Why We Passed: Inside SunDAO's Due Diligence on 7 Deals
In 2025, SunDAO sourced 11 deals. We invested in 4. This post is about the other 7.
I think the deals you say no to reveal more about an investment thesis than the deals you say yes to. Anyone can list their portfolio and explain why they were smart to invest. Fewer people are willing to show you the ones that didn’t make the cut - and explain their reasoning in public.
We are. Startup names are anonymized to protect the founders, but everything else is real - the sectors, the metrics, the reasoning, and the debates our members had.
The 5 deals we passed on
1. DeFi / Liquid Staking
What they were building: Chain-abstracted staking connecting Ethereum liquidity with PoS chains via IBC. The idea was solid - make staking capital-efficient across ecosystems.
What we liked: The team was strong. The technical approach was clever. And liquid staking is a proven market with real demand.
Why we passed: Lido, Stride, Milkyway. Three well-funded, well-established competitors already deep in this space. Our members debated this one seriously - the technical differentiation was real, but the competitive moat wasn’t clear enough. We kept coming back to the same question: even if they execute perfectly, can they carve out meaningful share against incumbents who already have liquidity and integrations?
Market timing was the other concern. We felt the window for a new entrant in liquid staking was narrowing, not opening.
What this taught us: A strong team in a crowded market isn’t enough. We need to see either a distribution advantage or a technical wedge that incumbents can’t easily replicate.
2. BTCFi / Institutional BTC Yield
What they were building: Delta-neutral vaults designed for institutional BTC yield. Think: Bitcoin treasury management for funds and corporates who want yield without directional exposure.
What we liked: The team had 100+ years of combined TradFi experience. Serious people with serious resumes. The product addressed a real gap - institutions hold BTC but struggle to generate yield safely.
Why we passed: The valuation. $75M for an early-stage product. Our VC members ran the numbers and kept hitting the same wall: at this price, the risk/reward doesn’t work. You’re paying growth-stage prices for a team that hasn’t proven product-market fit yet.
Sometimes the team is right and the price is wrong. This felt like one of those cases. We’d look at this again at a different valuation.
What this taught us: Pedigree doesn’t justify pricing. We evaluate the team and the terms separately. A world-class team at an unreasonable valuation is still a pass.
3. DePIN / Edge Infrastructure
What they were building: Sub-50ms consensus for gaming, robotics, and IoT. A physical infrastructure network targeting latency-sensitive applications.
What we liked: The traction numbers were impressive - 50+ partnerships and 40K+ nodes deployed. This wasn’t a whitepaper project. They had real infrastructure in the world.
Why we passed: Two things. First, the valuation was high relative to actual revenue. Nodes and partnerships look great in a deck, but our members wanted to see the revenue those nodes were generating. The gap between infrastructure deployed and revenue earned was too wide.
Second, the multi-vertical roadmap worried us. Gaming, robotics, AND IoT is three different markets with three different go-to-market strategies. At this stage, we wanted to see focus. Pick one vertical, dominate it, then expand. Trying to do all three simultaneously is an execution risk that the valuation didn’t account for.
What this taught us: Impressive metrics without corresponding revenue is not a green one. And breadth of vision at pre-scale is often a sign that the team hasn’t found their wedge yet.
4. DeFAI / Research & Trading
What they were building: AI-powered onchain research and trading tools. In short: an AI agent that helps you research tokens and execute trades.
What we liked: This was the most traction-heavy deal we evaluated all year. $85M in trading volume. 100K+ users. Live product, real usage, measurable engagement. Real metrics.
Why we passed: The DeFAI space was exploding in 2025. Every week, a new AI x DeFi product launched. Our members ran a competitive analysis and counted over a dozen credible players going after variations of the same thesis. The question wasn’t “is this team good?” - they were. The question was “what does this look like in 12 months when there are 50 of these?”
We couldn’t find a durable moat. The AI models are commoditizing. The onchain data is public. The trading interfaces are converging. When the underlying inputs are available to everyone, differentiation becomes a marketing problem, not a technology problem.
What this taught us: Traction in a hype cycle is not the same as traction with a moat. We now explicitly ask: “If 20 well-funded teams copy this approach, what survives?”
5. Web3 Data Infrastructure
What they were building: A distributed compute and data marketplace. Decentralized infrastructure for data processing and storage.
What we liked: Real revenue. $200K+ in ARR with 30 paying customers. In a space full of pre-revenue projects, this stood out. The team had clearly found early adopters willing to pay.
Why we passed: Timing and trust. We reviewed this deal during a significant market crash, and our members were understandably cautious about deploying capital in that environment. That alone might not have killed it - but the valuation story raised red flags. The team initially presented at a $40M valuation, then came back offering $15M. That kind of swing erodes confidence. If the team itself can’t anchor on what they’re worth, it’s hard for investors to feel solid about the terms.
What this taught us: Market conditions matter. Even a good deal at a reasonable price can stall when the broader environment makes people risk-averse. And valuation consistency matters just as much as valuation level - if the number moves dramatically between conversations, it signals fluctuation in conviction around the product value.
The 2 deals we wanted - but couldn’t close
Not every pass is our decision. Two deals got a yes vote from our members, but the rounds didn’t close. This is worth talking about because it’s part of the reality of early-stage investing that rarely gets discussed.
Cross-Chain DeFi Development Environment
The team included a former ICF Board member. They had $1M committed from a Cosmos and Ethereum contributors. $35M valuation cap. Our members liked the team, liked the product, liked the positioning. We voted yes.
The round didn’t come together. Not enough other investors committed to fill it out. That’s not a reflection on the team - it’s a reflection on market conditions and fundraising dynamics.
AI Verification L1 Blockchain
This one had everything: 15M+ users in 5 months, 250K daily active, a live mainnet, and $2.5M in annualized revenue. Featured in Messari. Our members were genuinely excited about this deal.
Same outcome - the round didn’t close.
These two are a useful reminder. Our job is to evaluate, vote, and commit. But we can’t control whether a round comes together. Early-stage investing involves more parties than just you and the founder.
Patterns we’ve noticed across 11 deals
After a year of evaluating deals together, some themes keep coming up in our members’ discussions:
Valuation discipline is disappearing again. We saw multiple deals where strong teams were raising at valuations that assumed everything would go right. We’d rather miss a deal at a bad price than deploy capital at terms that only work in a bull market.
Multi-vertical roadmaps are a warning sign at early stage. The best deals we invested in had a clear, narrow focus. The deals we passed on often tried to address too many markets at once. Focus is a feature.
Competitive moats matter more than competitive advantages. Several deals had real advantages - strong teams, good traction, clever technology. But advantages erode. Moats compound. We now spend more time asking “what stops a well-funded team from doing this in 6 months?” than “is this team good?”
Traction during a hype cycle needs extra scrutiny. $100M in volume and 200K users sounds incredible - until you realize the entire category is growing at that rate. We try to separate “this team is winning” from “this market is temporarily inflated.”
Why we publish this
Most investment DAOs treat their pass reasons as internal notes. We think that’s a missed opportunity.
For founders: seeing why investors pass helps you sharpen your pitch, address real objections, and understand how the other side of the table thinks. Even if we passed on you, this might help with the next investor.
For our members: transparent reasoning builds trust in the process. When you can see exactly why a deal was passed, you calibrate your own judgment better.
For prospective members: this is the kind of analysis you get access to on every deal, not just the ones we write about publicly.
We source 1-2 deals per month. Every one goes through this level of scrutiny. If you want to be part of these conversations - evaluating deals, debating theses, and deploying capital alongside people who take this seriously - SunDAO membership is opened.
SunDAO Ventures is an investment DAO where 70+ blockchain experts collaborate on due diligence and co-invest in frontier blockchain infrastructure. Founded by former ICF Ecosystem Lead Daiana Marculescu and ICF Technical Director & BIS Managing Architect Chris Zhong.
This post is for informational purposes only and does not constitute investment advice.