The problem A Bank for DAOs solves

DAOs are the native companies of Web3, but there’s a marked lack of “small business DAOs”. That's partly because Web3 doesn't have any financial infrastructure for them: small and medium businesses—which comprise half the real economy and 99.9% of all companies—aren't going to take venture capital. They're not going to start a native token. They can't afford overcollateralized loans. And grants don't solve their liquidity problems.

If we want Web3 to scale to the rest of society, then we need to support more small businesses like restaurants, dev shops, barbers, and event managers. We need more mom-and-pop DAOs.

We need a bank for DAOs.

That's why we're offering dead simple, under- and uncollateralized loans to DAOs and small businesses willing to organize as DAOs. Almost all loans in crypto are overcollateralized due to lack of reputation or recourse, but overcollateralized loans are designed for trading and don't fit the needs of a typical SMB. We get around the reputation and recourse questions by (1) focusing narrowly on DAOs, (2) building in community with key DAOs and stakeholders, and (3) leveraging emerging DAO patterns around governance, reputation, and attestations.

We have thoughts on how to scale, but that isn't part of this hackathon.

Challenges we ran into

The biggest hurdle was just "building" our MVP: i.e. locking down a first loan as a proof of concept. After running around all over ETH Denver, we managed to source a loan from Metacartel's ETHos to Open Source Observer that collateralizes OS Observer's future RetroPGF income stream.

What we found in our work: while there is substantial demand for small business loans coming from multiple sectors within the DAO/Web3 community, relatively few lenders in crypto are set up to make trust-based loans to SMBs. Matchmaking between lenders and borrowers in this sector requires a strong network—and legwork.

A different hurdle: the lure of building technology. We're technologists and computer scientists, and we've shipped plenty of protocols and tech, so the lure of building a neat technical solution was strong. But in this case, we decided to consciously put community before technology. Our models here are local community banks and credit unions whose networks and insights can't be automated (yet), not exchanges or broker-dealers that can be more directly protocolized. So instead of shipping code (though we did think about building some integrations on top of lending protocols like Goldfinch and Union) we decided to spend ETH Denver talking to people, listening to their stories, and trying to understand the market.