DAOs and NFTs: web3 investment lessons from Wall Street Neon Dao by Sergio Silva

hello Hello whoa that's loud sorry about that testing testing one two there we go hi everybody thank you for sticking around to graveyard shift my name is Sergio Silva um also known as sergito online that's just Sergio little some Mexican and that's what my family calls me when I was making a Twitter name I have no idea what to put on there and so I became sergito I'm going to talk to you today about web3 investment dials and some of the lessons that we can take from traditional Finance to apply to this new space um so with that let me tell you a little bit more about myself um my day job is web 3 Business Development I lead that effort at fireblocks we are the largest infrastructure provider um in the digital asset space will help Enterprises with their wallet infrastructure smart contract security and everything like that so that is what I do uh from nine to five and then from five to nine I came into web 3 back in 2021 early 2021 I was working on Wall Street at Barclays Bank I was leading the equity derivative sales desk for uh you know Equity structure nodes options flow ETF and I came across the crypto punks while reading the defiant I was actually quite taken back by an article that noted somebody had purchased an ape Punk for a hundred and forty thousand dollars and I thought it was the most ridiculous thing I had ever seen or read in my life and actually made a lot of fun about it but I joined the Discord it was my first time actually on a Discord and I joined the punk stairs Court in early February of 2021 I just fell in love I fell down the rabbit hole and I couldn't stop thinking about web 3 or nfts ever since then um what I did was pretty much decided to stake my whole career on web3 and nfts I left a Barclays where I had spent seven years I actually started at Goldman Sachs where I had spent five years before that so 12 years of Wall Street Experience I joined the good Folks at fire blocks and uh have been there for two years now and one of the things that I noticed early on with web 3 and with nfts was you know there was this new way of coordinating um you know group activities online um and for me was something that was very different from what I had seen in Wall Street which is you're very siled to the bank that you work at you're very Silo to like the investment um team that you're working with there's no real ability to like expand that surface area right so I remember a lot from my sophomore High School sophomore chemistry class that the best way to have a successful chemical reaction was to expand the surface area of the molecules right that's why you need to heat up things to mix them together because that expands the surface area so web3 immediately just jumped out to me and I said wait we can expand our own surface area for investment and we can do so by coordinating with other people around the world that might have different areas of expertise that might have different access to different investment opportunities or different ideas different regions different time zones and we can do it over Discord yeah sign me up so I me and some friends we started metaverse down oh actually it was started before I got there but I joined it early on metaverozau was a small Dao formed to invest in metaverse land just like the name implies um it was I was 20 25 people so not like your traditional dials that you think about you know let's go by the Constitution or let's go buy a bunch of nfts and there's like 5 000 people on a Discord nobody can do anything together this was a smaller dial where you know we kind of like all knew each other um and from there we started building stuff on crypto voxels we put together some some nft shows some crypto voxels and we were approached by Flamingo down I don't know if you've heard of flamingo though they're like one of the largest nft collecting dials they were incubated by tribute labs and they were looking to expand into the metaverse and so they approached us and said listen we want to take you guys fold you into a new Dao and bring in more investors and continue doing what you're doing with more Capital so we're all for that and um we put together neon Dao Neon was a combination of metaverse Dao plus some investors from Flamingo Dao and tribute Labs as well as the team from artifact the web 3 arm of Nike now this was before the acquisition the artifact team joined us as well and so that's how neon Dao was born and um personally I'm also a project founder I did a meme project focused on the me bits uh the mebits are this beautiful 3D characters that you their metaverse ready they're like 10 years ahead of their time by the same uh team as the crypto punks and now obviously owned by Hugo Labs so I put together this project called seize the memes it's a meme project an addition art project I wanted to have some skin in the game as far as like understanding you know the founders side the Community Management side and finally I'm a lover of math and culture 1D equals 1B I love crypto dick Bots and if you take anything away from this stock today is that 1D always equals 1B so let's dive a little more into this investment dials that I you know that I'm talking about as I said before not every Dao is created equally um my idea of the web 3 investment dial is now that's probably under 100 people that also helps with like jurisdictional requirements um regulatory requirements for like an investment fund I like to think of it more like a small group of friends like a small VC on web3 Rails it's a fund that's managed and owned by its members it organizes and deploys capital again using web3 rails so you know you can have this course not really web3 but you know it's kind of like Twitter has become the Bedrock for for web free communication and coordination so you can have your investment fund pretty much run on Discord channels and we do that at neon down I'll tell you a little bit more about that um you can also just take a focused investment into an area so Flamingo dial nft art metaverse uh neon Dao the tribute Labs team has also put together other dials that invest in like music nfts through sandals and gaming nfts through Ready Player Dao um actually we just put together another doubts called Metropolis Dao and it's going to invest in AI um so again you're focused on one investment theme and you can put together all the background all the contacts all the experience that the members have and do that to deploy the capital together why I mentioned you know a smaller group of people you can play nice I I'm a firm believer in you know making sure that you are within the bounds of the law um because I also want to be able to call the police one day if somebody's like trying to like carjack me um so you know I think there's compromises to be made especially we're talking about finances I do think that it's important for us to try to play as much as we can with it like investor protection and the like and you know if I were to Define this dial this web3 investment that will be a group chat with a joint wallet pretty much what are the advantages and I'm sure you're already thinking okay us is talking about you know ability to combine the diversity of background so for example neon Dao we have Founders I mentioned their artifact team right their designers they've had successful exits uh we have artists we have other types of Builders and what this does is just gives you a whole different level of just expertise and experience that you can combine and invest in together um it's a different kind of skin in the game versus you know just helping a traditional investment fund because for those you just send a check you know you get your Capital call you wire your money and that's it you're investing on like one person or a small team whereas here you're investing in the wisdom of the group um and you have the transparency that blockchain enables you we know what the wallets are we know what we have on them we know how much we paid for them you know whether we're making money or not um if we got an airdrop if we got any kind of perk it's all there and and that's just not only a big plus but it gives you the ability to execute rapidly because you know we're at uh East Denver you can do a lot of stuff programming you know execution of purchases so for example neon Dao we have this thing called Emoji consensus where somebody says you know let's buy 15 ether one of moon Birds um and put up the vote on the channel and if you get 15 yes uh on the on the Emojis as a vote we have a bot that automatically goes out and executes the trade so you can automate a lot of that and again if I'm not involved that day but then I go and check the wallet I see oh we bought some you know whatever nft or whatever token you also need less service providers anywhere you are like an investment fund or have invested in one you know how much back office there is how much settlement like all the kinds of you know providers that are really just take away the capital of the fund right you pay 220 and that two percent just goes into fees with this for example neon Lao we have tribute Labs on the back end and they do take care of all like the K1 something like but we're able to reduce a lot of just the overhead um that you have in a traditional investment vehicle investment Dallas versus traditional funds and I've already kind of like mentioned some of this so I'll go quickly through them hive mind decision making versus centralized investment team mnlp in a great web refund but really you know the exposure that they can get being a team of five being a team of six it's very minimal compared to Neon Dao we have 69 members I think uh the last count where you know we have ice everywhere where we're users of the products we are in the space um and so that's a huge plus also aligned incentives versus your you know traditional funds and a higher degree of collaboration for an uh traditional investment vehicle you pay the management fee and really they only make money if they're you know hitting their their watermarks from their years prior if you are in a fund that starts underperforming that incentive to to do really well and find good Investments kind of starts going away um whereas here right you you have real big skin in the game and so you're incentivized to continue to go out there and get that deal for low for for the Dao make sure that you are participating on the calls that you're voting um that you're promoting the doubt I'm wearing my neon dial hoodie um and and and this just increase the surface area more opportunities more deal flow and better Capital um efficiency because you know versus writing a 200 000 check to one VC fund or two VC funds you have the ability to maybe participate in like 10 different of these dials or three of these different dials which give you a lot more exposure to different projects and you're not so concentrated which I think gives you Capital efficiency now obviously as we all know there's a ton of challenges being this early in the space um the first one that always comes to mind with dials is just the risk of low participation and by that by default that turns into concentrated governance right if there's always the same people that turn into the calls always the same people that vote you know they're they're gonna start really just driving most of the investment decisions which might not be the best risk management or portfolio strategy which leads me to the second point right versus a traditional uh firm or fund or whatever there's no real well-defined uh investment strategy there's no real well-defined portfolio management strategy we've had some of those for example at neon where we're really good at buying things we're terrible at knowing when to sell them or how to sell them right like we we've done really well and it's like well do we sell do we not sell it like it's just it's a challenge I would challenge just come opportunities obviously and then experimental tooling right I mentioned the uh Emoji uh Discord consensus um and and there's no real like big tools for for managing a portfolio you know neon doubt the pick in in ether terms before we started deploying we had 6 000 ether so it's not a small amount of money but the tooling might not be there yet what are the solutions to this problem so flow participation um you know when you create this dials you can require people to have a minimum threshold of participation and if not you you know kind of like kick them out if you don't want to participate you don't want to be a part of this well then you're gone hopefully the dowel is performing well enough that people are in centralized to stay or you can start rewarding people where for example you say let's buy I don't know this is an idea 10 nfts from a good artist and we are going to do a quarterly vote amongst the Dow to reward these 10 nfts to the top 10 participants or top 10 more engaged people and you can start like deriving different ways of incentivizing participation which I think will later on also come into play as this space developed um for the lack of portfolio and risk management strategies I actually think there's a big opportunity there to include a lot of the quantitative trading star uh strategies that we see in traditional Finance so one of the big things that happened over the last 10 years and was Street was you know you use quantitative methods to determine your trade entry points are exit points and also to automatically execute those trades so maybe not like you know in a venture portfolio you can't really do that but if you're doing tokens and nfts there's a lot of opportunity to apply those and develop them um and then for the experimental tooling how do you fix that well this is a big opportunity to build what is needed I think this types of investment dials are going to have a lot a lot a lot of growth and so if you're early on and you're discovering the issues that they have you can start building the tooling tribute Labs has been doing that for for its Dows and it's been a great success for them so with that I'm almost out of time here I just wanted to first and foremost thank you again for being here yeah you know I know happy hour is already kicked off so I really appreciate you uh for being here you can get a hold of me through Twitter I'm sergito sergito or telegram as well and if you like mebets season memes my meme project um I would love to have you as collectors but if not you know neon Dao you can also find us on Twitter at neon Dao or tribute Labs they're also out there uh thank you so much for your time and your attention today foreign