Γ—

What a Deal Flow Means for a DAO

Business deal flow
What a Deal Flow Means for a DAO
Date Published: 03/03/2023
Date Modified: 03/03/2023
Business deal flow

DAOs don’t just fund every proposal that appears before them, as they are accountable to their voting members. Much like a regular investment fund, though not all DAOs are investment funds, they undergo a defined process called a deal flow. Sometimes written as dealflow, this process allows decentralized autonomous organizations to fairly source, evaluate and select investments based on a defined set of criteria.

What is a deal flow in a DAO?

In a DAO, the deal flow process is essentially how proposals or investment opportunities are sourced, evaluated, and decided to fund. Often, the deal flow is heavily influenced by the DAO’s mission, goals, and members, who ultimately make the majority of decisions. Exceptions to this occur in the case of low-ticket proposals, where the deal flow may be handled within the DAO’s management team, depending on the individual protocol.

Although every DAO will have a slightly different deal flow process, it generally follows a format similar to this:

  1. Proposal submission: A DAO member or other interested body can submit a proposal through the relevant channels. This contains all the details about the project, including its purpose, timeline, budget, and expected outcomes.
  2. Proposal review: Once submitted, the project is then reviewed by the DAO’s team, usually called the deal flow working group, who assess whether it meets the criteria.
  3. Voting: If a project passes review. It is then voted on by the DAO’s members. Voting protocols vary, depending on the DAO’s governance structure.
  4. Funding: Later, if it passes the vote and is approved. A project receives its funds via tokens or fiat currency.
  5. Monitoring and reporting: Like most funding types, DAOs generally require projects to report back on their progress and ensure that funds are appropriately used. This ensures transparency and accountability, which may encourage more people to join the DAO.

This is a general process. Each DAO develops its own deal flow that suits its specific needs and requirements. For example, the VitaDAO deal flow has notable additional steps aimed at improving its capabilities.

  • Project sourcing: projects can come to the DAO in various ways. For example, via its community, outreach (scouting), or inbound. Those scouting projects can receive a bounty for their efforts if approved.
  • Shepherding projects: as the aim of the DAO is to improve longevity research. VitaDAO puts a lot of focus on reviewing, due diligence, and ensuring the project is the best it can be before approval.
  • Posting community reports: community is a vital part of a DAO. That’s why VitaDAO makes reporting on project approval and declinations a standard part of all processes. Projects are classified as Tier A, B, C, and D to proclaim their current quality. As a standard, the DAO avoids strong “no” answers in order to encourage participants to continually improve their work and contribute to the field.

What is a deal flow working group?

Numerous people take part in a DAO’s deal flow, from the project proposers to the DAO’s members, all of whom play an important role in the process. This process is principally managed by the deal flow working group.

Often, the deal flow working group is a group of professionals within the DAO. They may have specific skills or experience and are tasked with identifying, evaluating and following up on prospective opportunities for the DAO that meet its goals and objectives. This group can include scientific experts, managers, and marketing professionals, depending on the DAO’s needs.

Although the deal flow working group’s responsibilities vary from organization to organization, based on necessity and understanding of the role, typical tasks can include sourcing new deal opportunities, screening potential deals, presenting deals to decision-makers, and managing ongoing relationships.

Essentially, the deal flow working group within a DAO helps to ensure that the organization stays on track with its investments and that they continue to align with its strategy. Deal flow group members are key to a DAO’s growth and success.

What is a deal flow steward?

A deal flow steward is an individual or group that manages (or stewards) the deal flow process within the DAO. The steward can be responsible for such tasks as sourcing and screening projects, tracking potential deals, relationship management, and stakeholder management.

The steward’s primary goal is to ensure that the deal flow process is effective and aligns with the organization’s strategic and financial goals, and identify investment opportunities.

How do the two groups differ?

The deal flow working group and the DAO’s stewards perform different functions within the organization. The working group operates collaboratively to solve tasks within the organization. They are generally formed from interested parties or via a proposal and voting process. DAOs can create various working groups for various purposes; deal flow is just one of these.

On the other hand, the DAO’s stewards concentrate primarily on the overall functioning of the organization, its strategy, and the deal flow process. The nature of their roles means that, at times, their functions may overlap when performing certain tasks or initiatives. Both are essential to the DAO and its operations.

Summary

Like any investment body, a DAO that deals with funding projects must put processes in place to ensure that its strategies are followed when it invests in them. This is why DAOs often develop deal flow processes to meet these needs. Within those processes, numerous individuals and groups are involved, including deal flow working groups, shepherds, members, and stewards as defined by the DAO’s protocol.

About the author
Maria Isabella

Maria Isabella

Maria is a writer and editor with a passion for technology, health, and lifelong learning. With over 6 years of experience in content creation for the fintech and wellness industries, and 10 years in the non-profit sector, as well as a Masters of Science in Development Management, she is passionate about combining tech and healthcare to make the world a better place.