Bessemer’s Steel DAO wants to put scouting on the blockchain

Scouting, but on the chain

When Bessemer first unveiled its BessemerDAO six months ago, it was purposefully a little vague on what exactly the DAO was going to do to decentralize venture capital. At the very least, it was a statement that Bessemer was taking crypto seriously and wanted to build a Web3 community. But would that lead to real innovation in venture?

This week, it launched its first project: a decentralized scouting network that turns DAO members into potential scouts for the firm.

• It’s part of a bigger rebrand and a push to decentralize the group away from Bessemer’s stewardship, said Bessemer partner Ethan Kurzweil. The BessemerDAO is now the Steel DAO (a nod to Bessemer’s Carnegie family-office origins) and will be using Syndicate’s investment club technology to help power the DAO. Its first initiatives are going to be Bridge, a talent collective, and Links, what it’s calling its on-chain scouting network.
• Any member of the DAO can scout a deal and bring it to the governance committee (currently 11 people in the Steel DAO), which will debate and vote on it. The original deal scout and the governance committee’s votes will be recorded on the Ethereum chain, and deals that pass will be brought to Bessemer to invest (which it expects to do most of the time, Kurzweil said).
• “That’s not been democratized that way before,” Kurzweil told me. “To be a scout for a traditional venture firm, you have to know somebody. It’s a little bit of a network game — can you get access to a partner at the firm such that they trust you? So in theory, this is a way to allow for an open, honest, transparent process around letting anybody have that potential access.”
• So far, Bessemer has allocated $500,000 for deals brought by the Steel DAO scout network in Web3 areas like consumer, DeFi, and infrastructure, a mere sliver of the $250 million it has set aside for crypto investing in general. Bessemer will then be sharing the profits with both the scout and the DAO’s governance committee per the Steel DAO’s charter, a proposed 5% for the GC and 10% for the scout who sourced the deal.

The existential question for any Web3 project is whether putting it “on the chain” actually makes any difference.

• After all, adding a governance committee vote in between a scout and Bessemer actually adds a step to the traditional scout process, I pointed out to Kurzweil. “Yes, it’s one more step but I don’t believe it’ll actually create any friction or add any latency to the process because the deals will be more well vetted,” Kurzweil said. Plus, there’s the potential in the future that the DAO will have its own funds as well and could invest directly as an entity, although it’s not near that today, he said.
• The other advantage he considers is the added transparency of the deals the DAO is considering by having the information stored on chain. “I think the idea of having full visibility into every investment that they’re considering and how the votes went is not something that’s been done before, and is sort of a perfect use for the blockchain if you think about it because it’s immutable, it stays there forever,” Kurzweil said. (Of course, companies voted down could end up grappling with a negative signal broadcast for eternity. Bessemer said it would “watch it closely and adjust as needed.”)
• But does having a record of who sourced deals and who voted on them really move the needle? I told Kurzweil that if transparency is the only advantage then I didn’t think an on-chain scorecard of deals was going to revolutionize or decentralize the venture ecosystem. Kurzweil argues it’s the community process of finding and vetting that will lead to a sum greater than its parts. “We believe it’ll be more than a neat scorecard system because we do believe that the collaborative process around finding new things and vetting them and making that transparent does yield better results,” Kurzweil said.

The reality is that we won’t know for a while whether a decentralized scouting network outperforms what exists today. It will likely take many years before we’re able to tell whether the Steel DAO sourced better deals and whether the added transparency was helpful in the DAO members’ reputations and careers. Having some public accountability for who originated deals and who voted yea or nay on them could be an overall good step for the venture community. At least if it became a widespread practice, it’d put an end to some of the deal-credit disputes and investors claiming they saw a deal if there’s proof of who actually did.

Overheard

The “once great civilization” of Silicon Valley. After buying a home in Las Vegas and considering Manhattan, Marc Andreessen tried to get ahead of reporters’ questions by announcing he was staying put in the “once great” Silicon Valley. “We rationalize our decision as choosing to live in the ruins of a once great civilization — like Rome in maybe 250 A.D., we live amidst an enormous flowering of culture and creativity, but the roads are becoming unsafe and nobody is quite sure why,” he tweeted. He’s become quite the student of history, so he also published a list of 42 books that he recommends to better civilization.

Kanye is mad at Josh Kushner. After previous rants against VCs, Kanye went after Thrive Capital’s Josh Kushner after finding out the very obvious fact (as Dan Primack pointed out) that Thrive owns part of Kim Kardashian’s Skims underwear line.

Documentary or a vanity project? Coinbase commissioned its own “documentary,” if you consider a documentary to be paying someone to make a film about you because you don’t want to get Sorkined like Mark Zuckerberg in “The Social Network.” It debuted on Friday, but there was no score on Rotten Tomatoes as of this newsletter’s deadline.

Liquid Death or liquid gold? The water-in-a-can brand Liquid Death is now valued at $700 million, which forced people to choose sides between this being either ridiculously dumb or ridiculously brilliant. Either way, you know Peter Pham is on a dance floor celebrating somewhere after Martha Stewart released her own “Dismembered Moments” Liquid Death candle for spooky season.

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Inside track

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Need to know

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