Startup Upstream Raises $12.5M For Its “DAO In A Box” Web3 Tools
Entrepreneurs Alex Taub and Michael Schonfeld have created software tools for the social media boom. Now they hope to supply the plumbing for a new Web3 wild west.
After launching a new venture, Upstream, during the sale of their previous startup SocialRank in early 2020, Taub and Schonfeld recently shifted Upstream’s focus to groups using cryptocurrencies. Last November, they launched Upstream Collective, a product to help manage Decentralized Autonomous Organizations, or DAOs. After finding early traction with users, they have now raised $12.5 million in Series A funding led by bold companies to expand.
The round, which values Upstream at $80 million after investment, featured a group of investors including Tiger Global, Ibex Investors, Vayner Fund, Panoramic Ventures, Alpaca VC, Human Ventures and Blumberg Capital. Crypto specialists including Fenbushi Capital and The Medici Group have also joined us.
Upstream calls its product a collective, but what it offers are tools for managing, and possibly launching, DAOs, which bring together groups of people who invest capital, often by buying tokens via cryptocurrency, in exchange for voting rights in the decisions taken by the group. Today, Upstream Collective allows these entities to contribute and manage their projects; in the coming months, it plans to make launching new ones as easy as a few clicks, says Taub, CEO of the startup.
“The problem with DAOs is that they’re really hard to get started. Think of websites from the 1980s,” Taub says. “We think DAOs will end up being the next LLC,” he adds. , referring to limited liability companies, a type of business structure that has proven popular in recent decades.
Upstream and its investors are betting on “DAO in a box” which is proving increasingly in demand, even if no cover song by The Lonely Island is currently planned. The total value of global DAOs currently stands at more than $8 billion, according to tracker DeepDAO, from an all-time high of around $10 billion as the value of popular cryptocurrencies fell. Upstream Collective holds over $2 million in its test user treasuries; the startup had hoped to end last year with $100,000, but exceeded that sum by 4x. (Upstream takes 2% of contributions to projects it hosts as revenue.)
Upstream Collective feels like a third act for Taub and Schonfeld, even if it’s more like a second or 20and depends on how you slice it. The two met at crypto-payment company Dwolla in 2012 before launching SocialRank, which provides social media analytics and audience data, in 2014. That company raised investors including boldstart’s Eliot Durbin, who led Upstream’s latest funding round; the two put it on autopilot, however, in 2018 after API restrictions and scrutiny of external tools like Cambridge Analytica’s made them “see the writing on the wall.”
Taub and Schonfeld sold SocialRank in November 2019 for an undisclosed sum; the company was making around $100,000 a month, says Taub, who considers himself an active user to this day. Experimenting with other ideas, such as a job site for gig economy workers, the duo settled on Upstream, an app for professional groups and networking, in early 2020. When the pandemic returned the American workers at home weeks later, Upstream focused on virtual events, which it launched in April 2020, raising $2.75 million round seed in May 2021.
Taub, meanwhile, was becoming an avid collector of digital collectibles and NFTs, eventually co-hosting an Upstream Friday meeting on the subject that became Upstream’s most active community. So it was perhaps unsurprising that last fall the startup aligned itself more closely with communities under the loosely defined banner of Web3.
Upstream Collective is far from the only startup looking to capitalize on interest in DAOs. A CAD creation toolmaker, Syndicate, raised $20 million of Andreessen Horowitz and a host of other high profile investors in August 2021.
But Taub and his investors are counting on the fact that, as Durbin told boldstart, “We’re not even in the first round of the market yet.” The killer use case for a DAO that takes on a truly mainstream one has yet to be built, they admit. (The much-publicized ConstitutionDAO, which tried to buy a copy of the US Constitution last year with Taub’s participation, worked more like a crowd-funded advertisement for DAOs, Taub notes.)
Such a popular DAO door opener will emerge over the next year, Taub claims. And he doesn’t care about the competition. “This market is so big that even if we fear, which we won’t, we would still have a positive outcome as a company,” Taub says.
That’s Upstream Collective’s biggest bet: that its entrepreneurs have finally found their rising tide to lift all the boats. “We’re at the start of one of the seismic shifts, similar to the internet and then mobile. Ownership and web3 are going to be as big as those things,” Taub says. “I’m betting my career on it.