How to Bootstrap a Service DAO

Summary

I’m writing this paper with two very strong, and very different motivators: excitement and anger.

Anger at the actions of billionaires that cost their customers and employees their life savings. (Also, billionaires that treat their employees callously and put free speech in danger.) Tech companies that throw billions at pet projects and have laid off thousands of workers in the past several weeks.

Not naming names, or anything.

And yet — excitement. I’ve been working in DAOs for the past 18 months, and I know that DAOs are on to something that could change the way billionaires get away with their misdeeds and even improve the way we work. The way that DAOs enable radical transparency, particularly financial transparency, and enable (even require!) employee ownership of company decision-making paints a picture of a very different future.

I’m writing this because I believe “DAOs can eat the world” and the time is right for them to start — so many talented individuals and creators are fed up, recently unemployed, and ready for change. If you’re one of them, this paper outlines how to start a Service DAO with very little capital and resources required.

Setting up the Service

Fundamentally, Service DAOs act as the builder and facilitator of a two-sided marketplace between Creators & Consumers. The Service DAO is responsible for constructing a fair and efficient marketplace. The two parties in the marketplace setup are Creators (who produce and validate work) and Consumers (who request and pay for work to be done.) When the Service DAO marketplace is operating effectively, creators are able to easily find opportunities that fit their skills and get rewarded fairly and quickly when the task is complete. Consumers are able to easily request work and receive outputs that are verified as complete and accurate.

There are three key steps in a marketplace for the Service DAO: Ask, Answer, and Review. This paper will briefly review the components of each step and how to set up a process to facilitate each step.

Ask

An Ask is the request for services. Depending on the type of service DAO, this could be a creative brief, product requirements, etc. Asks originate with Consumers but work is often required from DAO Contributors or a subset of Reviewers for an Ask to be ready for Creators to work on it.

In traditional agency, enterprise, or consulting work, defining the scope of services is often the highest-effort part of the engagement. In order to scale efficiently, Service DAOs need to streamline this step as much as possible by relying on Consumers to define their needs according to the Services Menu (more on this in the pricing section). Additionally, the DAO should mandate a signoff from either Creators or Reviewers before the Ask is published. This validates that the Ask is ready for work without putting additional overhead on DAO contributors. Depending on the subject matter and complexity of the Ask, some Service DAOs may explicitly create a role or more defined process for approving Asks.

Every Ask should contain the following components. Most of these may be supplied by the consumer, and some will require input from DAO Contributors or Reviewers.

• Ask Type, selected from the DAO’s Services Menu (more on this in the Pricing section)
• Budget (including currency the Ask will be paid in)
• Timeline, including deadline and any requests for in-progress check-ins
• Detailed description of the ask, including any relevant context or examples
• Skills or qualifications needed to complete
• # Limit of Answers requested

The process of creating an ask is theoretically simple — especially if the Ask is well-defined.

• Ask is submitted by the Consumer.
• Ask is approved by Creators (or Reviewers) as complete and “ready for work”
• Ask is published, often publicly, to be worked on by Creators.

Answer

The Answer is the deliverable, completed by the Creator, that is submitted for review and payment. In some cases, an Answer may be submitted by multiple Creators working as a team. This format is best when the project is large, or redundancy is needed in a long-term engagement (i.e., maintaining an analytics dashboard or website for several months.)

In some cases, multiple Answers may be submitted by multiple Creators. The competitive nature of this setup (in which the best answers are often rewarded disproportionately to other accepted answers) encourages a proliferation of content and the competitive nature of the Ask often surfaces the best work. This format is used successfully by Code4rena and MetricsDAO.

Every answer should contain the following components:

• Link to live work
• Creator(s) identifying information and information needed for payment (wallet address, etc)

The Answer process encompasses both claiming or signaling work to be done, and submitting work.

• Published Asks contain a limit on the number of Answers that will be accepted for payment. In some cases with a low limit of acceptable Answers, Creators will submit a claim to an Answer. This claim is a promise to deliver work to the Consumer.
• In cases with no limit or a high limit on the number of Answers, Creators may signal that they’re working on the Answer. This can be as simple as an emoji reaction to a message and helps DAO contributors gauge the number of anticipated Answers to make sure that Reviewers are ready.
• Once work is complete, Creators will submit their Answers to be reviewed.

Review

This process verifies that the completed work is valid for payment. It is undertaken by a specialized team of Reviewers. Reviewers have the highest level of subject matter expertise in an organization and are capable of clear communication and feedback to Creators.

For Asks with a sliding payment scale or tiers of payment, this process will determine how much payment the work receives. In some cases, the Consumer may be part of the Reviewer team.

Components:

• Feedback: Reviewers should leave a few sentences of feedback for each Answer that is submitted. Feedback empowers Creators to continuously learn and improve their work.
• Score: Depending on the incentive and scoring structure, this may be “pass/fail” (payment is made in full or not at all), or there may be a quality-based scale.
• A simpler scoring system is best to start out with. A 5-point scale with clear guidelines and examples of each score helps Reviewers easily learn how to score Answers.

Process:

• The number of Reviewers is established based on the volume of anticipated Answers and Reviewers needed per Answer. When a high-quality Answer is needed for an Ask, multiple Reviewers (2–3) are recommended. Multiple Reviewers are also highly useful to normalize new scoring systems.
• Individual Reviewers are selected based on their interest, availability, and qualifications.
• Reviewers complete their review & feedback of the Answer, normally within 72 hours of submission.
• In some cases, Creators are given the opportunity to refine and resubmit their work. This is most useful with complex or creative processes, including web design or website builds.
• Answers are delivered to Consumers by the DAO Contributor team.
• Creators are paid as specified in the Review.

A Quick Note on Setup

As a Service DAO grows, the marketplace will become more complex to manage and should be scaled using technology. In the bootstrapping phase, the technology is irrelevant — the goal is simply to set up an MVP that evaluates demand and output. Low- or no-code tools such as Notion, Airtable, or web3-native tools such as Wonderverse and Dework are enough to get started.

Pricing

First, a caveat: this is a very general guideline that may be useful when bootstrapping a Service DAO. It should be modified in accordance with internal and subject matter best practices.

Menu of Services

In an industry as nascent as Web3, the hardest part of selling isn’t competitors, or legal, or contract language — it’s helping potential customers figure out what they need and whether your organization can fill that need. Articulating service options as clearly and distinctly as possible is one way to help customers determine whether this organization can fit their needs.

First, start by articulating the various services that an organization can offer. MetricsDAO, a full-service analytics DAO, offers the following services:

• Data curation: transform raw blockchain data into legible, SQL-ready tables
• Analyst engagement and onboarding: run bounties to onboard & teach analysts a particular protocol or blockchain
• Business Intelligence: get answers to key business questions

Next, articulate the different levels within those service areas. For example, MetricsDAO breaks down Business Intelligence pricing according to the difficulty of the question. Each of the levels below corresponds to a distinct Ask and has a non-negotiable price associated with it.

• Moderate difficulty question
• Hard difficulty question
• Elite difficulty or complex dashboard build

Having a menu of services is no guarantee that a Consumer will never approach a DAO with a request that isn’t on the menu — or that the DAO shouldn’t service that request, if the subject matter is aligned with interest and expertise of Creators! “Off menu” services should generally be treated as a learning experience that may eventually be scaled and included in the service menu.

Revenue Breakdown

Payment directed toward DAO Treasury: 20%

Payment directed toward participants in a Marketplace: 80%

• Ask: Payment is made to Reviewers or DAO Contributors who refine an Ask. This can be compensated at 5–15% of the overall payment, depending on the level of effort required for the particular Ask.
• Answer: 50% of the overall payment should be disbursed to Creators.
• Review: Reviewers are the most highly-skilled participants in the network. Though the process of Review takes less time than the answer itself, the skill level merits up to 25% of the overall payment (depending on the portion devoted to the Ask) to be processed to Reviewers.

Pricing out the organization’s service itself is too subject-specific to give guidance on in a paper this broad. Subject matter experts in the organization should research and determine initial pricing (which, like everything else, is subject to change as the DAO grows!)

KPIs

Now that the Marketplace is set up — how can its success be measured? As with any early product launch, it’s too soon to set formal goals or OKRs. Success in this stage is more likely to be illustrated by feedback from the first participants. The goal of the bootstrapping stage is to find traction and indicators of product-market fit.

Instead of KPIs, here are key themes to obsess over:

Onboarding new Consumers

Onboard 5–10 Consumers actively using the service in the first few months. Don’t be afraid to give it away for free or low cost, as long as they’ll actually use it and give their feedback.

After the Consumers have used the service, put an end to the service or finish the beta period. The truest test of whether the service is important to them is how they react when it’s taken away!

Creator engagement

Rather than optimizing for a large pool of Creator activity, optimize for engaging and rewarding a few talented Creators. When they have options about where they do work, do they come back to the Service DAO? Creators should feel empowered and incredibly excited to work at the DAO.

Quality of results

This gauges whether the Creator network and the Consumer network are a fit: are Creators capable of producing work that delights the Consumer?

Note: This is not the time to worry about the efficiency of the marketplace, which will inevitably start with a ton of friction. Once there is confidence in the service and marketplace concept, it will be time to scale and optimize.

Team

There are a few key roles needed when bootstrapping a Service DAO — and as with any early-stage startup, it is wise to find a small number of versatile team members who can cover many areas!

The “Protagonist”

This role (coined by Flipside Crypto) represents the public persona of the project. They have subject matter expertise, even if they’re not as deep in the subject matter as other members of the org.) The Protagonist will be the most market-facing member of the organization, including recruiting and managing Creator relationships and recruiting Consumers (representing Business Development for the DAO.) They are often also involved in fundraising or other promotion of the DAO.

The “Operator”

When you need something done 5 minutes ago, you call the Operator. They’re responsible for the day-to-day functioning of the marketplace, constantly checking in on things such as: have enough Creators signaled interest in a particular Ask? Is the most recent Ask from a Consumer ready for Answers? They may also be managing freelance resources across areas including marketing, treasury, and governance as the organization itself starts to grow.

The “Architect”

This role is most similar to a Product Manager in a tech startup. The Architect is a thoughtful tactician who is obsessed with studying, experimenting, and perfecting the marketplace setup. They will be working on incentive and reward structures for Creators, creating qualifications and processes to facilitate high-quality Reviews, and more.

Tooling

Besides the tools used for a low-code marketplace setup (to be covered in a future guide), there are several other tools needed to facilitate operations of a Service DAO.

Finance & Treasury Tools

Multi-sig setup

Gnosis Safe is the standard for a reason! Simple to set up and incredibly useful for treasury security.

• A “2 of 4” or “2 of 5” signer setup is recommended for an initial setup. This creates a small, trusted group with both redundancy & flexibility.
• If the organization is managing funds over $100k USD, it is recommended to set up a separate Ops account and a Treasury account. The Ops account should be used to pay regular expenses, with a smaller group of signers or smaller delta between required and potential signers controlling Treasury reserves.

Multi-payment tool

Parcel and Utopia are the category leaders. They save both time and money by batching transactions and covering gas fees!

Community Organization

Group chat

Telegram and Discord are the most popular apps for community organization. Telegram is useful for organizing a smaller or single-purpose community — there are no permissions or channels to navigate, and it’s easy to get started. Discord is more highly recommended for Service DAOs that want to allow different levels or types of users to access various conversations. (More on permissioning below!)

Roles & permissioning

Badger allows admins to define, issue, and revoke badges representing permission levels as ERC1155s. With Badger’s unopinionated protocol, administrators can move their team on-chain and use the tool stack that the organization most prefers.

Guild seamlessly completes the Badger & Discord stack: it allows an admin to set membership permissions across Discord channels based on the Badger NFTs held in a wallet. (Think of Discord as the home, Badger as the key, and Guild as the lock.) By stacking Badger, Guild, and Discord, Creators can be given access to a set of channels with relevant information on new Asks or spaces to collaborate. DAO Contributors and other groups may have their own sets of channels as well.

Documentation

Website

Many DAOs launch without a website, but creating a simple one-page website adds credibility. There are many no-code Web2 website creation tools, including Ghost, Wix, Squarespace, etc. The website should provide an overview of the DAO’s services, value proposition, and key team members (especially the Protagonist!)

Onboarding and service tutorials

In an organization where Creators work asynchronously and with flexible commitments, great onboarding and organizational documentation is key. Notion and Gitbook are both popular tools for documentation that have a free starter plan (with limits). Raid Guild provides a great example of onboarding documentation.

Conclusion

Are you ready to start a Service DAO yet?!

While starting something new is never easy — I hope this paper has demystified the act of starting a Service DAO. I’d love to hear more about your ideas, feedback, concerns and questions. Drop a note in the comments or find me on Twitter @meglister !