How do you create a structure for early projects that allows them to: a) raise capital, b) give out equity or an equity like instrument to backers, c) not result in securities violations, d) doesn't require teams to jump through legal loopholes?
The proposed model below is a crypto-native approach to allow projects to raise up to a few $MM while starting out. It uses a DAO to manage the cap table.
For more information on why we want this to be the foundation rather than an existing DAO platform, see our "who and what" doc.
We are proposing an MVP here based on the model adopted by Web3API: a product-building DAO that raises its initial funding via an "over the counter" (OTC) method. Unlike the typical progressive decentralization path, where a DAO is launched only after the product reaches product-market-fit, Web3API launched a DAO from the get go. Instead of a legal entity and SAFT, they used the DAO to broker individual sales of governance tokens to investors in order to raise their pre-seed round. We believe generalizing this approach solves a problem for the crypto ecosystem, as we'll describe below.
We also believe this OTC investing use-case is an excellent starting point for the Lego DAO project since it can be built quickly and reuse many existing DAO tools.
Crypto projects have no way to raise initial funds that is compatible with their needs and values:
Existing fundraising solutions don't meet these criteria: