are ascendant — and for good reason.
DAOs are a profound new way to organize human and financial capital that leverages the blockchain and the decentralized world. And do so in a way that includes more investors, from accredited to non-accredited.
In just a few short years, DAOs have hit billions of total AUM.
DAOs are not the be all and end all of funding and capital formation — at least not yet.
Most companies are still governed by traditional equity and funded in fiat. And for good reason. There are less than 100 million blockchain wallets in the world. To see DAOs succeed, we must see crypto wallets become commonplace.
But to understand DAOs, we must understand the evolution of innovations in investment platforms to take stock in how we got here.
The multi-trillion dollar opportunity
Lest we forget that there is close to $1T allocated to alternative investment funds (private equity, private credit, venture, real estate, real asset, and hedge funds) every year. And there’s over $30T in capital across the 5,000 private wealth firms in the US, of which a portion will be allocated to alternative investments every year.
Historically, investing into alternative assets and alternative investment funds has been the domain of institutional investors. Top pensions and endowments have 20-30% allocations to private equity and venture funds, whereas other investors are structurally underallocated to alts. HNW clients of private wealth managers are likely to have closer to 5% allocated to alternatives. And a client of the average RIA might have closer to 1% allocation.
Part of this woefully low allocation to alts is due to allocation size. But part of this has been due to (1) access to funds at lower minimums and (2) the technology enabling investors to access funds at lower minimums in a way that also handles the administrative burden for funds.
Market structure innovation in the alts space has made it possible for alts to go mainstream — and downstream.
Allocations to alternative assets are making its way downstream from institutional investors (like pensions and endowments) to individual accredited and non-accredited investors thanks to the infrastructure solutions that are making it possible for investors to find and access alternative investments.
The Access Stack
Alts are going mainstream. Not just because of a single investment platform or a single part of the market being opened up to investors. Access is being unlocked all the way DAOn the stack — from institutional to retail, from private equity funds to crypto.
Infrastructure platforms like iCapital and Moonfare are unlocking access to top-tier private equity funds and hedge funds for accredited investors and wealth managers. As interest in alternative investment funds grows, it’s not surprising that a platform like iCapital has over $114 billion in AUM across hundreds of feeder funds that provide access to private equity funds and hedge funds.
Infrastructure platforms like AngelList and Allocate are unlocking access to top-tier and emerging venture funds for accredited investors and wealth managers. As investors want to gain exposure to venture to capture returns in private markets, it’s not surprising that a record-breaking $621 billion flowed into venture funds in 2021.
Brokerage issuance and infrastructure platforms like Republic, CoinList, and Party Round are turning customers and users into stakeholders by enabling non-accredited and accredited investors to invest into startups and crypto projects early on. As individual investors want access to startups and crypto projects, it’s not surprising that investment platforms like Republic and CoinList have generated billions of dollars in investment volume across startup and crypto token investments.
DAO infrastructure tools like Syndicate are enabling better mechanisms for coordinating social and financial capital on the internet by providing the tools for people to create investment clubs to invest into all sorts of assets. As an increasing number of people look to create investment clubs to invest into all sorts of assets. As an increasing number of people look to participate in the ownership of assets and contribute to building the cryptoeconomy, it’s not surprising that billions of dollars have already flowed into DAOs.
DAOs will become increasingly important as a way for organizations to fund their operations and coordinate community with capital.
In fact, at some point it wouldn’t be shocking to see a venture fund, or even a large traditional private equity fund platform like Blackstone, form a DAO to invest into companies or tokens.
Bessemer recently announced the formation of BessemerDAO, a Web3 community for founders, creators, and operators to share ideas and information on crypto. While this initiative does not yet extend to the DAO itself investing into companies or tokens, perhaps it’s foreshadowing of a future where VC and PE funds leverage the structure of DAOs to coalesce community to direct capital and connections into companies and tokens.
Some, like Seed Club Ventures, already have. And companies like Syndicate, whose infrastructure is responsible for 10% of all DAOs created, will help enable this trend.
Access and ownership
Access and ownership — two defining features of why alts have taken center stage. And the pieces of the puzzle are beginning to fit together.
Platforms that provide access to private equity funds have their place in opening up access to alts just as platforms that enable the formation and creation of DAOs so that individuals can own upside in a crypto project where they are a community member.
The day of a Blackstone DAO being spun up on Syndicate may not be as far off as it might seem, but in the meantime, they are just fine working with a platform like iCapital to enable the trillions of dollars of private wealth accounts to more efficiently and effectively access their funds. And that’s why it’s important that access is being provided all the way up and DAOn the alts stack.