Gov-Acc Pipeline.

Journal of Business Venturing Insights 23 (2025) e00537 Contents lists available at ScienceDirect JournalofBusinessVenturingInsights journal homepage: www.elsevier.com/locate/jbvi Votinggovernanceandvaluecreationindecentralizedautonomous (cid:73) organizations(DAOs) Cristiano Bellavitisa,b ,∗, Paul P. Momtaza aMartin J. Whitman School of Management, Syracuse University,NY,USA bStevens Institute of Technology,NJ,USA A R T I C L E I N F O A B S T R A C T JEL classification: Decentralized autonomous organizations (DAOs) crowdfunds to invest in various projects. The G14 decentralization feature of DAOs submits that decision-making is a collective democratic action G30 of all DAO members. The autonomy feature of DAOs suggests that decision-making is an L26 algorithmic process governed by self-executing smart contracts. However, in reality, DAOs are M13 neither perfectly decentralized nor completely autonomous. Our empirical analysis shows that O16 deviations from the ideals of decentralization and autonomy are costly. Non-algorithmic off- Keywords: chain voting governance of decision-making leads to a substantial discount in DAO value. D Bl e o c c e k n c t h ra a l i i n z e te d c a h u n t o o l n o o g m y ous organization (DAO) Non-decentralized aspects such as large voting coalitions also affect DAO value. Interaction On- versus off-chain governance effects are also shown. The study implies that platform governance design choices are crucial Crowdfunding for DAO success. Entrepreneurial finance 1. Introduction Decentralized autonomous organizations (DAOs) represent a groundbreaking evolution in organizational design, changing traditional governance structures by leveraging blockchain technology to decentralize decision-making and reduce reliance on intermediaries (Hsieh et al., 2018; Bellavitis et al., 2023; Lo Monaco et al., 2025). DAOs operate through smart contracts, facilitating automated governance and enabling members to participate in organizational decisions, often through token-based voting (Bellavitis et al., 2023; Lo Monaco et al., 2025). The emergence of DAOs can be contextualized within a broader shift toward decentralized, automated, and autonomous systems that challenge traditional hierarchical models (Santana and Albareda, 2022; Cumming et al., 2025). By enabling programmable reciprocity, DAOs address the fundamental dilemma of cooperation among self-interested parties, as described in algorithmic enforcement frameworks (Gregory et al., 2024). In recent years, DAOs have gained significant attention for their potential to democratize governance and foster transparency (Buddensiek and Momtaz, 2025), making them an attractive model for emerging fields such as decentralized finance (DeFi), crowdfunding, and digital asset management (Fisch, 2019; Cumming et al., 2025; Momtaz, 2024; Drobetz et al., 2025). However, concerns persist about potential centralization in token ownership and decision-making, which could undermine their democratic potential (Appel and Grennan, 2023; Cumming et al., 2025; Momtaz, 2024; Fuchs and Momtaz, 2024). Thus, despite their promise, DAOs face unique challenges that could impact their effectiveness and long-term viability, especially regarding the design and implementation of governance mechanisms. (cid:73) The authors thank Christian Fisch for helpful comments. ∗ Corresponding author at: Martin J. Whitman School of Management, Syracuse University, NY, USA. E-mail address: cbellavi@stevens.edu (C. Bellavitis). https://doi.org/10.1016/j.jbvi.2025.e00537 Received 16 December 2024; Received in revised form 7 April 2025; Accepted 21 April 2025 Available online 24 May 2025 2352-6734/© 2025 The Authors. Published by Elsevier Inc. This is an open access article under the CC BY license (h ttp://creativecommons.org/licenses/by/4.0/ ). C. Bellavitis and P.P. Momtaz Journal of Business Venturing Insights 23 (2025) e00537 The plausibly most crucial governance design choice is whether DAO voting is implemented on- versus off-chain. Voting is the mechanism through which nonhierarchical DAOs engage in decision-making. On-chain voting occurs directly on the blockchain, where each vote is recorded as a transaction in the ledger, while off-chain voting occurs on third-party platforms and does not record votes as transactions in the ledger. On-chain voting aligns with the principles of immutable and transparent governance found in digital commons, ensuring accountability in resource management (Li and Chen, 2024). However, on-chain voting can be costly and inefficient, leading many DAOs to adopt off-chain voting solutions that sacrifice some transparency for improved efficiency (Wang et al., 2021; Chen and Bellavitis, 2020). This trade-off between transparency and efficiency poses significant governance questions (Momtaz, 2021b; Hornuf et al., 2025), especially in terms of how these choices impact the valuations of DAOs. The application of transaction cost economics (TCE) further underscores the challenges of balancing flexibility and cost efficiency in DAO governance structures, particularly in adapting to dynamic environments (Halaburda and Levina, 2024). Therefore, this leads to our first research question: How does the choice between on-chain and off-chain voting governance affect a DAO’s valuation? There remains a critical gap in understanding how specific characteristics of DAOs — such as the size of the community, of voting coalitions, and of the development team involved in the project — affect the relationship between voting governance type and organizational value. Existing studies have primarily addressed governance in terms of general principles or case studies, without fully exploring the moderating role these structural characteristics play in shaping the efficacy of on-chain versus off-chain voting (Lumineau et al., 2021; Wegner et al., 2024). Additionally, the role of blockchain-enabled governance in emerging contexts, such as the metaverse, provides new dimensions for studying DAOs as platforms for collective action (Goldberg and Schär, 2023). In particular, analyzing DAO governance structures and voting mechanisms provides new light into the TCE trade-off between transparency and efficiency. This leaves open questions regarding the conditions under which off-chain governance might be as viable as on-chain governance and how certain features of DAOs influence the relative success of these governance models. This leads to our second research question: How do structural characteristics of DAOs moderate the relationship between off-chain governance and DAO valuation? Our study seeks to address this gap by exploring the impact of on- vs. off-chain voting governance on DAO valuation. By analyzing a comprehensive dataset of DAOs, we explore not only the direct effects of governance structure on DAO treasury size but also how characteristics like community size, coalition size, and the number of developers involved in the project interact with these governance structures to influence valuation. The empirical main finding is that off-chain voting has a significantly negative effect on DAO valuation, plausibly mirroring potential transparency issues associated with the uncertainty with which core DAO team members will implement the DAO community’s collective decision (Zhao et al., 2022). The value-destroying effect of off-chain voting governance is more pronounced in large DAO communities, voting coalitions, and in large technical development teams where transparency becomes paramount. Our two-stage-least-squares models suggest that the identified effect is likely of causal nature. Further, we show that some of these effects are marginally decreasing or increasing, and may be nonlinear. Our research contributes to two streams of literature. First, we contribute to the emerging DAO literature by providing empirical evidence on the valuation effects of different DAO governance design choices and offering a deeper understanding of how organizational characteristics interact with governance choices. A fundamental choice for DAOs is whether to adopt on-chain or off-chain voting governance, each with distinct implications for transparency, security, and the distribution of power among stakeholders. By examining the moderating effects of community and ownership dynamics on governance effectiveness, we extend the current literature on DAO governance and blockchain-based organizational design (Chen and Bellavitis, 2020; Hsieh et al., 2018; Goldberg and Schär, 2023; Li and Chen, 2024; Lo Monaco et al., 2025) and entrepreneurship (Weking et al., 2023; Bellavitis et al., 2023; Chandra, 2022; Lo Monaco et al., 2025). This study not only addresses the need for more granular analyses within DAO governance but also offers practical implications for DAO designers, policymakers, and investors seeking to optimize DAO structures for long-term success and stability, contributing to broader discussions on the evolution of digital institutions (Chalmers et al., 2022; Zhao et al., 2022; Chawla, 2020; Lo Monaco et al., 2025; Hornuf et al., 2025). Second, we contribute to the discussion on TCE. Our findings build on TCE’s core proposition that organizations must strike a balance between reducing opportunism through transparency and minimizing the efficiency costs of those controls. In DAOs, on- chain voting brings transparency and immutability but also higher transaction costs, echoing TCE’s notion that greater formalization can curb agency problems at the expense of efficiency. By contrast, off-chain voting lowers administrative overhead but risks exacerbating opportunism and eroding trust if outcomes cannot be transparently verified. We show empirically that when off-chain mechanisms dominate, DAO treasuries suffer—a result that highlights how cost efficiencies can come at the expense of transparency, thereby influencing organizational value creation. In the context of DAO, a governance mechanism that promotes collective decision making, transparency is particularly valued by its members, especially because DAOs are supposed to be more efficient at coordinating community interactions compared to standard organizations. And the benefits of transparency are particularly salient as the size of the community, of the voting coalition and of the technical development team increases. These insights expand TCE into the blockchain domain by demonstrating how the ‘‘smart-contracts-as-governance’’ model alters the familiar transparency–efficiency trade-off and reshapes the organizational design choices that underpin collective decision-making in emerging digital platforms. 2. Conceptual framework and hypotheses 2.1. Theoretical background: transaction cost economics (TCE) Transaction cost economics (TCE) offers a foundational framework for understanding how organizations minimize the costs of transacting under conditions of uncertainty and potential opportunism (Williamson, 1975, 1981). The central premise of TCE 2 C. Bellavitis and P.P. Momtaz Journal of Business Venturing Insights 23 (2025) e00537 is that firms choose governance structures – ranging from markets to hierarchies – to best align with the characteristics of the underlying transactions. Factors such as asset specificity, frequency, and uncertainty influence whether it is more efficient to govern via contracts, internal authority, or hybrid arrangements. In TCE, transparency and efficiency stand in a dynamic relationship. On one hand, improved transparency can mitigate opportunistic behavior by revealing information that might otherwise be hidden, thereby reducing monitoring costs. On the other hand, mandating high levels of transparency can introduce procedural complexities, inflate coordination costs, and slow decision- making. TCE posits that organizations weigh these trade-offs to design governance mechanisms that minimize the overall transaction costs of exchanging goods, services, or, more broadly, resources. Emerging digital platforms and decentralized systems present new challenges and opportunities for TCE. While blockchain technologies and automated contractual enforcement may lower enforcement costs, they can also introduce novel forms of uncertainty or asset specificity tied to cryptographic tokens, consensus algorithms, and code-based governance. Transparency, a hallmark of many distributed ledgers, can reduce information asymmetry yet may simultaneously amplify compliance costs. Hybrid governance solutions thus emerge, attempting to balance automation with human oversight, and to reconcile global transparency with the protection of strategic information. Overall, TCE remains a vital theoretical lens to interpret how organizations weigh efficiency and control, especially as they navigate novel technological settings. By framing organizational choices as attempts to minimize transaction hazards, TCE highlights why transparency can be both a solution to opportunistic behavior and a source of additional costs—and how organizations must continuously recalibrate this trade-off to maintain effectiveness. 2.2. Baseline effect: on-chain vs. off-chain voting governance Voting is an essential function in DAOs, typically implemented either on-chain or off-chain. On-chain voting occurs directly on the blockchain, where each vote is recorded as a transaction, ensuring transparency and immutability through blockchain technology. On-chain voting also incorporates trustless systems, where decisions are governed by smart contracts, thereby minimizing reliance on human intermediaries and reducing risks of manipulation (Bellavitis et al., 2023; Nakamoto, 2008). According to Halaburda and Levina (2024), these smart contracts represent a new mode of governance that reduces transaction enforcement costs while enhancing automation and trust in decision-making processes. This transparency, immutability, and security are appealing for many investors, especially within blockchain ventures where trust is often decentralized (Momtaz, 2021b; Fisch, 2019). However, on-chain voting can be costly due to transaction fees, and slow due to the time required for block confirmations (Chen and Bellavitis, 2020). These costs may render on-chain voting less feasible for DAOs with frequent voting needs or limited resources. Off-chain voting, conducted on platforms like Snapshot, allows DAO members to cast votes without creating on-chain transactions, which avoids transaction fees and improves voting efficiency (Wang et al., 2022). Despite these advantages, off-chain voting lacks the transparency and security of on-chain voting, as votes are not permanently recorded on the blockchain, which can lead to potential trust issues and challenges in verifying voting outcomes retrospectively (Catalini and Gans, 2018; Li and Chen, 2024). Given these trade-offs, we hypothesize that off-chain voting governance is associated with a lower valuation of DAOs due to the reduced transparency, security, and trust inherent to this method. DAOs using off-chain voting may appear less reliable or secure to potential investors, which could ultimately affect their ability to attract funds and build a substantial treasury. Transparency is particularly salient in the blockchain industry which not only started as a way to democratize finance, but also due to a large amount of scams (Bellavitis et al., 2022). Hypothesis 1 (H1). Off-chain (on-chain) voting governance is negatively (positively) associated with DAO valuation 2.3. Moderating effects While we expect off-chain voting to lead to a lower DAO valuation, we propose that the strength of this effect will vary depending on specific DAO characteristics. Specifically, we examine the moderating roles of the size of the community, of the voting coalition, and of the technical developers’ team. The general idea is that as these groups grow, the transparency and trust associated with on-chain voting become paramount to ensure higher DAO valuations. 2.3.1. Community size Community size, often measured by the number of active participants in DAO governance, is a crucial characteristic influencing voting governance. In DAOs with larger communities, off-chain voting can be particularly disadvantageous. Larger communities require greater transparency and trust to ensure fair representation and accountability in decision-making (Afuah and Tucci, 2012). On-chain voting, with its inherent transparency and immutability, is more suitable for such environments, as it provides an audit trail and reduces information asymmetry for members and investors alike (Momtaz, 2021b; Bellavitis et al., 2021), and fostering collaboration (Santana and Albareda, 2022). Conversely, off-chain voting can exacerbate issues in larger communities by creating opportunities for power imbalances, where a subset of the community may disproportionately influence voting outcomes. The lack of an immutable audit trail in off-chain systems makes it challenging for members to verify decisions, leading to potential mistrust (Catalini and Gans, 2018). Thus, we propose that the negative impact of off-chain voting is amplified in DAOs with larger communities due to the higher demand for transparency and security. Hypothesis 2a (H2a). The negative (positive) effect of off-chain (on-chain) voting governance is amplified by larger community size. 3 C. Bellavitis and P.P. Momtaz Journal of Business Venturing Insights 23 (2025) e00537 2.3.2. Coalition size Coalitions form within DAOs when groups of members with aligned interests coordinate their voting actions. While coalitions can foster collective action, they can also lead to power consolidation and potential governance challenges, particularly in off-chain voting contexts where decisions lack transparency and permanent records (Bellavitis et al., 2023; Chen and Bellavitis, 2020). Larger coalitions may increase the risks of coordinated voting that benefits specific groups at the expense of the broader community, especially in systems without on-chain transparency to ensure equitable representation. In DAOs with larger coalitions, the absence of an immutable audit trail in off-chain voting can create information asymmetry, where smaller or non-aligned stakeholders may be disadvantaged or lack confidence in the voting process. Consequently, the drawbacks of off-chain governance are likely to be more pronounced in DAOs with larger coalitions, as these structures introduce additional risks of power imbalances and conflicts of interest. Hypothesis 2b (H2b). The negative (positive) effect of off-chain (on-chain) voting governance is amplified by larger voting coalitions. 2.3.3. Technical development team size Although off-chain voting can increase governance flexibility, its drawbacks become more pronounced in DAOs with larger technical development teams. In highly technical DAOs, where frequent protocol upgrades and product iterations are necessary, governance mechanisms must balance speed with accountability (Halaburda and Levina, 2024). While off-chain voting may facilitate quicker decision-making, its lack of transparency and verifiability poses a greater risk as team size increases. Larger developer teams introduce greater coordination challenges, making transparent decision-making even more critical. On- chain voting provides an immutable record of governance decisions, ensuring that all stakeholders — both developers and broader community members — can track, audit, and hold decision-makers accountable (Bellavitis et al. 2021; Momtaz, 2021b). In contrast, off-chain voting in larger technical teams can exacerbate information asymmetry, where key decisions are made informally or by influential subgroups without broader community scrutiny (Catalini and Gans, 2018). This opacity can reduce investor confidence, as external stakeholders may struggle to verify whether governance processes align with the DAO’s long-term interests. Moreover, larger development teams often mean that more individuals and subgroups have diverging priorities and differentiated expertise, leading to increased complexity in governance. In the absence of on-chain transparency, internal conflicts and competing interests within the technical team may not be adequately resolved through fair and open voting mechanisms. Off-chain governance, in this context, allows dominant factions within the development team to exert outsized influence over decision-making, potentially alienating the broader DAO community and undermining decentralization (Bellavitis et al. 2023). Additionally, the lack of on-chain enforcement in off-chain voting can heighten governance inefficiencies in larger teams. While smaller DAOs may rely on informal trust mechanisms and direct communication, larger teams require structured, transparent, and enforceable decision-making processes to ensure fair governance (Santana and Albareda, 2022). Without these mechanisms, off-chain voting in larger developer teams can lead to fragmented decision-making, governance disputes, and ultimately, a decline in DAO valuation. Thus, larger technical development teams intensify governance challenges by increasing the need for formal accountability, reducing decision-making transparency, and exacerbating power imbalances. Accordingly, we propose: Hypothesis 2c (H2c). The negative (positive) effect of off-chain (on-chain) voting governance is amplified by larger technical development teams. 3. Data and methods 3.1. Data sources Our sample is based on a leading provider of data on DAOs, DeepDAO.1 For these DAOs, we manually collect additional data from various sources, including the number and activity of DAO developers on GitHub from the DAOs’ GitHub websites, DAO Google search and news intensities from Google, and Bitcoin trading volume during the same time period of the DAOs’ treasury-building activities from CoinMarketCap. We focus on DAOs with a near-complete set of variables, as described in Section 3.2. Our final sample consists of 365 DAOs. 1 We downloaded all DAO data from in July 2023, and compared the data to our previous download from May 2022. The download date is important because some DAOs changed their organizational set-up ex-post, for example, by adding on-chain voting when they offered only off-chain voting before. For our research design, time-varying DAO design choices are not problematic because we study the total initial treasury size, which is unaffected by ex-post design changes. We thank Professor Christian Fisch for suggesting this point. 4 C. Bellavitis and P.P. Momtaz Journal of Business Venturing Insights 23 (2025) e00537 3.2. Variables Dependent variable: DAO treasury size. Our dependent variable is the treasury size at the end of the fundraising period. Following existing studies on ICO performance that relied on the funding amount (e.g., Fisch (2019), Momtaz (2021b)), we operationalize DAOs’ treasury sizes as the logarithmic funding amount in USD acquired during the fundraising period. Independent variable: off-chain voting governance. Our main independent variable is a dummy variable for whether the DAO has an off-chain voting governance. Moderator 1: Community size: # distinct voters. We measure a DAO’s community size by the number of distinct voters, e.g., governance tokenholders that have voted at least once. Moderator 2: Voting coalition. We proxy for DAO voting coalitions with the percentage of proposals in which different DAO members vote together in a coalition. Moderator 3: # GitHub developers. To proxy for technical sophistication of the DAO’s underlying algorithmic framework, we take the natural logarithm of the number of GitHub developers registered for the DAO project. Additionally, we include a battery of control variables, as follows: • Ownership concentration. DAO governance token ownership concentration is measured as the percentage of governance tokens held by the largest tokenholder in the DAO. • Community intensity: avg. votes per voter. We explore the average number of votes per distinct voter as a proxy for the intensity with which a DAO’s community participates in decision-making. • Consensus rate. We measure a DAO’s average consensus rate in votings by the percentage of successful proposals. • Power concentration. We measure the concentration of decision-making power as the percentage of successful proposals of the largest governance tokenholder in a DAO. • Average # of contributions per GitHub developer. As a measure for the intensity of developers’ involvement, we take the average number of contributions per developer in a DAO. • Time spent on DAOs per GitHub developer. Similarly, as another measure for the intensity of developers’ involvement, we take the average time a developer spends on a DAO project. • Most active GitHub developer: # links to other DAOs. As a measure for cross-DAO connections and shared technical knowledge, we compute the number of links that the most active developer has to other DAO projects. • Bitcoin trading volume. To condition on volatile crypto market movements, we control for Bitcoin trading volume. • DAO Google search intensity. To control for investor attention in DAOs, we add the Google intensity for DAO as a search term. • DAO news intensity. Similarly, we control for the intensity with which DAOs are covered in the news at the time of the fundraising to proxy for information production about this novel organizational form. 3.3. Summary statistics Table 1 provides summary statistics for all of our main variables. The average DAO in our sample raises a treasury size of $24.4 million during the fundraising campaign. Three out of four DAOs have an off-chain voting governance. The average DAO has ten votes per proposal at the time of the end of the fundraising campaign, with more than 5 votes per voter, and one successful proposal out of four proposals that are put up for vote. In the average DAO, the largest governance tokenholder controls 8% and 37% of the largest tokenholder’s proposals are successful. Almost every other proposal features a voting coalition. The average number of GitHub developers is 958 and the average number of code contributions per GitHub developer is 539. The average number of DAOs the most active DAO developer per DAO is involved in is 154. These sample statistics suggest that DAOs raise significantly more funds than early ICOs, as documented in related studies (e.g., Fisch (2019), Momtaz (2021b), Drobetz et al. (2025), Cumming et al. (2025), Momtaz (2021a), Colombo et al. (2022), Bellavitis et al. (2022), Mansouri and Momtaz (2022), Bellavitis et al. (2021)). 3.4. Correlations The bivariate correlations indicate that the DAO treasury size is strongly negatively correlated with off-chain voting governance (𝜌=−0.55). DAO treasury size is positively correlated with community size (𝜌 = 0.28), community intensity (𝜌 = 0.10), and the consensus rate (𝜌 = 0.20), ownership concentration (𝜌 = 0.45), and voting coalitions (𝜌 = 0.12), while negatively with power concentration (𝜌=−0.15). These correlations indicate that treasury size is associated with strong communities, and with relatively low disagreement in voting and somewhat concentrated ownership that is balanced by contested proposals that are put up for vote by the largest tokenholders. The control variables are also correlated with the DAO treasury size, albeit the correlations are less significant. Overall, these correlations are in line with our overarching hypotheses (see Table 2). 5

C. Bellavitis and P.P. Momtaz Journal of Business Venturing Insights 23 (2025) e00537 Table 1 Summary statistics. Statistic Mean St. Dev. Q1 Median Q3 Treasury size, in USD million 24.43 123.56 0 0 0.02 Off-chain voting governance (dummy) 0.74 0.44 0 1 1 Community size: # votes per proposal (log.) 2.31 1.87 0.7 2.1 3.6 Community intensity: Avg. votes per voter 5.41 15.67 1.3 2.1 3.8 Consensus rate (% of successful proposals) 0.25 0.34 0 0.03 0.5 Ownership concentration (% of governance token ownership of largest DAO member) 0.08 0.18 0 0 0 Power concentration (% of successful proposals of largest governance tokenholder) 0.37 0.45 0.00 0.00 0.98 Voting coalition (% of proposals in which different DAO members vote together) 0.48 0.31 0.23 0.43 0.67 # GitHub developers 958.19 1,784.63 18 273 1,310 Average # of contributions per GitHub developer 538.76 543.73 199.46 361.33 622.30 Time spent on DAOs per GitHub developer 483.73 630.93 194.59 348.80 563.78 Most active GitHub developer: # links to other DAOs 154.41 77.70 124 204 208 Bitcoin trading volume 44.92 9.25 34.44 45.71 49.26 DAO Google search intensity 27.12 1.63 26.50 26.50 28.50 DAO news intensity 2,662.04 223.36 2,459 2,693 2,841 Table 2 Correlations. Treasury 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 1.Off-chainvotinggovernance(dummy) −0.55 1 2.Communitysize:#votesperproposal(log.) 0.28 −0.06 1 3.Communityintensity:Avg.votespervoter 0.10 −0.30 −0.12 1 4.Consensusrate(%ofsuccessfulproposals) 0.20 −0.51 0.01 0.18 1 5.Ownershipconcentration 0.45 −0.71 0.12 0.26 0.37 1 6.Powerconcentration −0.15 0.04 −0.18 −0.03 0.19 −0.21 1 7.Votingcoalition 0.12 0.12 0.55 −0.10 0.01 0.07 −0.12 1 8.#GitHubdevelopers −0.02 0.06 0.01 −0.01 0.01 −0.07 0.06 −0.07 1 9.Average#ofcontributionsperGitHubdev. −0.03 0.03 −0.19 0.01 0.05 −0.04 0.05 −0.12 0.21 1 10.TimespentonDAOsperGitHubdev. 0.01 −0.06 0.00 0.00 0.05 0.02 0.02 0.01 −0.19 0.00 1 11.MostactiveGitHubdev.:#linkstootherDAOs 0.08 −0.09 0.12 0.06 0.07 0.04 −0.06 −0.07 0.34 0.10 0.29 1 12.Bitcointradingvolume −0.09 0.20 −0.08 −0.01 −0.11 −0.12 0.04 0.00 −0.02 −0.01 −0.05 −0.07 1 13.DAOGooglesearchintensity −0.01 0.11 −0.09 −0.01 −0.05 −0.07 0.10 −0.03 −0.06 0.07 −0.04 −0.10 0.41 1 14.DAOnewsintensity −0.07 0.18 −0.07 0.10 −0.03 −0.11 0.12 −0.03 −0.01 0.03 −0.08 −0.07 0.72 0.44 3.5. Econometric approach It is a notable feature of the DAO context that DAOs may have some operational activity before the fundraising. For example, DAO code needs to be deployed on the blockchain and a number of decisions need to be taken prior to raising funds (e.g., DAOs may vote on the fundraising goal, timeline, method, and so forth). As a result, DAO communities may evolve prior to building a treasury and they may even dissolve before any funds are raised. As such, any study of DAO treasuries necessarily needs to address the endogeneity problem that comes with the fact that only some DAOs will successfully build a treasury. To address this empirical challenge, we estimate two-stage models that compute the probability that a DAO will successfully build a treasury or not, and then control for the probability to estimate the actual relation of interest: whether off-chain voting governance impacts the treasury size. The techniques used in our study have been employed before in similar contexts (e.g., Fisch and Momtaz (2020), Bertoni et al. (2011), Colombo and Grilli (2010), Mansouri and Momtaz (2022), Cumming et al. (2025)). Specifically, we use Generalized Residuals (GRs) as controls for any unobserved heterogeneity that may be correlated with both, the fundraising success and off-chain voting governance (Gourieroux et al., 1987). Consistent with Gourieroux et al. (1987), we define the generalized residual as: 𝐺𝑅 𝑖 = 𝑠𝑢𝑐𝑐𝑒𝑠𝑠 𝑖 × 1− 𝜙 𝛷 ( − ( − 𝛺 𝛺 𝑖 (𝑠) (𝑠 𝛿 ) ) 𝛿 ) + ( 1−𝑠𝑢𝑐𝑐𝑒𝑠𝑠 𝑖 ) × 𝛷 −𝜙 ( − ( 𝛺 𝛺 𝑖 ( ( 𝑠 𝑠 ) ) 𝛿 𝛿 ) ) where 𝜙(.) and 𝛷(.) denote the probability 𝑖 𝑖 density and the cumulative density functions of the standard normal distribution, respectively. 4. Empirical results 4.1. Main results Table 3 shows the main results for Hypothesis 1 that off-chain voting governance is associated with smaller DAO treasuries. Columns (1), (2), (3), and (4) show results for our control, first-stage selection, second-stage pooled, and second-stage successful- only model, respectively. All reported standard errors are robust. The R2 in all of our models is around 30% or higher, which is similar to previous studies of funding amounts in token offerings (e.g., Fisch (2019), Cumming et al. (2025), Drobetz et al. (2025), Momtaz (2021b)). The results of our control model (OLS) are in column (1), with log of the treasury size in USD million as the dependent variable. The coefficient of the off-chain voting governance proxy is −2.06, with a 𝑝-value < 1%, suggesting that the difference between on- chain and off-chain voting governance accounts for a marginal DAO treasury effect of 87.3% or, in nominal terms, $21.3 million. This strongly supports the hypothesis that there is a substantial off-chain voting governance-related valuation discount in DAOs. 6 C. Bellavitis and P.P. Momtaz Journal of Business Venturing Insights 23 (2025) e00537 Table 3 Main results — off-chain voting and DAO treasury size. Model: Control Selection Main Main/Sub Dependent variable: Treasury Success Treasury Treasury Stage: 1st 1st 2nd 2nd Off-chain voting governance (dummy) −2.0604*** −0.7626*** −2.2477*** −5.6219*** (0.2663) (0.0705) (0.5141) (1.4981) Community size: # votes per proposal (log.) 0.4463*** 0.0773* 0.4489** 1.6560** (0.1304) (0.0409) (0.1976) (0.6367) Community intensity: Avg. votes per voter 0.0186 0.0271 0.1805 0.2905 (0.1049) (0.0299) (0.1544) (0.3555) Consensus rate −0.6037* 0.1180 −0.4606 −0.1206 (0.3316) (0.0916) (0.4330) (1.1299) Ownership concentration 0.4641 −0.1233 0.3072 −0.8473 (0.7547) (0.1989) (0.8757) (1.4801) Power concentration −0.4243* −0.0695 −0.5011* −0.8356 (0.2295) (0.0652) (0.2910) (0.8613) Voting coalition 0.6829 −0.0036 0.7923 1.7582 (0.4180) (0.1202) (0.5251) (1.4228) # GitHub developers 0.0715 −0.0137 0.0587 0.2550* (0.0458) (0.0129) (0.0562) (0.1418) Average # of contributions per GitHub developer 0.1164 0.0055 0.1678 0.6543** (0.0818) (0.0223) (0.1058) (0.2569) Time spent on DAOs per GitHub developer 0.0126 −0.0152 0.0375 0.1743 (0.0727) (0.0196) (0.1032) (0.2861) Most active GitHub developer: # links to other DAOs −0.1548 0.0259 −0.1651 −0.7659** (0.1052) (0.0280) (0.1215) (0.3273) Bitcoin trading volume −0.1971 −0.1188 −0.3669 0.0015 (0.4745) (0.1328) (0.5863) (1.3845) DAO Google search intensity 1.9054 0.6952* 2.1292 1.8809 (1.3061) (0.3666) (1.7181) (3.8589) DAO news intensity 1.0851 0.0724 1.4383 5.6803 (1.1929) (0.3217) (1.4033) (3.5728) Generalized residual (cid:55) (cid:55) (cid:51) (cid:51) No. Observations 365 278 278 96 Adjusted 𝑅2 0.370 0.581 0.390 0.278 Notes: This table presents the first- and second-stage regression results for our main model. Model (1) is a control model that regresses the DAO treasury size (in log-transformed USD million) on our off-chain voting governance indicator variable. Model (2) is our selection model that predicts whether a DAO will eventually be able to raise a non-zero treasury. Models (3) and (4) predict the DAO treasury size with the off-chain voting governance dummy plus controls in a pooled regression of all (successful and unsuccessful) DAOs and successful-only DAOs, respectively. All variables are defined in Section 3.2. Standard errors are in parentheses. * Statistical significance at 10% levels. ** Statistical significance at 5% levels. *** Statistical significance at 1% levels. The coefficients of the control variables are largely consistent with expectations in that (i) the number of vites per proposal as a proxy for community size is positively associated with DAO treasury size, reflecting the view that a larger crowd is willing to back the DAO, (ii) the consensus rate is negatively associated with DAO treasury size, reflecting arguments that the wisdom of the crowd requires disagreement, at least to some extent, to unfold its potential, and (iii) power concentration is also negatively associated with DAO treasury size, suggesting that concentration of decision-making power among very powerful governance tokenholders is detrimental to DAO treasury size. Given the potential concern of the DAO treasury’s endogeneity with respect to the voting governance system, as explained in Section 3.5, we perform a two-stage approach in columns (2)-(4). Column (2) contains a first-stage Heckman selection model, which 7 C. Bellavitis and P.P. Momtaz Journal of Business Venturing Insights 23 (2025) e00537 predicts the conditional probability that a DAO successfully builds a non-empty treasury. Community size and DAO Google search intensity positively predict success in the DAOs’ treasury fundraising efforts. We use the first-stage results to obtain generalized residuals, as described in Section 3.5. We include GRs as an additional control in columns (3) and (4). The difference in the two columns is that (3) shows a pooled regression for both successful and successful DAOs, while (4) shows a regression only for successful DAOs. In column (3), the coefficient of the off-chain governance voting proxy is almost unchanged (−2.06 in column (1) vs. −2.25 in column (3)). In column (4), for the successful DAO sample, the off-chain voting governance effect further reduces to −5.62, suggesting that successful DAOs that do not offer on-chain voting governance raise the smallest non-empty treasury size. It is noteworthy that unobserved heterogeneity captured by the generalized residuals may deflate the off-chain voting governance-related valuation discount in DAOs to some extent. Overall, our baseline result is robust to controlling for unobserved heterogeneity, and therefore supports our main hypothesis. 4.2. Moderation results It is plausible that the effect of off-chain voting governance and DAO treasury size is contingent on other cross-sectional DAO characteristics. To test this, we modify our second-stage pooled regression model from column (3) in Table 3 so that the off-chain voting governance proxy is interacted with a number of potential moderators. It is noteworthy that the interactions improve model fit significantly, with Adjusted R-squared values of around 40%. Table 4 shows three interactions, of which all are statistically significant: community size, voting coalitions, and the number of technical developers on GitHub. All three statistically significant effects are negative and, thus, increasing the negative effect of off-chain voting governance on DAO treasury size, supporting our Hypotheses 2a, 2b, and 2c. 4.3. Curvilinear effects and margin plots As some of these effects may plausibly not be linear, we test curvilinear effects (untabulated and available from the authors upon request). We only find one variable of interest also being curvilinear. Specifically, the consensus rate mitigates the negative effect of off-chain voting governance on DAO treasury size, but this mitigating effect is marginally decreasing in the consensus rate. Intuitively, consensus is important for investors, as only a lack thereof may lead to problems associated with a lack in on-chain governance, but the delta from a sufficiently high to a very high consensus rate may not add value. We also check for non-linear effects in the interaction models shown in Table 4. We find that the same independent variable remains curvilinear in nature when interacted with the off-chain voting governance proxy. The untabulated results suggest that the consensus rate has a marginally decreasing mitigating effect on DAO treasury size. Margins plots in support of the linear and non-linear interactions with our three moderating variables and on-chain versus off- chain voting governance are in Fig. 1. The plots reflect the tabulated results and we therefore abstain, for the sake of brevity, from repeating them. 5. Discussion and concluding remarks This paper tests the overarching hypotheses that off-chain voting governance is detrimental to initial DAO success, as proxied by the treasury size at the end of the fundraising campaign, and that the negative relation between off-chain governance and DAO success is driven by several determinants related to a DAO’s degree of decentralization. Using a two-stage approach to address endogeneity concerns related to the fact that only some operationally active DAOs will successfully raise treasuries, we find that DAOs that implement on-chain voting from the very beginning raise five times more funds than those governed off-chain. The effect crucially depends on the size of the DAO’s community, coalition, and technical development teams. These moderating effects shed light on the mechanism by which off-chain voting undermines DAO success. Our evidence suggests that DAOs lose much of the transparency and automation that defines blockchain-based governance when voting is executed off- chain, generating uncertainty among tokenholders and potential backers. In particular, larger communities, voting coalitions and technical development teams magnify the negative implications of this opacity, because members find it more difficult to verify whether outcomes truly reflect the larger group’s preferences. Hence, although off-chain voting can lower transaction fees and improve agility, these benefits are often outweighed by the perceived reduction in trust and accountability in many organizational settings, especially in those associated with DAOs. By highlighting these trade-offs, the moderating variables in our study point to transparency as the central mechanism explaining why off-chain voting carries a persistent ‘‘discount’’ on DAO valuations. Our study contributes to the literature in the intersection of entrepreneurial finance and organizational design, and the emerging DAO literature specifically (for a review, see Santana and Albareda (2022)). First, we are among the first to study DAO treasury size as an outcome variable in the entrepreneurial finance literature. Although the funding amount achieved by selling tokens has been frequently studied in the ICO literature (e.g., Fisch (2019), Momtaz (2021b), Drobetz et al. (2025), Cumming et al. (2025)), DAO treasuries are a distinct success measure as they represent the DAOs’ working capital that, unlike in ICOs, remains under collective ownership and governance of the DAO backers tokenholders. As such, DAO investors retain more rights in treasuries than ICO investors in the project valuation, which may result in higher valuations of $ 24 million in our sample (see Table 1) as compared to the mean ICO valuation of $ 14 million, e.g., in Fisch (2019) or Momtaz (2021b). Second, given DAO members’ collectively retained ownership of the treasury, it is an organizational design question, which community and governance design choices maximize DAOs’ working capital (Hsieh et al., 2018; Goldberg and Schär, 2023; Halaburda and Levina, 2024; Gregory et al., 8 C. Bellavitis and P.P. Momtaz Journal of Business Venturing Insights 23 (2025) e00537 Table 4 Moderation results for the second-stage pooled regression model. Dependent variable: Treasury size, in USD million (log(1+.)) (1) (2) (3) Off-chain voting governance (dummy) × 0.9646 −0.7426 −1.1132* (0.7310) (0.6531) (0.6354) Community size: # distinct voters −2.1076*** (0.3593) Voting coalition −3.6927*** (1.0230) # GitHub developers −0.2350*** (0.0794) Community size: # votes per proposal (log.) 2.0975*** 0.3540* 0.4757** (0.3371) (0.1950) (0.1950) Community intensity: Avg. votes per voter 0.2564* 0.1487 0.1811 (0.1460) (0.1512) (0.1521) Consensus rate −0.1218 −0.4462 −0.3657 (0.4118) (0.4234) (0.4279) Ownership concentration −0.0400 −0.7872 0.3865 (0.8268) (0.9084) (0.8635) Power concentration −0.1770 −0.3614 −0.5529* (0.2796) (0.2872) (0.2873) Voting coalition 0.4429 3.6120*** 0.7849 (0.4981) (0.9348) (0.5176) # GitHub developers 0.0612 0.0725 0.2416*** (0.0530) (0.0551) (0.0830) Average # of contributions per GitHub developer 0.1693* 0.1971* 0.1781* (0.0997) (0.1038) (0.1043) Time spent on DAOs per GitHub developer 0.0415 0.0371 0.0049 (0.0972) (0.1009) (0.1023) Most active GitHub developer: # links to other DAOs −0.1638 −0.1980* −0.1585 (0.1144) (0.1191) (0.1197) Bitcoin trading volume −0.1510 −0.3346 −0.3155 (0.5534) (0.5733) (0.5781) DAO Google search intensity 1.3008 1.7394 3.1231* (1.6242) (1.6835) (1.7262) DAO news intensity 1.4992 1.6052 1.1131 (1.3216) (1.3730) (1.3874) Generalized residuals ✓ ✓ ✓ No. Observations 278 278 278 Adjusted 𝑅2 0.459 0.417 0.408 Notes: This table presents regression results for our second-stage pooled regression model. The dependent variable is the DAO treasury size (in log-transformed USD million). All variables are defined in Section 3.2. Standard errors are in parentheses. * Statistical significance at 10% levels. ** Statistical significance at 5% levels. *** Statistical significance at 1% levels. 2024; Chawla, 2020; Li and Chen, 2024; Lo Monaco et al., 2025). The question is non-trivial because two coordination problems may suggest diverging optimal design choices — the chicken-and-egg problem of kickstarting decentralized platforms like DAOs suggests to delegate all decision-making power in a democratic fashion to governance tokenholders, while the collective action problem suggests to allocate control to an organizational elite (Cumming et al., 2025). To our best knowledge, we are the first to show that off-chain voting governance, as a proxy for retained control in the hand of the DAO’s core team (Zhao et al., 2022), is the most important predictor of DAO fundraising success. Further, we show that the detrimental effect of off-chain voting governance seems to give more (empirical) weight to the chicken-and-egg, rather than to the collective action problem, whilst also showing that empirical patterns of how governance power is distributed within DAO communities has a strong moderating effect. Third, we contribute to the TCE literature by illustrating how DAOs tilt the conventional transparency–efficiency trade-off in favor of openness and accountability. Although off-chain voting may appear to minimize transaction costs by eliminating on-chain fees and reducing procedural complexities, our findings demonstrate that DAO members typically value transparent and immutable governance more than these potential cost savings. This outcome suggests that the adoption of trust-enhancing mechanisms, such as on-chain voting, can supersede concerns about added inefficiencies when the organizational objective is to ensure broad-based legitimacy and member confidence. In effect, our results situate DAOs as a novel empirical context in which TCE’s insights about governance design are reconfigured through blockchain technology, with enhanced transparency emerging as an indispensable component of organizational value creation. By casting these results through the lens of TCE, we see that reducing transparency via off-chain voting elevates transaction hazards and opportunism, thereby eroding trust and organizational value. Put differently, while TCE posits that governance 9 C. Bellavitis and P.P. Momtaz Journal of Business Venturing Insights 23 (2025) e00537 Fig. 1. Margin plots. structures should align with the specificity and uncertainty of transactions, the decentralization ethos of DAOs amplifies the significance of trust and verifiability. Hence, off-chain governance creates a mismatch between the need for robust safeguards and the limited transparency provided — culminating in higher perceived risk for contributors. Our evidence thus reinforces the central TCE proposition that minimizing transaction costs involves balancing efficiency against vulnerability to opportunistic behavior. In DAOs, on-chain voting appears to reduce such vulnerabilities by embedding transparency as a core principle, even if it means incurring the additional expense and complexity of on-chain execution. For DAOs, developers, and investors, our study has important practical implications for how DAOs’ governance frameworks can be designed to create value. Specifically, successful DAOs should feature transparent and enforceable on-chain voting to honor DAOs’ autonomy promise, and this is even more important in the presence of larger communities and powerful voting coalitions, where several tokenholders collude to win votings. For policymakers, our study has important implications, as DAOs are largely unregulated in most jurisdictions, yet they promise to become central entities in the emerging metaverse (Chandra, 2022; Weking et al., 2023; Chalmers et al., 2022). In particular, the presence and detrimental impact of voting coalitions highlight the need for governance token ownership disclosure rules that prevent voting competition-reducing voter collusion. A limitation of our study is its cross-sectional nature, which focuses on determinants of DAO treasury size, while neglecting time-varying dynamics that promise interesting outcomes for future research. In particular, it seems worthwhile to explore the longer-term performance of DAOs that could inform us about the efficiency with which DAOs deploy their treasuries. Similarly, as DAO communities evolve over time, understanding the interplay between DAO performance and community dynamics seems interesting. Finally, some DAOs move from off-chain to on-chain voting governance (and potentially vice versa), which could be exploited in quasi-experimental identification frameworks. CRediT authorship contribution statement Cristiano Bellavitis: Writing – review & editing, Conceptualization. Paul P. Momtaz: Writing – original draft, Formal analysis, Data curation, Conceptualization. Declaration of competing interest The authors declare the following financial interests/personal relationships which may be considered as potential competing interests: Cristiano Bellavitis reports was provided by Syracuse University. If there are other authors, they declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper. 10 C. Bellavitis and P.P. Momtaz Journal of Business Venturing Insights 23 (2025) e00537 References Afuah, Allan, Tucci, Christopher L., 2012. Crowdsourcing as a solution to distant search. Acad. 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