Breaking the Myth: Why Starting Small is a Strategic Move for DAOs

When we think of Decentralized Autonomous Organizations (DAOs), we often imagine large communities with thousands of token holders spread across the world. However, DAOs don’t necessarily need to start on a massive scale. Just as many traditional businesses begin with only a handful of individuals, DAOs, too, can benefit from starting small.

Consider Instagram, for instance, which started out with only 13 employees but became a significant player in the social media space and was eventually acquired by Facebook for $1 billion. So, why do we assume that DAOs must start large? It’s time to challenge this notion.

Starting small doesn’t mean starting weak. It’s about beginning with agility and adaptability. DAOs can start with a small founding team and gradually scale up as their product-market fit and investor interest validate their concept. During it’s initial year, it’s core team might consist of just a few members, but they can harness the power of the DAO framework to manage finances, monitor progress, and even establish themselves as conventional companies if needed.

Let’s take inspiration from the history of DAOs. Gitcoin, for example, began as a one-person project and later grew to include two co-founders and a few more contributors. They didn’t start with thousands of participants, but as a small startup that eventually decentralized and created a community.

What helped them grow was the network they were part of. This is the new paradigm shift we see in web3; we are no longer building in isolation. We are building on the same playground, contributing to the overall economy, from which we all eventually benefit.

This is where DAOs have the greatest advantage compared to traditional organizations. As DAO creators, we are building interconnected networks that share resources and value created.

The best example would be Optimism with their retroactive public goods funding. They create immense value, and if they were a web2 company, they would just distribute to the shareholders, but they are not. So all the excess value would flow back to the ecosystem to support more projects and create a flywheel where those projects when they grow, increase their value creation and share some of the value through transaction fees, which will increase the amount that Optimism can distribute to other projects.

In conclusion, the narrative that DAOs are exclusively for large-scale operations is a misconception. DAOs, with their inherent flexibility and adaptability, are uniquely positioned to start small and grow organically. This scalability is not just a logistical advantage but a strategic one, as it allows these organizations to intimately connect with their core communities and iteratively refine their purpose and operations. By being part of a larger, supportive network in the web3 space, small DAOs are not just individual entities but integral components of a dynamic ecosystem. This interconnectedness amplifies their potential impact, enabling them to contribute significantly to the broader economic and technological landscape. Therefore, in the evolving world of DAOs, starting small is not a limitation but a gateway to innovation, collaboration, and substantial growth.

Author Bio

Puncar is passionate about supporting the web3 ecosystem through designing the right incentives, tokenomics, and governance structures.