Hydra’s Investment Thesis: All In on Specialized Communities

Hydra Ventures
October 12, 2023
min read

Hydra Ventures DAO is a fund-of-funds, aiming to foster the growth of community-oriented investment DAOs and stimulate novel investment models. Comprising DAO operators, service providers, founders, and web3 VCs, Hydra sets new industry standards for the design and operation of investment DAOs.

In the grand digital chessboard of crypto, investment DAOs can serve as the invisible hands moving the pieces, orchestrating the successes of significant projects from behind the scenes. We’ve witnessed a transformation in the web3 investment space since the last bear market, with altered conditions for successful capital allocation. Hydra was formed in this new paradigm to make concentrated bets on specific sectors and niches, setting the stage for the evolution of investment DAOs into tightly-bound communities with aligned incentives. 

The Proliferation of Investable Verticals

This proliferation of opportunities presents both exciting prospects and significant challenges for investors navigating the rapidly evolving crypto space.

Timeline of Crypto Verticals

The approach typically taken by generalist investors — investing a mile wide and an inch deep across an industry — is less likely to succeed due to the variety and complexity of the emerging crypto verticals. Each sector requires specialized knowledge to understand the regulatory landscape, value accrual mechanisms, and market and execution risks to effectively assess startup projects and their teams. In the earliest stages of a new vertical, only a small number of people working in the trenches seem to understand its potential and can see which projects can unlock its value. 

Enter Hydra

As the number of verticals increases, Hydra will succeed by investing in and incubating specialized investment DAOs with curated memberships that position investment professionals shoulder-to-shoulder with subject matter experts who are deeply embedded within their respective communities. This strategy leverages domain-specific knowledge and networks to provide an edge in deal sourcing, investment diligence, and strategic support offered to portfolio companies, while decreasing the barrier to entry for experts who want to participate in the investment process. 

With investment decisions being made by both experienced practitioners and investment professionals, the investment DAOs in Hydra’s portfolio will make more informed investments while helping to advance the entire DAO space through rapid experimentation and tight feedback loops across a diverse network of investment DAOs.

Ultimately, Hydra is focused on a new form of human coordination that will unlock value and innovation across a number of verticals, both within web3 — and beyond. Web3 is the home to early adopters for these emerging models and therefore will provide the perfect testing ground for how we will execute similar strategies in verticals outside of the technology sector. 

Unlocking Community Potential 

To address the broad decision space of an investment DAO, Hydra has built organizational structures which focus members' attention on the key areas where they maintain expertise — fostering fast decisions within defined boundaries. "When stewards of a community are investing among peers in the domain they know best, the trust, ownership, and understanding of the investment opportunities are unparalleled. 

Hydra’s community-centric approach also front-runs the historic issue of high-value members reducing their contributions over time — as DAOs often experience an initial wave of enthusiasm followed by member apathy. Hydra incorporates incentive structures, transparent systems of accountability, and trust networks among DAO members to turn this challenge on its head — allowing the most enthusiastic and productive community members to be directly rewarded for their contributions. As a result, the members of the DAO increase the value of the DAO while ensuring that their high-value contributions are recognized and accounted for. 


People collaborating through a community-oriented investment DAO have the incentives to do well together, while individually advancing their careers, financial goals, and fields of study. As the investment DAO model continues to proliferate, expanding into adjacent industries beyond web3, the volume of research and specialized knowledge required to make great investments will grow proportionally. The time is ripe to make concentrated bets on the wisdom of communities bound together by a shared affinity. Hydra will seek out and support those communities and provide the substrate for their exponential growth.

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