Despite macro headwinds, crypto venture capital firm dao5 closes a $222M second fund

The blockchain-focused venture firm dao5 has closed a second fund with $222 million, as interest in crypto venture capital remains strong even as global investors face macro headwinds and the downturn in initial public offerings.

The firm, which was founded last year by former corporate lawyer Tekin Salimi, previously raised a $125 million debut fund, which he said has now fully deployed into crypto startups, including the layer-1 blockchain Berachain and the decentralized AI project Bittensor.

In an interview with Fortune, Salimi said that dao5's edge in the crowded crypto venture market comes from his long track record in the industry, as well as the firm's ability to serve as an adviser, especially to early-stage startups.

“Sometimes the job [of VC] can range from everything to investor to close friend and then therapist of these young founders,” Salimi said. “So I just try to be very ingrained in the relationship.”

One of a few suits

In the often Wild West world of crypto, Salimi came into the industry through an untraditional path: corporate law. Growing up in Toronto—which has its own place in the blockchain annals as the hometown of Ethereum inventor Vitalik Buterin—Salimi said he began looking into crypto when searching for interesting areas to build a practice around.

This was the “initial coin offering” era around 2017, and Salimi said he was one of the “few suits” at blockchain meetups, trying to meet as many founders as he could. He eventually quit his white-shoe law firm job and set out on his own, helping projects with everything from raising capital to restructuring, often receiving payments in Bitcoin or pre-launch tokens in return.

Salimi later joined Polychain, the venture firm founded by early Coinbase employee Olaf Carlson-Wee, in late 2017. While he worked on the investment team, he also assisted with legal work, such as helping to build novel deal structures at the time, such as token warrants, which give investors the right to purchase future cryptocurrencies from projects they’re backing.

After working on some of the biggest deals in crypto during that era—including with the layer-1 blockchain Avalanche—Salimi decided to start his own venture fund in late 2021 as Polychain grew into a megafund, with billions of dollars worth of assets under management.

“I really just missed the early startup feel,” he said. “Frankly, there are benefits to having a smaller pool of capital as well.”

A 1x DPI in first fund

Salimi’s first fund out of dao5 was a 2022 vintage—the tail end of a boom period that capped off with the collapse of Sam Bankman-Fried’s FTX at the end of the year.

Still, Salimi said he was able to fully deploy the fund, including becoming one of the first venture backers of the decentralized AI project Bittensor, as well as investing in the seed round of Berachain, whose valuation later topped $1 billion.

According to Salimi, dao5 has now begun to harvest positions from the first fund with a 1x DPI, meaning it has already paid back its investors the capital they originally put in.

“I credit that to a big part of why we’re able to have a successful fundraise in this market,” Salimi said, adding that the new fund is concentrated in around 15 limited partners, mostly from family offices and high net worth individuals. One LP from dao5’s first fund, the crypto angel investor George Lambeth, is joining the firm as a general partner.

Despite crypto’s ascendancy under President Trump, who has embraced the industry and helped shepherd key policies such as a strategic government Bitcoin reserve, prices of top assets have remained relatively stagnant amid macroeconomic concerns, including Trump’s trade war.

After previous cycles being focused on what he described as “extremely sci-fi projects” with long-time horizons, such as NFTs or even Bittensor, Salimi said his current focus is on institutional adoption of blockchain technology, including stablecoins and tokenization.

“It’s almost like the less sexy products are now more important,” he said.