Whales and Minnows, Investment Returns and Contributor Incentives

With Special Guest
Thomas Rush
Austin McKee


In this episode of the Hydra Ventures podcast, the discussion centres on venture DAOs and their impact on the venture capital sector. The conversation explores how these decentralised models provide a more inclusive and equitable approach to venture capital. This is achieved by enabling a diverse range of participants to contribute and earn investment returns, not just through capital but also through other forms of contribution. 

The episode examines the drawbacks of traditional VC models, introducing investment DAOs as an alternative that addresses these issues. Key topics include the challenges of DAO governance and the necessity of a well-structured incentives framework to ensure balanced contribution from all members.

Throughout the episode, the evolution of venture capital is viewed through the prism of investment DAOs. These decentralised models are presented as a response to the inequities found in the conventional GP/LP VC structure. The discussion highlights how investment DAOs allow for earning returns through various forms of participation, beyond mere capital investment. 

The episode touches on the unique challenges faced by DAOs, such as governance complexities and ensuring active and equitable member participation. The conversation explores strategies for implementing an effective incentive framework that balances the contributions of both work and capital. The episode concludes with a positive outlook on the potential of investment DAOs to broaden access to venture investing, making it more inclusive and equitable.

Show Notes


  • 1:35 - Hydra's novel approach to incentives.
  • 2.33 - Reinvention of Investment DAO through matching knowledge and capital to maximise benefits. 
  • 4.42 - Current state of investment DAOs and where the unlock for the future potential is.
  • 7:33 - Challenges of traditional VC model and entry barriers. 
  • 11:43 - What inspired the creation of Hydra, and how does its model seek to address the issues identified in a traditional model?
  • 12:30 - Capital contribution Investment DAO vs GP/LP model. 
  • 13:00 - Member-managed LLC structure and change in the relationship of capital contributors.
  • 14:00 - Crypto rails facilitation of member-managed structures and removal of GP.
  • 15:07 - Expanded participant set model - member requirements. 
  • 16:19 - Novel incentive structure based on DAO contribution.
  • 17:03 - A closer look at mechanisms of Hydra - earning your way into investment returns and how it disrupts the status quo.
  • 18:16 - Democratisation of investing by Investment DAO.
  • 19:04 - Dilution to solve the free rider problem.
  • 22:33- Challenges that whales present for community-managed Investment DAO - improvements in voting approach - investment limitations for whales to foster diversification.
  • 25:40 - Introducing new incentive framework - implementation experience. 
  • 29:00 - How to define, measure and balance fair contribution. 
  • 35:30 - Dos and don'ts - dilution management.
  • 39:13 - Keeping people happy, motivated and engaged- how to combat DAO fatigue and maintain members' activity. 
  • 45:00 - Hydra incentive system - empowering whales and minnows.