MetaCartel 3.0 and beyond (re hybrid for-profit model)

Intro: Just as societies are experimenting with various blends of socialist and capitalist policies, I believe DAOs should do similar experimentations at a much smaller scale, but with scalability in mind. Hence, my proposal for Metacartel DAO-or any DAO that is interested in these hybrid solutions- follows which tries to bridge for-profit and non-profit models into a hybrid for-impact model:

Motivation:

While non-profit and grant oriented DAOs are exciting developments in governance, they suffer from the same shortcomings w.r.t. access to capital as traditional nonprofits. If the assumption is that resources are finite and DAOs can’t print their own magic internet moneyz (MIM), then the funding has to come from somewhere. For now, it seems like the answer is people who got lucky (i.e. were early) and have too much magic internet moneyz … :mage::woman_mage::money_with_wings:

Well … that does not sound like a sustainable, let alone scalable, plan for long term survival of any DAO.

Absent monstrosities like T-word (taxes!!!) and I-word (Inflation!!!) :shushing_face: blockchain projects and their symbiotic DAOs are always going to suffer from the lack of funding in one way or another. Heck, even ZCash is now begging their community for more money despite their initial “founder rewards” scheme. More money, if it doesn’t come with loss of mission, is a good thing and if some of that extra money (which would not have even been there absent for-profit motives) has to be returned, so be it!

In sum, the TL;DR of this proposal is a mechanism (or a collection of mechanisms) for incentivizing for-profit investors to get involved with funding-DAOs like Moloch and Metacartel WITH the expectation of a capped (whether absolute or in %) ROI.

A few concrete proposals! :unicorn:

The DAO/DApp brotherhood/sisterhood model: :star_struck:
Right now there is absolutely zero expectation of returns (whether token or $) from grantees. So, my first proposal is centered around a novel idea that even some venture capital firms are considering (Seth from FiftyYearsVC)…

The idea is that every DAO or DApp or individual grant recipient pledges a certain % of their potential income or revenue (or token supply) to the DAO and collectively all other DAO members and grantees.

Imagine if every YC company owned some X% (let’s say 7% of the entire batch) of every other YC company in that batch or fund (due to legal separation of VC funds). Now, apply that to grant recipients of Metacartel DAO. There are two options:

1- the individual or project does something valuable and freely available to all DAO members and the broader community. All good, no claim on that since it’s already open source and freely available!

2- the project or company expects to generate future cash flow or income as a result of the investment/grant/services(1) provided by the DAO. In this case they owe X% (negotiable) to the reserve pool of the DAO and potentially passive investors who joined that specific funding round(2).

This way everyone is incentivized to help everyone else in the DAO (El Cartel!) succeed, because their success is everyone’s success, though indirectly!

Up until here we are not even talking about giving returns to evil greedy investors! Just a brother helping another brother(s). Now comes the cool stuff …

The 10/10 funding-DAO structure (vs. 2/20 in VC)::smiling_face_with_three_hearts:

This part can get very complicated and despite my love-hate relationship with VCs, I am not a VC! So, apologies for any mistakes or oversimplifications of VC legalese.

Currently there is a contribution cap for individuals and companies joining MetaCartel which severely limits the potential of the DAO (at least in terms of access to capital). At the same time, if we just open it up to Crypto funds the mission is most likely lost and overtaken by pure for-profit motives.

So, what’s the solution? :money_mouth_face:

What if we kept the active membership (governing/voting rights) as is, but allowed passive external investors to join individual funding rounds via the DAO. Sort of a funding-DAO sidecar with reasonable terms and fees. All permissionlessly (managed by smart contracts) and without giving the VCs/investors any outsized governing rights. Of course, they can get all their firm partners and employees to join with the cap, but that would be easily noticed as a soft sybil attack by that entity.

Why 10/10 vs. 2/20 (i.e. 10% of each funding round and 10% of any eventual returns)? :nerd_face:

Here, the idea is that you as an investor will have to “donate” 10% of the initial investment amount (like a one time scouting and services fee) and 10% of the potential exit or revenue share (carry) to the DAO. The DAO will likely have supported this project directly or indirectly before they became mature enough for investment. And since most of the services and resources of the DAO are open to everyone, the 10% initial fee will ensure the DAO can continue to provide these resources for future projects! I do see the potential for the investors to circumvent the DAO entirely (because deals are not done secretly and behind the scenes), but I am confident in our ability to (token) engineer some kind of FOMO and artificial scarcity/monopoly to fend off such demonic anti-community efforts :slight_smile:

Also, quite likely the first sidecar investors will not be actual VCs, but other cash/token rich crypto projects like Ethereum, Aragon, …, the 2017 class of ICO mania! These guys already fund all sorts of open source efforts. 10% for a clearly useful and beneficial DAO is nothing crazy. I hope folks like Stefano Bernardi (managing Aragon’s $$$) who are involved in both VC and Crypto will chime in and give feedback on this issue.

My best guess/proposal for the legal framework of this model::thinking:

The DAO, and indirectly the sidecar passive investors, will have a claim on X% of the potential revenue or equity/token supply of the grant/funding recipients. Instead of paying regular dividends, one option could be that the grantees can decide to periodically unburden themselves of the debt to the DAO and external co-investors. We could look at this either as a equity/token buy back or the company paying back their debt in increments that makes sense for their business. Again, there is a lot to be figured out here and I will make sure to consult existing revenue-share investors like my friends at IndyVC, FairMint and Clearbanc about their opinion and feedback … once we have internal traction and momentum around this proposal.

That’s it for now. This was not meant to be a formal proposal, rather me sitting on my sofa on a lazy Sunday evening summarizing my thoughts :thought_balloon: before formally applying to join MetaCartel :slight_smile: … please feel free to roast/criticize me and/or the proposal(s)!
I plan to publish an edited version of this on Medium (Hackernoon!?) and potentially talk about it with Ameen and Peter on our upcoming soon-to-be-launched podcast @PretopiaFM :studio_microphone:

You can also email me nima@ieee.org for private feedback or on Telegram/Twitter @insideNiMA

  • NiMA

(1) services model like pioneered by A16Z. Could include code audit, marketing, email list, recruiting help, etc. …

(2) Like a (passive) sidecar fund for a VC fund or angel group (had to remove the link bc I am a new user!!!)

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Great stuff!

I’ve recently been outlining a DAO / subDAO VC model which has some similarities to the model you’re laying out … In the concept below, the investors remain in full control of their funds, and “allow” a group of managers (ie MetaCartel) to invest as they please. The DAO/subDAO structure is live on DAOstack as an experiment.

I’ve also thought of the same concept: what if every company the DAO invested in held ownership in every other company. The way I’ve been thinking about it is more like founder insurance: any grantee can donate a portion of future dividends to a pool, in return for fractional ownership of that pool. In this way, the risk of participating in a startup is minimized. Startup risk is extremely high, this is a way to share that risk.

I really love the 10/10 funding-DAO structure :star_struck:

In the start of this article you mention “bridge for-profit and non-profit models into a hybrid for-impact model”. I love the vision, but I don’t think this setup actually achieves this. I see a high likelihood that MetaCartel members will drift to funding endeavors that are profit maximizing. One approach which would help is to limit the returns on investment (more like a debt instrument). Another would be to outline what % of the fund is expected to generate returns, and what % is not, make it very clear, and having some mechanism to prevent changing that breakdown. Deserves more thought…

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