Enabling the future of community, an interview with Alex Taub, Co-Founder of Upstream
One of the central Web3 themes has been about new ways to build community. I previously interviewed Yury Lifshits, CEO of SuperDAO, Zvi Band, Founder of Camp Social and Ricardo Garcia-Amaya of Orange DAO. This week - I interview Alex Taub, Co-Founder of Upstream. Upstream has always focused on building communities, but pivoted to enabling Web3 communities/DAOs in the past year.
The following has been edited for clarity and length.
What’s the origin story behind Upstream?
The concept has always been around the future of community. We started the company in January 2020, and a few months later, Covid hit. We were looking at the future of community as professional networking, and during Covid, virtual events and virtual communities were very popular.
One of the most popular communities on Upstream was the NFT community. Last summer, we started to think about what a Web3 community play would look like, and it was very obvious, very quickly, that it was DAOs. In the DAO landscape, there wasn’t a Squarespace, Shopify, or Wordpress — there wasn’t an easy builder with tools for operating and scaling. We started building that product, and we sort of retrofitted it into our existing community product.
A lot of companies in the DAO space come from a DeFi or more technical crypto angle, and we’re thinking about it as an interesting way to pool money to buy stuff or coordinate a digital community. We’re spending a lot of time thinking about the end game design and the tokenomics of communities. What does participate-and-earn look like in a community?
What does the DAO model enable a community to do?
It really comes down to ownership. Community 1.0 is geolocated and IRL: I was born in New York, so I’m a Yankees fan. Community 2.0 is online interest-based groups on Facebook, Discord, Reddit, and so on. The promise of Web3 and community 3.0 is ownership. When I join a DAO, I earn a token, and I have upside with whatever happens in the community. If we make a bunch of money, the value of my ownership goes up.
What kind of communities work best with a DAO structure?
The big use case that I’ve been seeing is investment clubs, where a bunch of friends pool their money together to buy digital assets. In Web 2.0, we’d all open up a bank account or trust one person with the funds. With a DAO, we put money in the DAO, vote, unlock the money, and then the action is taken.
The second use case is in the NFT community. Let’s say I sell $1 million in NFTs and I decide to put 10% of that into a DAO for the community to decide what to do with it. If it wasn’t Web3, we’d have to build voting software or maybe do a poll. In the Web3 world, the money’s in the treasury, I can see it because it’s transparent, and I can make a proposal, vote on stuff, and see what other people vote on.
The third use case that I’m seeing is around participate-and-earn. I think everyone is going to do X-and-earn models: Peloton could release a sweat-and-earn rewards model that uses coins, and GrubHub could do eat-and-earn. If I have a community, I want the people who do the most work to be rewarded programmatically. At the end of the day, crypto is programmable money.
What types of communities don’t necessarily work as a DAO?
For anything that doesn’t involve money, you probably don’t need a DAO. A community of people who share dog photos doesn’t need to be Web3. You can do that on Facebook.
Going back to Upstream, tell me more about the product and your customers.
The customers are those three use cases I mentioned — mainly the first and second, and the third we’re working on right now. The product itself is pretty simple. You onboard and create a DAO, which we call “collectives,” and you get governance, voting, the ability to make proposals, the ability to run events and hold office hours, and a treasury. You can also see the ownership and members.
Are there any examples you can point to publicly?
One of the DAOs is a NFT project that I worked on with a few friends called Illuminati NFT, which had a mint in January, with 50% of that going into the DAO. The community votes on how to use the money. We’ve voted on three or four things so far, including resurrecting an old project and hosting a gala event at NFT.NYC.
What growing pains are you seeing among the DAOs that you work with and talk to?
Coordination is always hard. Getting people on board is relatively easy, and getting them to continue participating and voting is trickier. We’ve done some things internally to make that easier. We launched something called “dynamic delegation,” which lets you delegate portions of your vote to other people. We released mobile voting, which also helps. Anything that pushes the ball forward in terms of coordination and voting is helpful for those growing pains.
What level of participation do you think a DAO needs to have, as a percentage of membership, to be healthy?
It’s all customizable on Upstream, but the default is that you need 30% for quorum. It will immediately pass after you hit quorum if there’s no chance that it could fail, and otherwise it goes to full term, and then it’s the majority of quorum. If you have 10 people in a DAO and one person owns 90% of the vote, you might want to quorum at 50%, meaning this person can’t do anything by themselves unless they convince four other people in the group to do it.
What common missteps do you see DAOs making?
I think a lot of people call themselves DAOs, but it’s really just one or two people making all the decisions. We do a multi-sig wallet, so you need multiple signatures. One person can’t do anything on their own.
Figuring out legal was a big challenge at the end of last year, and I think it’s becoming a lot more clear now. If you’re trying to make money as an investment club under 100 people, you could set up an LLC really easily. You don’t need to, but you probably should if you want to protect yourself from conflict. Nonprofits work, too.
I think the tricky part is that over 100 people, a for-profit situation requires a lot of compliance. You start to play around with securities law issues. There’s still a lot of exploring to do in that area.
Which sectors have a big opportunity with DAOs that they maybe haven’t explored yet?
One is brands, like apparel and beauty companies. They can use it as a community play by, for instance, setting up a DAO around a collaboration and having community members vote on it. The second is nonprofits. There could be some interesting use cases around transparency and people dictating where the money goes, as opposed to sending it into a black hole and hoping it gets used properly.
What other aspects of the community experience are you going to be looking at in the future?
I don’t want to give too much away, but we have a whole roadmap. Right now, DAOs are a lot of throwing spaghetti against the wall and seeing what sticks and what can scale. If you look at the market size, it’s $10 billion, but 90% of that is DeFi. Investment clubs and NFT projects are sub-$1 billion, probably sub-$500 million at this point. That’s the pie you want to grow.
Hi, I’m Andrew Chang - I created the Web3 Roundup to share what I’m learning in this space. I’ve spent my career at the forefront of the technology industry in areas such as crypto/blockchain (Former COO @ Paxos, co-founding partner of Liberty City Ventures), video and adtech. I learn by meeting with founders, investors and other thought leaders and approach Web3 with the same enthusiasm – and skepticism – I had about crypto/blockchain technologies 10 years ago.
You can connect with me on LinkedIn or Twitter (@DigitalDrex)