It is always a pleasure to chat with a crypto OG. And today, I have with me Hatu Sheik, the co-founder of DAO Maker.
DAO Maker is a time-tested crypto launchpad aiming to democratize venture capital investing for the masses. It supports a variety of projects building on Binance Smart Chain (BSC) and Ethereum. DAO Maker is known for launching high-quality projects through its IDO offerings. Some prominent names in this regard include Elrond Network, Orion Protocol, and My Neighbor Alice.
Hello Hatu, I appreciate you joining us today. Please introduce yourself, and enlighten us on how and when you got started in the crypto industry.
Hey! Thanks for having me.
I am Hatu Sheik, the co-founder and CMO of DAO Maker. I come from a deep finance background with a Bachelor’s Degree in Mathematical Economics and Business. I pursued different research fields like crowdfunding and macroeconomic theory during my time at the university, both as a researcher and a teacher. I also co-managed a multi-million dollar fund—$3.4 million, to be exact—for college events.
But it wasn't until 2018 that I moved to the blockchain and crypto industry. I was initially involved with projects looking to improve their brand representation and token economies. I also helped them bootstrap funds through private sales and ICOs.
After working with several projects across domains, though, I realized how venture capital was becoming more of a bane than a boon. For example, VCs often put immense pressure on entrepreneurs to scale rapidly, over short durations. This is particularly true of bear markets when liquidity dries up and valuations go down.
VCs practically abandoned projects at the time of their direst need, which is quite unfair and devastating. I think this is where DAO Maker makes all the difference for investors and Web3 innovators. We are democratizing VC funding to lower entry barriers while giving projects a flexible timeline for business developments with increased cash flows.
Historically, every bear market helped build ground-breaking blockchain solutions, taking adoption to the next level. According to you, how did the ICO meltdown help the industry recognize the flaws of crowdfunding and improve market conditions for retail investors and new crypto projects?
You are right.
I entered the crypto space at the beginning of a new bear cycle. Prices were plummeting. Teams were abandoning projects. There was panic and fear all over the place. Then, when the ICO bubble finally burst and the dust settled down, it was clear why projects couldn’t sustain growth.
Teams mostly knew very little about how to launch their tokens or, for that matter, what utilities they must provide. At times they even didn’t have much idea about whether or what kind of token was required in the first place. They also failed to conduct legitimate security audits, which led to major coin thefts and data breaches.
So, ICOs may have presented a novel approach to fundraising. And don't get me wrong, they had great potential, especially because they didn’t involve intermediaries. But they also were too fragile and misleading for the masses.
Thus, crypto launchpads arrived on the scene to fill the gaps in crypto-based crowdfunding. They addressed the shortcomings of VC-led ICOs and brought startups closer to retail investors.
I think launchpads have been among the crypto industry’s biggest breakthroughs. They helped projects raise capital through IDOs and build passionate communities with a long-term vision from the ground up.
Launchpads are indeed a hot trend right now. What makes them so attractive for capital formation? And how do crypto launchpads promote financial inclusion for retail investors?
Launchpads are becoming the go-to choice because they are cost-efficient and distribute ownership equitably. The latter can’t be emphasized enough.
Biased decision-making is the most likely when ownership and control lie in the hands of a few. But with community-driven platforms, decentralized governance helps create a positive feedback loop and inspires teams to innovate further.
Moreover, launchpads are a blessing for retail investors. They often look for early-stage projects that offer their tokens at discounted prices. However, the industry is so vast, with dozens of market segments, that identifying projects with high growth potential is extremely difficult.
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Now, the best thing about launchpads is that they do the heavy lifting. Investors, for their part, can simply browse through the project listings and apply for IDOs. They also don’t have to meet large capital requirements, unlike in the VC world.
Further, investors can participate in IDOs from anywhere. So, with low entry barriers and global accessibility, launchpads promote financial inclusion for the average backer in the crypto markets.
Democratizing early-stage investing is a big deal. However, we must acknowledge the risks associated in terms of teams failing to deliver or token prices falling below a certain threshold. With DAO Maker, how are you planning to overcome these investors’ fears and help them operate within their risk tolerance?
No doubt. Even with all the screening tests in the world, no one can predict fully accurately whether a project will ultimately be valuable. The same applies to token prices. Such uncertainties are pretty inherent in the crypto industry. So, it’s very important that we find effective ways to protect retail investors.
DAO Maker offers several products to this end, protecting the interests of both investors and projects. For example, we have introduced a new crowdfunding model called Dynamic Coin Offering (DYCO). Investors get guaranteed refunds if the token drops below the floor price. Moreover, our Strong Holder Offerings (SHOs) provide exclusive guarantees to token owners with long-term holdings or liquidity contributions to AMMs.
However, while DYCOs and SHOs hold the fort to protect investors and hold teams accountable, they still involve some risk, because guaranteeing a 100% refund is not feasible. We want to eliminate that risk by providing venture bonds.
With venture bonds, the principal capital deployed by investors is not touched. Rather, they fund projects using the 8-10% APYs generated through various CeFi and DeFi platforms. If projects want more money and can prove rising market demand, they can issue more bonds.
There’s no doubt raising capital is the first intersection of community and projects. But it shouldn’t be the last. In your perspective, what else is needed for a project to accelerate growth and quickly capture market share?
Indeed. Financial capital is only one side of the equation. Projects should also focus on labor capital to capture the attention of communities and promote active involvement.
I realized early on that community and online exposure are crucial for any project to scale. So, in 2019, along with my colleagues at DAO Maker, I came up with a novel concept called Social Mining. It’s a reputed governance style nowadays.
With Social Mining, tokenized startups can create a platform for the community to make contributions, be it social media or technical support, in exchange for token rewards. The incentives ensure high levels of participation and conviction.
Another area where projects need to improve to attract more users is liquidity mining. Most projects miss out on onboarding interested participants because they are reluctant to build a new smart contract. And even when they do, they don’t perform proper security audits.
At DAO Maker, we solve these issues with a set of tools called YieldShield. It helps projects scan and rewards holder addresses with no third-party contract, given they provide liquidity.
Excellent. Now, let’s briefly discuss NFTs. They are on the rise and can be the next significant financial instrument for crowdfunding. So, are you looking to enter the NFT and metaverse territory with an exclusive launchpad?
I believe NFTs are here to stay. And they have the potential to eclipse the utility token market. But the NFT market also suffers from various scams and look-alike projects stealing liquidity.
So, I think there’s an opportunity for DAO Maker to bring much-need changes to the NFT space. We aim to strengthen issuance by launching an exclusive NFT launchpad. I believe a launchpad is an answer to maintaining transparency and creating infrastructure for the masses.
This was truly insightful, Hatu. Let me close with one last question. As we’re now in a bear market, how would you suggest retail investors and emerging startups navigate bleak market conditions and keep building with a long-term vision?
I truly think projects have an advantage when building in a bear market. Of course, there will be financial troubles. But they stand a chance to be a market leader if they survive. So, I would advise projects to continue with their roadmap and emphasize community building during market downturns.
For retail investors, I would stress avoiding panic sales while teams work relentlessly on a project’s execution. They must also go for dollar-cost averaging since markets can drop further. Lastly, it’s best that investors commit themselves for the long run.