NFT startup Otterspace has raised $3.7 million to build a protocol and application that it hopes can reduce financialization in web3.
The seed round was co-led by venture firms Cherry crypto and Inflection, with Bessemer Venture Partners and Coinbase Ventures participating. Otterspace was valued at $20 million after the round closed in May.
The startup was founded in February by ex-Soundcloud employees Rahul Rumalla and Emily Furlong, along with former Venture Capital investor Ben Dobbrick, previously of Btov Partners and Paua Ventures — both of which also took part in the seed funding round.
Otterspace aims to use NFTs that are earned rather than bought to reward certain behavior and recognize participation in a decentralized autonomous organization (DAOs).
Once contributors have completed certain tasks or behaviors set by the DAO through the application, a contributor earns one of these nontransferable NFT badges which entitle them to a host of benefits.
“These badges allow you to create teams and identify who is a core contributor and automate permissions to a space on Discord or Telegram,” explained Dobbrick in an interview with The Block.” You can use it to vote on governance or you can just use it as a reputation system to get a payment stream like a normal regular monthly salary.”
The DAO of DeFi newsletter Bankless currently uses Otterspace’s NFTs to assign roles and relevant compensation.
Why do we need to ‘definancialize web3’?
DAOs are built on the promise of decentralizing the traditional concept of shareholder voting. In this decentralized structure, investors are given the ability to vote on proposals ranging from a protocol’s marketing efforts to new products. Investors are able to vote by using the DAO’s native governance token.
Currently in DAOs, those that hold the money hold the power. DAOs are often built upon the financial incentive of access to tokens and the ability to govern the organization through such tokens, says Dobbrick. The more tokens that you amass, the bigger sway you have over the outcome of governance proposals.
“We now see that crypto is overly financialized — even hyper-financialized — and specifically in DAOs you see that as people vote with these tokens holdings,” said Dobbrick. “This has a bunch of problems in that whales have a disproportionate share in the governance process and in this way, contributors with smaller holding have less of a say.”
Dobbrick believes that Otterspace’s NFTs badges offer the alternative to this by offering a gateway into governance that isn’t dependent on one’s holdings. This not only gives influencing power to those that otherwise could not afford it but also engages new DAO members who may only hold a small number of tokens. Importantly these cannot be bought or sold thanks to the specific interface — EIP-4973 — these tokens are built on.
DAOs and beyond
Including Bankless, Otterspace is live in private beta with 15 other DAOs.
Dobbrick says that it’s not only DAOs that are interested in their services. He cites the education platform Token Engineering Academy as another that is using its services via API to assign students into batches. He expects companies like this also to be interested in using Otterspace along with decentralized entities.
Built on the Layer 2 solution Optimism, Otterspace is also set to soon launch on the Ethereum mainnet. Through this round, Dobbrick says that the startup has at least 29 months of runway.
Companies such as Otterspace in the NFT and gaming space accounted for 35% of seed and pre-series A deals last quarter according to The Block Research.
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