SPEAKER_00: Hey, everybody, we have a great show for you today. I am going to interview Aaron Wright. He is from Open Law, a company which is rebranding to be called Tribute Labs. Long and short, he is the smartest individual in the DAO space. He set up a dozen of these DAOs. They're all crushing it. If you don't know what a DAO is, it's a decentralized autonomous organization. It's a fancy way of saying a collective of people in a chat room who make financial decisions according to a smart contract and voting based on their ownership. Anyway, it's a brave new world, kind of like LLCs, but programmable. It's all the rage in

SPEAKER_01: crypto. And I actually think that this is one of the great use cases for crypto. And so we're starting to see now, hey, my skepticism of the ICOs and Bitcoin and some of this stuff is now starting to when we get to the application layer starting to make sense to me. But before that, speaking of

SPEAKER_04: disconnected from reality, Rivian has IPO, it's worth $100 billion. I'm going to do a lot of math on this. They've only delivered like 150 cars and they delivered them to their employees.

SPEAKER_05: This is a bit crazy. It's totally disconnected from reality. I'm going to take the whole thing apart piece by piece. Stick with us.

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SPEAKER_00: EV startup Rivian started trading on Wednesday and the stock has popped 60% and peaked at over a $100

SPEAKER_01: billion valuation. They of course have no revenue. So as of midday Thursday, the stock settled at around $117 a share that represents around $100 billion market cap. In other words, it's worth what Airbnb, Uber and other companies that have 10s of billions of dollars in revenue is worth. And those

SPEAKER_04: are obviously much better businesses. The company has made zero revenue as of their s one from October

SPEAKER_00: 1. Their projected best case scenario for q3 is a million in revenue. Obviously, quarter three and September 30. For those of you who are not familiar. And as of September 30, Rivian reported 48,000 pre orders for both the R1T and the R1S. This is their pickup truck, which is pretty good looking. I think it's looks essentially like a pickup truck with a nice set of lights. Not really much different than a pickup truck

SPEAKER_01: you might see from Ford, to be totally honest. And I think that was their design choice was to just say, Hey, this is really easy for somebody who owns a Ford 150. Of course, since they announced, Ford announced that they're doing an electric 150. So I think that's going to be a big problem for Rivian to be totally honest, because Ford can lose money on the 150. I don't think Ford is as far behind today, as it was when Tesla came out over a decade ago. So let's put that on the side for a second. These customers paid a cancelable and fully refundable deposit of $1,000. So they have $48

SPEAKER_03: million in deposits. Remember Jason's law, I tell you about this all the time. If a company has a billion dollar valuation before they have revenue or a product in market, it's either a fraud or it's going to fail. This has been true almost universally. We saw it with Nicola, we might be seeing it with

SPEAKER_01: magically unknown. If magic leaps ever going to get to profitability or products in market was the last

SPEAKER_03: time anybody used a magically product. There are no falls into this category. Nicola Quibi, maybe, which you know, wasn't a terrible product, but wasn't a great product either. And I give them credit for trying but it did command a huge valuation. So I always get worried when the valuation gets too high compared with the performance. And that's coming for me as an investor in private companies, you would think I'd be like, Yeah, let it rip. You know, it's good for me if these things rip. Why wouldn't I as an

SPEAKER_01: investor want to see valuations disconnect from reality? Well, because I don't think it's sustainable. I would like there to be a sustainable environment for startups and for high tech companies. A company with no

SPEAKER_03: delivered vehicles becoming worth $100 billion is absolutely insane. Now, this might be a case where Jason's law does not actually wind up applying, it could wind up not being a fraud, and it could wind up being successful. I think Nicola Fisker, and some of these other electric vehicle startups are nowhere near where Rivian is based on what I can see, it has an estimated range of 314 miles, it starts at 67k. But I

SPEAKER_15: don't think that's the actual price. I think it winds up being closer to, you know, 90 or 100. As of

SPEAKER_18: September 30 2021, we produced 12 R1 T's and delivered 11. Now, all of these vehicles seem to

SPEAKER_03: be have delivered to their employees. In other words, it sounds like they're bespoke, handcrafted

SPEAKER_04: vehicles. This is what Tesla called the founder series, or, you know, basically prototypes. So

SPEAKER_00: by October 31, we produced 180 R1 T's and delivered 156. So that's 145 delivered in October, I guess they timed this to be when they were delivering their products, quoting Rivian nearly all of these

SPEAKER_04: vehicles were delivered to Rivian employees and we expect to ramp deliveries to third party consumers as we increase our production rate. That's a big red flag. It's not uncommon to give the first ones to employees. Obviously, the employees are not going to rip it to shreds. And the founder series at Tesla did go out to the early investors, I had a founder series of model three, obviously,

SPEAKER_01: people famously know I have signature 001 of the Model S. And that's a collectible that I think I'm

SPEAKER_04: going to maybe donate to the Smithsonian or something. I don't know if there's a place where I can donate this million dollar car so I can get out of my garage. And they could maybe insure it and put it on display. There's a car. If I listen, the folks at rally road, I got to get back to them. They were very nice. They wanted to auction off the signature one and my roadster 16. I haven't done

SPEAKER_01: that. But I would like to put them in a museum somewhere if somebody wanted to if there is there a great museum that takes these cars, and you know, we'll take custodianship of them. And I don't know if I want to give it to them yet or donate it. But I would like to just have it on display

SPEAKER_25: somewhere like two of the first be kind of cool. So here's a tweet from a Rivian employee, Travis Munson on October 22. The R1T truck has been driven and reviewed by the press, though. Bloomberg,

SPEAKER_01: Motor Trend, Roadshow and CNET. And they've generally been positive, noting the large storage space. Bloomberg noted the truck is cute, but not a badass pickup truck. Not sure I'm looking for

SPEAKER_00: Bloomberg for their take on these Amazon and Ford own about a third of the company combined. And those are really two good votes of confidence. Amazon owns 20%, which is now worth over $20 billion. I wonder if that's Bezos trying to stick it to Elon, you know, they have that little back and forth over rocket ships, and Ford owns a 12% stake value at over $10 billion. So you have to wonder, like, what's going on with the relationship with Ford and Rivian? Ford, just was it six months ago that they announced the electric F-150? And they kind of surprised the market with that announcement that

SPEAKER_28: this was coming? And like, Ford owns 12% of a company that they're the number one competitor of? I mean, how does that work? I mean, obviously, Ford is getting an education here. But I don't think they're hedging their bet at all. I think they want to win the category. So that's got to be interesting. At 12%, you would have a board seat. But how do you give a board seat to Ford? Maybe Ford thinks they have a chance to buy the company. But now that the market caps 100 billion is more than what Ford's worth. So Rivian with zero well with 150 cars delivered to their employees could buy

SPEAKER_01: Ford or be an equal merger. It's bizarre. I mean, the world has literally gotten disconnected from reality. That doesn't mean Rivian is not a real product, a real company. So let me be clear about that. I actually think they're more real than like, let's say, Fisker, which I think is going to be

SPEAKER_15: just a total washout like Nicola, because Fisker, everything he touches seems to die. You know,

SPEAKER_33: it's like the third time they resuscitated the carcass of Fisker. And their cars are ugly and gross. And I never liked him or the cars, I'll be totally honest. In the 2.5 years prior to

SPEAKER_01: growing public, Rivian raised 10 billion, over 10 billion. Most recent round they closed was 2.5 billion. In July, they raised almost 12 billion for the IPO, which is great. They have a war chest. So good for them. Amazon has ordered 100,000 Rivian delivery vehicles be delivered by 2030. So that is a pretty big deal to have Amazon as a customer. And obviously, Bezos cares deeply about the climate as do most I think people in the world who have any any trust of the scientific method or have read a newspaper or open their eyes and gone outside and seen extreme weather. According to CNBC, Rivian

SPEAKER_34: reserves 7% of its IPO allocation for a direct share program for people who pre ordered. And apparently,

SPEAKER_04: you know, collectively, the headline is they made millions of dollars, but I think it was 175 shares is what they were allocated each so make a fact check me on that. Which means you know, people may have

SPEAKER_01: made enough not to cover the cost. But they made a little bit. It's that time of year again, the

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SPEAKER_01: So just looking at market caps of other company GM 86 billion for 77 billion. And Daimler, which makes Mercedes Benz may have heard of them is 108 billion. So just absolutely crazy disconnected from reality. Rivian's losing a ton of money, as you would expect, for a company that is

SPEAKER_04: pre launch, it's really hard to build these first nine months of 2021. They lost just over a billion dollars. Again, that's not shocking. That's to be expected. And they're planning on offering a subscription service to customers to create reoccurring revenue streams services, they're planning telematics based insurance. I think that's something Tesla is doing as well. Proactive vehicle

SPEAKER_01: service like maintenance and repair. I think that's also something that a lot of people order, maybe some software updates. So I don't think that Rivian is going to really be able to beat Ford, they're certainly not gonna be able to beat Tesla. But they do have close to $20 billion in cash, so they're gonna be able to put up a good fight, they're gonna be able to lose money if they lose 2 billion a year, let's say 3 billion a year. You know, they're going to have something like five years of runway here. And that's probably what they should do. They should probably, you know, make a really good go of it, lose money on every car, or break even on every car, and really try to build something important in the world. But you have to also remember, like self driving is going to be a big piece of this. So I don't know that they have the charging stations, the self driving. But the delivery vehicle space, I think is going to be a very real one. Of course, you have to ask yourself,

SPEAKER_00: what if Tesla decides, you know what, we have the Cybertruck coming, they've got, I think a half

SPEAKER_01: million, the last I remember was 500,000. So the Cybertruck has 10 times the number of deposits, I believe, for Cybertruck, somebody can fact check me on that. So I think they're going to have a hard

SPEAKER_04: time competing at Cybertruck and F 150. I'm going to guess a Rivian comes in third to those two

SPEAKER_00: competitors. It's obviously going to come in third to that. Oh, wow, Cybertruck has over a million deposits now. So 20 times what Vivian has. Vivian should be worth if I gave them just an incredible amount of credit. If you gave Vivian a million dollars in valuation for every truck they'd sold,

SPEAKER_01: that would be 50 billion. That'd be kind of crazy, because you don't make a million dollars off each one. So if you gave them 100,000 in value, it would be worth 5 billion, I think 5 billion would be a fine

SPEAKER_04: valuation for Vivian right now. But obviously, they've raised all this money. So they have to have

SPEAKER_01: a valuation over 17 billion, because that's how much cash they have. So maybe double that 40 billion, even there, it doesn't make much sense. I think it's a terrible stock to own right now.

SPEAKER_04: I wonder if Tesla Q and the folks who were betting against Tesla all this time, if they were betting against Tesla as Tesla was delivering hundreds of 1000s of vehicles, and was making all this progress

SPEAKER_01: on self driving, and had the super charging stations, and the Gigafactory, and the Powerwall technology and solar, and was doing electric grid work, if they were betting against that, for five years, 10 years, and shorting it, I wonder if Tesla Q would make all the money they lost on Tesla back shorting Vivian, I'm not, I would not short anything in this kind of stock market, because nobody knows when this madness is going to end. When I say madness, I mean, the overvaluing of massively speculative stocks. My best advice to you all the public out there, and I hate to get financial advice is, you really need to think, do you want to be placing bets on companies without product

SPEAKER_00: market fit at extremely high valuations? That is what I was talking to my brother or my mom, and they were like, Hey, should I place a bet on this? I would say, Well, are there other companies that have the same valuation that are growing and that have a large consumer base like Airbnb, like Uber, like Robinhood, like Coinbase, like Stripe? I mean, there are many companies that are in a similar valuation range that have massive amounts of revenue. And, you know, depending on the company, tens of millions to hundreds of millions of paying customers. Why would you place if you could, it's not like this is the only bet you could place and, you know, including versus Fisker or other speculative companies, Nicola. If you're going to place speculative bets, you should get rewarded from them. And you should have a valuation commensurate with the speculation. So if these if it was worth 5 billion, 10 billion, even 20 billion, I'd say, Okay, maybe you want to take a speculative bet here. Sure. But at 100 billion, I don't know how that makes any sense. Okay, so that's my thoughts on

SPEAKER_03: Rivian. Congratulations on securing the bag. That's job number one for the team there. I mean,

SPEAKER_04: delivering the vehicles, and securing the bag at this point in their lifespan. And their timeline, both of those are equally important, because these things are expensive to produce factories are

SPEAKER_01: expensive. And this is real world research, and you're up against Tesla, which, I mean, good luck. I mean, and Ford, good luck. I think these guys are roadkill. I'll be totally honest, I don't think they're going to carve out a niche. I mean, just this is like going up against like Facebook and Google

SPEAKER_03: for ad revenue, right? Like, sure, Twitter's trying, sure, Snapchat's trying, but going up against the duopoly of Google, and Facebook in the ad space, you know, just very hard. There's kind of a duopoly here as well, I think Ford, and Tesla with Cybertruck. These are two, and I'm just talking about the truck sector. These are two people who really are crushing it. If you look at Ford, their profits come from trucks, and they have the Ford Transit. Do you think they're not going to produce an electric Ford Transit and then absolutely just roll over Rivian's delivery vans? Of course they are. And then what if Tesla decides, you know what, the Model Y, if we just build it a little taller,

SPEAKER_18: they can make a transit competitor immediately. The amount of time it would take Tesla to create, and I don't have any inside information here. Obviously, sometimes people think I do,

SPEAKER_49: because I know some people like Tesla, the Model Y could be a Ford Transit competitor,

SPEAKER_01: I would guess in under a year, like they already have those factories and making it a big giant box, it would have the same dashboard, the same seats up front, it would just be a little bit taller, not much, same drivetrain, same self driving, would just be taller and maybe have sliding doors on each side is it would not be very difficult. I got to think less than a year to just make a Tesla box.

SPEAKER_04: So anyway, good luck. It's kind of crazy. And then for people who are speculating on stocks, please. I hate to get financial advice. But I hope that you've paid down your credit card debt,

SPEAKER_00: I hope you own your home. And if you're placing speculative bets, just get some thinking around index funds, get some thinking around, you know, wealth front and having a balanced portfolio, and think about when you're going to need that money, because the market could crash. And if the market does crash, who's going to get hit? First, this is what I would encourage you to think about. If we have a correction, over 20% correct, who gets hit first, the speculative stocks with no customers, the companies that are emerging with, you know, 10s of millions of customers, or the companies that have hundreds of millions of customers. Well, I think it's going to kind of happen in that order. The companies that have hundreds of millions to billions of customers are going to, you know, be the places

SPEAKER_01: where people retreat, the places that have dividends, established revenue streams, and then who gets hit first, it's going to be the massively speculative ones. So buying public stocks in this category, it's kind of like doing what I do for a day job. But we invest that 10s of millions of dollars. And they're asking you to invest in these companies at 10s of billions. So just do the math people is all I'm imploring you to do is just do some basic math, take the valuation of the company, take how many cars they delivered this month times it by 12, divide those two numbers. So if we were to divide those two numbers, in this case, they delivered whatever 150 cars, let's round it up to 200. That's 2500 for the year. What's 100 billion divided by 2500 cars delivered? That's the

SPEAKER_00: valuation per car. So if we were to do that math equals $40 million per car. Somebody check my math on that $40 million per car. If we give them credit for delivering 200 cars a month, a third more than they delivered this month, and the times at times 12 months, that's $40 million per car. Now I know, it's a little bit of funny math, right? Well, the math is sound, but it's an interesting way to look at it. Well, that's how other businesses get judged. You know, either earnings, revenue, customers, etc. You really can't value a company this high, even if we gave them credit for 25,000 vehicles, like 10 times that amount, it would still be valued at $4 million per car. And that's maybe

SPEAKER_55: what they do two years out or something, right? So this is a bit crazy. It's disconnected from

SPEAKER_00: reality. I don't know how many ways to tell you folks when something is disconnected from reality.

SPEAKER_01: I nailed it on Nicola, I nailed it on Theranos. I nailed it on tether. I know of what I speak, because I do this for a living. This valuation is disconnected from reality, take the 17 billion out, you get 83 billion, 83 billion. You take out the cash. Is it worth that? No, it's not clearly not worth that. So be careful, folks. Okay. Next up, a really great interview with Aaron Wright from Open Law. And we is basically the guy, he's the guy who set up all these DAOs.

SPEAKER_00: He's the Dow King. He's creating the AWS and the legal framework for DAOs. He's doing it for NFTs. He's doing it for other crypto projects. And basically, smartest guy I know to date about DAOs. And I learned a

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SPEAKER_29: That's our crowd.com slash twist to sign up for free. Okay, we've been talking about DAOs on this program, on social media on all in. They're very promising and very confusing. They're theoretical more than reality today. And our guest today is trying to take them from being theoretical to being reality. So I'm very excited to welcome Aaron right to the program for his first appearance. He is the co founder of a company called open law, which is going to rebrand to tribute labs. And open law makes it easier to create legal arrangements that work with Ethereum. And one of those would be DAOs, I assume. Welcome to the program, Aaron. Hey, thanks so much for having me, Jason. You heard my brief introduction there. DAOs have captured people's imagination. And you are one of those people, but you're also an attorney and a professor of the law. So you are trying to take what is, I think, largely theoretical, in some cases, hype, in some cases, the promise of a brighter future, and then turn it into reality,

SPEAKER_69: correct? Yeah, correct. So I'm a law professor at Cordoza Law School, have spent quite a bit of time

SPEAKER_72: in crypto ecosystem from starting in Bitcoin in 2011, played a role helping to launch Ethereum, co authored a book looking at blockchain law and policy. And we're really bringing to life a lot of the concepts that have animated many folks in the Ethereum community from the beginning, most notably

SPEAKER_18: DAOs. Okay, so DAOs, for those people who don't know, stand for decentralized autonomous organizations.

SPEAKER_01: So if we break down those three words, decentralized, they don't exist in one place under one authority, I think would be the best description of that autonomous. They work automatically according to some preset rules. And they're an organization, which means there's, I would think many people in them, um, but we don't specify how many in it. Is that an accurate description of what these are? And how

SPEAKER_18: would you describe them? To a person who doesn't know what they are, but understand startups and

SPEAKER_80: business, and why they should exist? Yeah, so I think that that's the broad mantle, right? How do we

SPEAKER_72: create organizations that are more decentralized, have more people that are involved are more automated, and potentially over time, completely autonomous, and are organizations that pull together capital, pull together resources, pull together people so they can do things more productively. The notion and concept around DAOs has kicked around the crypto community for quite some time, starting with Bitcoin. In 2013, Dan Larimer, who put together a blockchain project called EOS, began to conceptualize what a decentralized autonomous corporation would look like. So thinking about using tools that are available on blockchain technology, things like smart contracts and other kind of techniques and approaches to begin to automate aspects of how a corporation would operate. And the Ethereum ecosystem really generalized that concept around the notion of a DAO, which is thinking about not just corporations, but all forms of organizations and potential organizations that are a bit flatter, less hierarchical in nature. And I think that's the core insight is that due to the efficiency that blockchain technology presents in terms of transferring assets, pulling together assets, collectively managing assets, and the ability to use blockchain technology to vote or record votes, sum up votes, and take action based on those votes, you can begin to imagine organizations that are flatter. They don't necessarily have a board of directors, a CEO, a general partner, or some, you know, predefined centralized management, but can still take actions together. And that's kind of

SPEAKER_74: the, I think, one of the most interesting things about that DAOs.

SPEAKER_29: So, we're taking out the board of directors, we're taking out the management team, and we're replacing it with voting by anonymous folks. How is that better? Some people might look at that and say, this sounds a little bit chaotic, it sounds like there's no repercussions. And didn't we, and you studied the law and teach it? Didn't we add the law to create for good purpose? And we added corporate governance for a good purpose, which is, there should be stewards. And there should be people who are fiduciaries, for the shareholders and are basically watching the store. What we're describing here with DAOs, I guess, is maybe taking that out or changing it in a way. So maybe you could comment on that.

SPEAKER_65: Yeah, I mean, I don't think it's necessarily needs to be anonymous folks that are pulling together capital

SPEAKER_72: through the company that I co-founded Tribute Labs. We've now supported nine different DAOs. There's about 200 plus million dollars worth of ether that's been contributed to them. They've done a lot of different activity, which I hope we get to dive into in more detail. And everybody that's joined these DAOs has gone through compliance checks, they're accredited, they've gone through KYC. So they may operate inside the DAO by a pseudonym. But they're known, at least to a party if there's any compliance or any regulatory or other issues that come up. There's other DAO experiments, which are a little bit more free flowing, that are focused more on managing smart contract based systems, particularly in the DeFi ecosystem. There, it's not anonymous, right? It's synonymous. There's always an address tied to some token balance, which is used for voting. But I, you know, I don't think you need to whittle away all the lessons of governance that we've learned over the past several hundred years when it comes to managing organizations. Instead, what we're really exploring is whether or not we can evolve beyond expert driven organizations. Due to the efficiencies that are presented by blockchain technology, can different groups of people scattered all across the globe work together to make decisions that are as good, if not better than these expert driven organizations that we've had up until this point in time. And the answer seems to be, and there's still a lot of evidence that needs to be collected, time is still going to need to test these. The answer seems to be yes, right? These types of flatter organizations can make decisions, they can move quick, you can filter information, they can perform due diligence, if it's focused on investments, and they can, and they can begin to make an impact in a way similar, if not better, to some of these more traditional organizations and

SPEAKER_87: structures. And I think the best evidence of that, or perhaps the best case you could build for that would be, well, if we have a hundred units of in a Dow, let's call them, you know, there's a hundred

SPEAKER_29: Ethereum or ETH in a in a Dow, you put in 40 of them, and then 60 other people put in two each, I'm sorry, 30 other people put in two each, you would have 40% of the vote, the other 60, 30 people combined would have 60%. Your vote should matter more because you have more skin in the game. That is

SPEAKER_80: one of the core tenants here. Is it not? Yeah, exactly. You know, for the data we put together,

SPEAKER_72: it operates similar to that, it's all prorata based on your ether or contribution in ether. It's not weighted towards heavy ownership, such as like 40%. The maximum amount that any one party could own is less than 10%. It's 9%. But in reality, it's usually one to 2%. People participate in these structures in general, individually. So that means their skin is in the game, right? Their incentives are aligned. There's not kind of this layer of GPLPs, where the general partner doesn't have skin in the game. So they're making decisions with their own capital. And they're working together, not just with a handful of people, but with a whole disparate group of people from across the internet, who are deep in on a particular topic. And that's where I think the magic kind of happens. We are living in an era, particularly in crypto, where it's very, very hard to stay up to speed with all the opportunities with all the different teams, all the different potential directions in which the ecosystem can go. And having a small group of people, let's say one or two general partners, really steering that ship is not working, you need to actually band together to kind of sift through the information that we're, that we're seeing get

SPEAKER_91: created and, and all the opportunities that are manifesting, particularly when it comes to Web3 and crypto.

SPEAKER_82: So this brings up an interesting point, we have the LLC structure in America, a limited liability

SPEAKER_92: corporation. And that has been copied around the world, I believe, I think it may have had its origins in England, correct?

SPEAKER_93: Wyoming. Yeah, so it's a US invention, one of them is a US invention. Okay,

SPEAKER_38: inventions. Yep, exactly. Great. So with LLCs, you can do many different things, you could run a law

SPEAKER_29: firm, an accounting firm, a recruiter, you could buy a piece of art and share ownership in it, you could create a venture capital fund. So when we say DAOs, or we say LLCs, what we're really saying is like a

SPEAKER_21: platform to conduct business and have some rule set. Would we agree on that?

SPEAKER_80: Yeah, somewhat. So you know, if you're pulling together capital and trying to make a profit,

SPEAKER_72: and there's no legal structure applied to it in the US by default, you're likely going to be considered a general partnership, general partnerships are kind of the OG of organizations, they're amazing in many ways, because they come by default. Lots of states depending on where the partnership is organized has slightly different rules, but they're largely standardized. LLCs provide additional benefits. You can register with a specific state and receive limitation of liability, which is critically important. I know you've spoken to lots of startups that you worked with about the importance of limited liability for investors and for the teams. But what it enables you to do is limit the risk associated with the commercial activity. LLCs in the US are hyper hyper flexible. And they're really creatures of contract. And so you have a lot of latitude, a lot like an engineer has when they open up, you know, their editor, and they want a program to kind of structure and put together different structures. So DAOs today, some are free, free form, right, there's no legal structure with it. Lots of early crypto OGs are going to say that that's the way to do it. But at some point, those projects could face an issue and that could create liability for members or folks with deep pockets in those organizations. The DAOs that we support actually are rooted in a US LLC. And we've put together a different operating agreement and different structures to make sure that they can comply with US law and manage the risks that we think are sensible. So our approach is a lot like Coinbase, right? We think that DAOs are a big category. We think that they're going to transform the world just like we've seen other digital asset and crypto based projects and initiatives do that. And

SPEAKER_88: we're really pushing to do that in a way that's responsible and can make sure that they can continue

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SPEAKER_29: week in startups. Okay. Thanks. And broker. Great job. I think what's great about your analogy is you can't open up, uh, a window and program and LLC. You can get on the phone with an attorney and have them program it through the law. But what we're really talking about here is taking what's worked in LLCs for hundreds of years, uh, and basically making it programmable, which is super exciting and making it global. And then instead of having the execution occur through, uh, good faith, which is how I would say LLCs kind of run today with the law as a backstop to bad behavior. These have the law built into them in certain cases. Am I correct? Yeah. So it's both. So, you know,

SPEAKER_72: in our DAOs, we call them rap DAOs. They are anchored in the U in a U S legal entity. Um, those entities are organized in Delaware that provides the legal protection. So if something goes sideways, if there's a risk, if somebody needs to go into court, um, then you, you actually know what you're dealing with, but you know, and lawyers and judges and juries can kind of begin to comprehend that. Uh, at the same time, you can put in extra protections through smart contract based systems. So you can put in controls to make sure that nobody runs away with the capital. You can begin to program, uh, different ways in which the pooled assets can be managed by this collective group without having to necessarily rely on a centralized administrator for all those functions. And, and that's really beneficial, right? That means that different people from around the globe that may not know or trust one another, they may know each other just from Twitter. Uh, they may have met, met each other at a couple of conferences. They may never have met anybody before. They have a little bit more trust that, uh, if they pull together their capital, it's not going to get stolen in some sort of way. Um, and that, uh, opens up a whole new vector for people to work together, uh, in ways that are different, right? You don't have to be located in the same small sliver of California or New York or another major city. Uh, you know, you could be sitting in Ohio, you could be sitting in Bali, you could be sitting in, uh, South Africa and you could all work together towards, um, for this common vision and purpose. So one analogy we've liked to use for DAOs is, uh, in many ways they're a lot like a subreddit, or a message board, but with a bank account. Uh, so you develop relationships that are personal. You, you can, uh, chat about something you're passionate about, but instead of just limiting it to a chat or conversation, you can begin to deploy capital against that too. Um, and that I think is pretty interesting. And that I think is the direction where we're going to see more and more organizations continue to move towards. So this is super fascinating. Um,

SPEAKER_87: if you think about the formation of capital here in the United States through venture capital, or

SPEAKER_25: something I'm, uh, I have a speciality in, uh, which is syndicates, uh, being the first one on

SPEAKER_29: AngelList and having the largest one in the world at the syndicate. We send an email, I pick a company, people decide if they want to invest, they pick the amount, they send it, we do a bunch of paperwork

SPEAKER_01: around it. There's $25,000 in costs, maybe by the end of the day, maybe 15 to 25. Uh, you know,

SPEAKER_29: wiring fees, et cetera. You create a Dow, everybody puts their money in. And then when a decision comes up, like, should we sell our shares? So we buy into a company, let's say it's Uber, Masayoshi-san offers to buy Uber shares. If my Uber shares in this analogy were in a Dow, and we had a hundred members, each one owned 1%, the membership could vote. Do we want to sell half of

SPEAKER_87: our Uber shares to, uh, Masayoshi-san? Or we could do another arrangement? Maybe, uh, how many, if we assume that we had to act collectively, we could do some sort of, uh, other rule like, hey, what is the max and the minimum you would like to sell? And then we come up with some

SPEAKER_29: weighted average, but we would have to have organized that decision because this is a decision that does happen in venture capital. When to distribute shares, when to take advantage of

SPEAKER_04: secondary, you rely on a general partner like myself or Sequoia, uh, with their new fund that they will decide when they distribute their shares in square was the example rule off both it was using on a recent podcast. Do they do them at the IPO price at 15 or 20 bucks? Do they do it at $70? Or they do it at 200? They have to make that decision. The LPs are trusting them. In this case, the LPs would just make their own decision, correct?

SPEAKER_72: Right. Or, uh, for our does that everything is managed by, uh, the members, right? So that includes all investment decisions that includes any distributions. So for the LAO, which was the first DAO that we set up, it's more focused on supporting projects. It has about $70 million worth of ether that's been contributed to it. Wow. It's back to a hundred plus projects. A number of them have turned out to become quite successful. It was- It's called LAO, L-A-O? LAO, yeah. What does it stand for?

SPEAKER_65: So the DAO was the original, uh, kind of, uh, DAO experiment in the Ethereum ecosystem. So we just did a

SPEAKER_91: riff on it because we anchored the DAO in a limited liability company. Ah, very nice.

SPEAKER_87: And people can read about that at the LAO.io, um, is the website for it. So you set this up when?

SPEAKER_72: Uh, so we set this up about 18 months ago. Uh, it came in first come first serve. People contributed 120 ETH at the time, which was about, I think about $50,000. ETH has obviously run up quite a bit in price. Um, and all decisions are made collectively. And so we've had some of those decisions, like, should we sell, uh, certain tokens or assets that, uh, that we received based on investments and distributions, you know, have been made. But what's nice about thinking about blockchain technology, those are decisions members can make, and the execution aspect can occur automatically, uh, via, you know, different smart contract based systems. Uh, so it's a lot more efficient to handle some of these administrative, uh, type roles where the members themselves can manage their own capital. The members themselves can manage, uh, lots of these administrative tasks without the intermediation that lawyers or fund administrators or general partners, uh, currently

SPEAKER_29: provide. And so the function of a general partner in the venture space would be to find deals, uh, vet them, meet with the founders, uh, maybe even do diligence on them, then present them to the partnership, which would then vote on, uh, you know, deploying LP capital in a lat in the lao who finds the ideas and presents them. Where do they present them and who does the due diligence?

SPEAKER_80: Yeah. So there's currently, I think 68 members of the lao. Uh, so the, the deals come from all

SPEAKER_72: different sources. The folks that are members of the lao have been part of the Ethereum ecosystem pretty much from the beginning. So major, uh, founders of significant, significant projects, protocols, uh, folks that have been deep in this space since, you know, 2011, 2012. Um, so they just have an instinctive feel for the direction of the ecosystem. They have a lot of relationships already with a number of the projects and teams. And so if they hear about a funding opportunity, they'll present it to the group, uh, that's discussed.

SPEAKER_124: Where do they present it on zoom or in a discord?

SPEAKER_72: Both. Yeah. So they presented in discord. Uh, so different channels are kind of created to talk about the opportunity, uh, to talk about the team. Um, there's oftentimes some soft polling that occurs through discord to see if there's rough consensus just around a particular project. Uh, there's two biweekly calls where people can tune in while it's voluntary, uh, where they can chat about the different deals or opportunities. Um, and then actions taken. Somebody can put up a governance proposal to fund the project. Uh, it opens up a seven day window, uh, to vote yes or no, uh, on whether or not to back it. If more people will say yes, then no. So instead of quorum based voting, it's consensus based voting, then the capital's committed. And to kind of soften the blow of whether or not you disagree with how this group is operating, you have the right to leave at any point in time, what, uh, Ethereum developers have called the rage quitting. So you can just, uh, basically, um, walk away with any undeployed capital, or you can sell your interest, um, at the member's approval to a third party or to another member. And so this has worked really, really well. Have many people rage quit? Uh, so we haven't had anybody, uh, rage quit in the allow yet. Uh, we had some people, uh, or one person rage quit in, uh, related to Flamingo DAO, which is an NFT focused DAO, uh, that was incubated by the allow, um, in right at the beginning when it started. So it hasn't been something that's been exercised that much, but I do think the ability to walk away with your capital, a very, very strong, uh, redemption, right. Which is one way to think about it is really important. Uh, it kind of keeps everybody in check and it's a great vote of no

SPEAKER_87: confidence. If somebody wants to do something that is, uh, which a member considered unethical or stupid or inadvisable, they can say, wow, what am I doing with this group? It would be like being a member and they're like, yeah, we have this incredible golf course where we're not gonna, you know, take care of it. It's like, well, why am I a member of this golf club? If you're not

SPEAKER_04: going to take care of the greens, I'm out and give me my money back. And you can't leave that kind of membership, nor can you leave a venture fund. If you try to leave a venture fund, you lose,

SPEAKER_29: uh, your principal in it. So it's quite punitive, uh, to leave those. So in this, um, you don't have that issue. There seems to be a lot of, uh, in my experience, infrastructure to running, uh, an investment club. And I actually call the syndicate.com that I run an investment club there. You need to have

SPEAKER_00: customer support. You, uh, need to host these meetings. You need to do deal sourcing. So you have given that out to the folks in the Dow, but there's still some amount of operations that will be

SPEAKER_29: needed. I would think over time, how does that get paid for? You have fees in a venture structure

SPEAKER_04: and those fees trickle down to create a support staff. Somebody can pick up the phone. Somebody can

David Friedberg: do research, uh, on a tax issue or a legal issue. Um, you know, like if one of your projects that you backed tried to screw you, how do you then know that they're trying to screw you or the, or the lao and, or the flamingo and how do you take legal action or, you know, who manages all that? In other

SPEAKER_72: words, how is it staffed? Yeah. Um, so each one of the dows, uh, has enlisted my, my company attribute labs as a service provider, and we fill in a lot of these gaps. So we've handled everything from the legal structuring to the maintenance of the DAP, uh, to community support. Uh, we, we kind of joke that we're like a mod on a subreddit or a whip in Congress where we can help people focus their activities, or if a vote needs to be taken, uh, we can prepare certain information to, to press that forward. And then we handle tax and compliance. So all those, uh, uh, areas in between what you're describing, which is just the core decision-making that we want the members to do, uh, and should be doing. We, we increasingly take care of that. Um, and we take a, a 2% annual fee. There's some variation on that depending on the doubt, but that's generally what we're, uh, what we're focused on no carry, uh, which I think is important, uh, because the members are making their own decisions and we don't have any investment related authority. It's all up to the members. Uh, so we're really like the support. Um, we joke that we're like a, we, our dows are a little bit like a reverse mullet. Um, and we handle, um, the business, all the business and operations in, uh, you guys have the party. Yeah. So the folks in the front can have the party. Exactly.

SPEAKER_29: So 2% of 70 million is 1.4 million. Uh, so every year that you run that you get 1.4 million.

SPEAKER_01: What do you do for that 1.4 million? That, that seems like a big number.

SPEAKER_72: Yeah. So, uh, we provide, uh, the legal structuring. So we have the structure for the lao, flamingo, Neptune, um, uh, a digital fashion dial called red dial. Uh, we also have a, uh, internet stable. We've, yes, we've taken our fake internet money to build a fake internet stable. Um, and we also have a metaverse dow. So there's about, uh, nine dollars right now.

SPEAKER_04: Uh, no, but I'm saying, what do you do for that 1.4 million? That seems like a big number to me in venture. The 2% that you get as fees is for sourcing the deals, diligencing the deals, going on the

SPEAKER_29: boards and managing, you don't do that function. So it's a big number. What, what, what, what does

SPEAKER_116: the Dow get for 1.4 million aside from the legal structure?

SPEAKER_72: So they get the legal structuring. They also, um, get the, uh, tooling. Uh, so we're able to pull together, uh, what we call a DAP or you can view it like an online portal where governance and other decision-making can occur. Uh, we provide the community support, which does take a bit of work, you know, just to keep, uh, people focused and push. So those two things, let's, let's double click on both

SPEAKER_29: those. So in a way you're like Amazon web services or Salesforce, like a SaaS provider

SPEAKER_87: of the management software, where the rules are written, where the votes are taken. That is

SPEAKER_93: actually super valuable. Exactly. And we've been building out advanced, uh, doubt tooling to make

SPEAKER_72: this all a lot more efficient. So right now, you know, crypto is still early, right? We're probably past the first inning, but I don't think we've seen the full ball game yet. Uh, there's a lot of work that needs to be done on the downside to lower costs, to increase operation. But what we've seen across the nine DAOs is the types of problems that we think that these online groups are going to face. And so since we see those problems, we can begin to solve them and then push that down into a coherent tech stack. So you can view what we're supporting as a broader network, uh, instead of being a network of blogs or network of, uh, different, uh, media properties. It's really a network of these, uh, DAO-like structures, uh, or DAO structures that all have the same or similar legal structuring, same tech stack. It's completely vertically integrated. So what you're learning in

SPEAKER_149: Flamingo might inform the allow might inform the next one. That makes total sense. And then

SPEAKER_87: double clicking on the community function, you host that week, those biweekly calls, um,

SPEAKER_29: you inform members, send them email updates of what's going on. You prepare tax documents and

SPEAKER_152: statements for them around. Exactly. So in a way you're like AngelList, Carta, or

SPEAKER_72: sure, which provides LLC services for folks. Right. Exactly. So it's like that. And then there's areas in which our DAOs are expanding. Uh, so Flamingo DAO is a great example. It was really the first, uh, substantive vehicle to explore NFTs collecting. So it launched October of last year. As an example, it's like the number three holder of crypto punks, uh, got in while before this upswing, and that was incubated by members of the LAO. So through this hive mind, this collection of folks that we've assembled, they saw the NFT opportunities, I think before most, uh, traditional venture capital funds, and even, um, you know, emerging crypto funds, and we're able to get in, uh, earlier than that. Uh, but that's expanding beyond even kind of, uh, things like collecting or supporting projects. They're beginning to work with artists and, um, and doing drops in a more collaborative way. So there's additional technology and tooling that's needed for it. Uh, so lots of these different functions we're able to support, uh, as these, these organizations continue to grow. They're pretty organic in, in terms of their, their general nature.

SPEAKER_87: Are they, uh, since you're doing them as a wrapped DAO, uh, these wrapped DAOs, are they, um,

SPEAKER_29: limited to accredited investors then here in the United States because of the accreditation laws?

SPEAKER_72: So, yeah, we, we have, uh, the answer as to whether they need to be is still an open question. Uh, so we've gone through kind of a bifurcated analysis, uh, we're, um, you know, in the abundance of caution, a little bit like I, how I think circle approaches things. We want to take the most conservative approach that we can. We've limited it to accredited investors and everybody goes through a KYC and compliance, uh, related check. Um, and that's another reason why having, uh, a service like Tribute Labs is important, right? If, uh, there's a change in the regulatory landscape, if there's more requirements that need to be handled, we'll be able to handle that and kind of mutualize the cost across the entire network, uh, which we think is important. Uh, so yes, 99 members, uh, for now. Um, and then everybody is accredited, uh, but people are, you know, stretched out across the globe, which I think is pretty, pretty interesting.

SPEAKER_87: So you're following the LLC rules of 99 members or $10 million cap with 250, I think,

SPEAKER_01: is the current LLC structures for investing in startups. Well, there's a couple different

SPEAKER_91: exceptions. So we rely on kind of the 99 member instead of the 250 member $10 million. Yeah.

SPEAKER_29: Yeah. Um, so that's a limitation. How about the open endedness or the closed endedness of this? So when you form the Dow, there's a period in which people can join, but the only way to join after

SPEAKER_72: that is to buy somebody else out. Is that correct? Yeah. It's either to purchase the interest from somebody else or the members have the ability to delete themselves. So what we've seen with allow and Flamingo, um, the members have decided to do that and they've let in more folks. So in allow, there's a 68 members and Flamingo there's about 70 members and periodically they let in new folks as part of that membership, usually at a higher price. Um, Oh wow. So they can command a higher

David Friedberg: price for them to join in, uh, which means they make a little profit on new members joining.

SPEAKER_72: Uh, so they don't make a direct profit, but it kind of increases their share the, the unit, the value of each unit, um, uh, in, in the Dow. So as an example for Flamingo initially to join, it was 60 ether for a hundred thousand units. Um, uh, it looks like they're opening up new membership and it's

SPEAKER_91: going to cost about 3000 ether, uh, for the same 100,000 units. Got it. And that would be commensurate

David Friedberg: with two things, the exclusivity of it, which people can decide if they see value in, but also

SPEAKER_87: the portfolio I would think has appreciated over some amount of time because they're probably still holding some ETH and the NFTs might have gone up. Uh, correct. Yeah. And then when you join as a new

SPEAKER_72: member, you enjoying the, in the profits and or losses of the entire portfolio. Um, so in for many of these DAOs, they're not really viewed as kind of pass through entities instead, at least the DAOs we support, they're really viewed as, um, you know, in for the long run. And so joining our, our DAOs, whether it's the Lao and you're looking for a kind of exposure more at the project level or Flamingo, which is looking for exposure at the NFT level, you kind of get to join a pretty well-vetted portfolio

SPEAKER_91: of either NFTs or projects or whatever other types of investment opportunities, um, uh, our DAOs provide.

SPEAKER_25: Okay. So the Genesis DAO, uh, which was created back in 2016, um, created quite a brutal, um, a bunch of

SPEAKER_29: Ethereum were stolen. Somebody hacked the smart contract. Tell us a little bit about what was

David Friedberg: learned from that case, uh, and then how you're protecting against what people I think reasonably

SPEAKER_87: have a fear of, which is like these smart contracts are run automatically. Can they be hacked? You

SPEAKER_29: know, we've had a big, long discussion, you know, would Bitcoin eventually be hacked? Could it be hacked? It's been pretty bell to last so far, but we did have Solana go down for some period of time. It is possible for things to get hacked as we saw with the Genesis DAO. So maybe you could explain

SPEAKER_04: to the audience what happened with the Genesis DAO and then what the community learned and then how that

SPEAKER_176: informs what you're doing going forward. Yeah, absolutely. So the, uh, the Ethereum ecosystem has been completely fascinated with DAOs pretty much from the beginning, shortly after Ethereum launched,

SPEAKER_72: the first kind of DAO experiment was hatched and that was called the DAO. Um, it was initially aiming to pull together about $500,000 worth of ether to begin to support projects. It collected about $150 million worth of ether, which today would be worth tens of billions of dollars. Um, and the concept was have the community identify projects that are worthy of being supported, um, have them built in an open source way. Um, and hopefully, you know, not just use digital assets like we see in the Bitcoin ecosystem, hold, you know, hold those assets, but put them productive deployment in some capacity. Unfortunately, uh, the smart contract based system underpinning, uh, the DAO itself was compromised and a tremendous amount of the, the underlying ether was drained by a hacker, attacker, robber. There's different ways people want to characterize it. Um, that led to a bad actor at a minimum. Yeah, uh, completely, probably a bad actor. I think people have still been trying to identify this, this person or a group of persons that, um, was responsible for it. And it led to a big, uh, conversation inside the Ethereum ecosystem and ultimately a hard fork of Ethereum. So basically they can roll back the changes. Yeah, exactly. Um, but since that time, we've learned a lot about smart contracts. It's very hard to, to build smart contracts. It's a lot like programming hardware. Um, so it's difficult. It takes a lot of work and expertise. Uh, but there's been a lot of development since that initial experiment. Um, and, uh, the smart contract based system that we use, uh, which is called Moloch V2, or the newer smart contract based system that we developed, which is the Tribute DAO framework, uh, aims to solve a number of those problems. Time will tell whether or not they're perfectly secure. Just like time will tell if Bitcoin's perfectly secure, there's always going to be some security risks. Um, but, uh, so far it looks like, uh, we've been able to address it. The second issue that the DAO itself brought up was just regulatory issues. So what are the interests in these, in, in these DAOs? Are they going to be classified as securities or commodities? Uh, the SEC did weigh in on that one. Uh, they issued a 21A report. So a non-binary report, nobody went to prison or got in trouble or got fined based on the DAO, but they, they kind of weighed in as, as, as to what they thought those tokens would be classified as. And the answer there, since there was some folks that were in charge of it, since there was some, somebody that was effectively a general partner, uh, they classified those interests as, uh, securities. And so what we've done in the DAOs that we support is try to shore up the smart contract, uh, pieces. And then also, uh, we've eliminated the general partner and we think have opened up, um, uh, different ways to hopefully, uh, argue that the interests themselves are not securities in our DAOs too. What would they be if not securities?

SPEAKER_184: Uh, they'd be partnership interests or more like commodities. Got it. So I have a partnership

SPEAKER_01: interest in it. It's not a security. What's the difference for the members in those two?

SPEAKER_72: I think the difference is, and this is what we're going to responsibly push towards is that you can have, uh, hopefully tradable interests in these DAOs. So instead of having all of your liquidity locked up, um, if there's some return, you can begin to have tradable, uh, interest in these vehicles as well. And that could be great for valuation purposes or assessing valuation. It could be great for liquidity for folks. So people could sell their interest to each other. Like you could sell a mutual

SPEAKER_92: fund or a secondary market for venture capital funds, which doesn't happen all that often.

SPEAKER_91: Right. But instead on, you know, open liquid, uh, blockchain based marketplaces. So instead of just private marketplaces, but, uh, public marketplaces. So I think there's a lot of work that we need to do to get to that point, but that's the direction I think, uh, we collectively would like to go.

SPEAKER_01: Okay. So, um, something is going on in Wyoming. Uh, there was this American crypto fed DAO. Um, and maybe you could explain to us what's going on in Wyoming.

SPEAKER_65: Yeah, sure. So Wyoming and I was, uh, part of this process. They extended out the Wyoming LLC act to

SPEAKER_72: recognize, uh, a subcategory of LLCs called a DAO. Uh, what it did was flip some of the default rules when you set up an LLC, just to make it easier to have these, um, online groups, uh, organize, uh, that are relying on smart contractor code-based systems. It looks like Wyoming weighed in, uh, on a DAO that was formed and found the interest in some of those DAOs or potentially the interest in some of those DAOs to be securities. Uh, and that's not surprising, right? Just because you call yourself a DAO, it doesn't mean that the, the law magically evaporates. It's going to really be

SPEAKER_91: fact specific and case specific and structure specific, uh, to know, to kind of know what's

SPEAKER_195: going on there. What if, um, the, the removal of the GP, uh, it's hard not for me to take personally

SPEAKER_29: as a GP, but, uh, GPs do have value in the ecosystem. Is it possible to create a DAO? Because

SPEAKER_01: I'm having you on because I keep getting contacted for the past couple of years about creating a J coin, uh, Jason coin that would in some way track my angel investing or doing a DAO around the syndicate, et cetera, um, to give people access to investing in startups or the secondary market in startups, real world private companies. Uh, and so I've been looking at and toying with it. In that case,

SPEAKER_04: people would want my access to startups, which is a very hard thing to establish. Um, and obviously for me to go do a DAO would mean taking away my revenue stream of the GP carry. So is it possible? It seems like it would be to create a DAO with a GP or a series of GPs who got carry if the members

David Friedberg: bought into that. And then it would create this ability to, uh, have the, maybe voting for other

SPEAKER_72: things like liquidations. Yeah. I mean, you could definitely do it. Uh, you can have a, a J coin. Uh, there's nothing really limiting that outside of whether or not the J coin itself would be, uh, transferable or tradable. I think that that's the real issue when you have a general partner, you know, the law is fairly clear, right? Uh, that person has access to information that person, uh, you know, has access to capital and to prevent the general partner from hurting the LPs. Yeah. You know, we have securities laws in place to do that and that's entirely sensible. Um, so the question is if you, if you are actually still running the show, um, and still making those decisions, uh, it's hard for me to see at least how you could have a freely tradable, uh, J coin without some sort of shift in, uh, the way that the securities laws are interpreted. Uh, you know, I, I do think, you know, what is special about these DAOs is, is actually the elimination of that, uh, centralized group of general partners. I think you get a better flow of information. Uh, you're kind of combining lots of different networks of all the members together. They're able to, to kind of source and provide, um, you know, deal flow. They're able to collectively, uh, perform due diligence, which is important. Um, and I think they're actually able to provide a bunch of different perspectives to know that you may be making the right decision. Uh, that's something. So if you wanted to go in that direction, Jason, it was super fascinating. I just would, you, you would have to think about how to eliminate yourself in part from that mix, right? I think that that's when you'd really see the magic.

SPEAKER_29: Yeah. Well, I, yes and no. Um, you know, I will say when I look at some equity crowdfunding, where the wisdom of the crowd invest in companies, I've seen companies that the venture community

SPEAKER_01: passed on, um, because they have more experience and they were able to vet those, but then the crowd, uh, invested in them. When we look at SPACs, you might have the crowd get very excited about it,

SPEAKER_04: Nicola, but anybody in Silicon Valley who had domain expertise wouldn't have done it. So if you, in fact, have the wisdom of the crowd with people who are smart and have domain expertise,

SPEAKER_01: which you clearly do in flamingo, uh, and didn't allow, yes, it makes sense in general startup investing. Sometimes people think, well, Nicola looks like, it sounds like Tesla. So therefore I'll invest in it. So, you know, it's, it really is an interesting question. I'm fascinated by the entire concept, um, especially on a global basis. And I think there are some functions

SPEAKER_29: that the audience, uh, could do. Like I do think diligence, we in our syndicate will often have people as, but one example, we had, uh, you know, people who are doctors,

SPEAKER_01: MDs, and we had a medical investment, and they were able to give us feedback on that. We had people who worked at Disney and a company that was a SaaS company targeting movie studios, like Disney, Marvel, Star Wars, Pixar. And so, wow, that was an incredible, uh, you know, confluence of, uh, you know, diligence and being able to sell into those companies. So we do see that. Um, it's just on a micro scale. Um, what, what legal changes or clarity do you need to see, or do you wish that you had from the SEC or other organizations to make this grow faster and more fluidly? And, you know, let's face it, democratize a bit of, uh, you know, getting into

SPEAKER_65: alternative investing. Yeah. I mean, I, I do think this question, um, as to what the boundaries will be for interest in DAOs is something that we need additional clarity with. Um, my sense is that

SPEAKER_152: Explain what that means for somebody who's unaware. Yeah. So the question is, if you have an interest

SPEAKER_65: in a DAO, what is it? Is it a security or is it something else? So the whole point of securities

SPEAKER_72: laws is to address information asymmetries. Somebody is, um, you're providing money to somebody that's in charge. Um, and that person is in charge to build a company or a project that person's in charge because they want to, you know, uh, generate a return for you. And so reasonably, at least in the U S many other parts of the globe, we say, Hey, you should, um, uh, provide disclosures. You should be a public in some sort of way, or, Hey, this is too risky for everyday retail folks to be a part of it. Um, I don't, uh, necessarily personally agree with all the, the boundaries on, on the limitations here. And I know the SEC is actively working to kind of expand that, but I don't think they've expanded it fast enough, at least in my opinion, the accreditation laws you're referring to. Yeah, exactly. Uh, but here, you know, you're, you potentially with DAOs have different, a different scenario. Everything is transparent. You have equal access to that information. You can walk away with your money at any point in time. Um, you have the ability to participate in decision-making at your choice. Um, and it sounds like more of a partnership. Exactly. So if, if it looks more like a partnership, uh, then why should we have this, um, important, but sometimes, uh, overly complex regulatory apparatus of the securities, uh, industry applied to it. And I think when you do that, you get a couple benefits, right? One is you can begin to see broader groups of folks that are putting in their own capital in order to make investment decisions. They're in charge of it, uh, with the smart contract based systems, you know, that they're unlikely to, to have that robbed from them because you could put in those controls. And then beyond that, I think it solves some problems that we see for venture capital funds or other forms of funds, which is just not gaining access to, uh, or the ability to actually have liquidity on those positions as well. Right. So instead of just having paper gains in a venture capital fund, you could actually have tradable interest in that, in that something that looks like a venture capital fund, maybe that would solve some of the late stage, uh, valuation problems that we've seen with project, you know, with companies like we work and others, right. Where in later stages of venture, you start to see that the valuations kind of decouple from what the public markets would support because even venture capitalists get exuberant, right?

SPEAKER_82: Um, well, I mean, we, you're racing for deals. And then also there is a bit of a dance that occurs,

SPEAKER_29: you know, you have to submit to an audit and then the auditors will look, you might have a company that's done phenomenal. Um, and they just haven't raised money in three years. Uh, their valuation three years ago was 10% of what it is now. Now the secondary market is trading it, but auditors might say, you know what, we don't want to rely on the secondary price of those shares in Uber or DoorDash or whatever private company Coinbase. So we're going to go with that old one. So now the fund looks like it's underperforming, then the company was public and then you get this huge jump and you're like, Oh, okay. So if venture funds could be traded in real time, uh, you would have a bunch of people maybe getting nervous during the portion of the J curve where you basically have invested the dollars and there's no return. It's maybe even gone down because you had company

SPEAKER_04: shut down. Then as companies emerge as winners, you would get, um, you know, some reward and you

SPEAKER_01: then be able to trade at a higher price, your partnership value. And it, it has come up, you

SPEAKER_04: know, I do, I have been approached previously, uh, by people, Aaron, who have said, Hey, this venture fund is shutting down or, you know, winding down. Would you like to buy an interest in it? Here's what they hold. Here's the bar value of those shares. Here's what this LP is offering it at. And you have to wonder, like, if you're an LP or an accredited investor, why do you want to get out of

SPEAKER_01: this? You know, uh, it could be like a life event, but generally, if it's a, you know, a major LP, why would they do that? Um, yeah, what does it cost? Is that one of these? Okay, answer the question.

SPEAKER_109: Yeah, I think what's, I think what's interesting there is, you know, many ways you have either an

SPEAKER_72: expert if it's a GP LP structure, right? Um, that has been presumably doing their diligence. Um, or you have kind of this collective group that may be larger that's able, it seems like to make comparable if not better decisions, you know, consumers are, are less likely to get hurt in those scenarios. There's obviously always the possibility for a fraud or a bad actor, but in general, you would think that this should be a reasonably safe, uh, bad if somebody wants to deploy capital or their own investment on the retail side. Um, so I, I, I do think that this is an area that's, that's, uh, a sub, uh, context for DAOs is how do we have vehicles that actually have tradable interest to solve some of the problems that we've seen in venture in hedge funds, you know, and other kind of fun like structures. Um, and I think that's a, that's important. Um, and, and what we're, what we're pressing towards really is how do we evolve something that's actually better than the, the traditional GP LP structure that we have in venture? How do we produce something that can actually have an a better return than what we've seen, um, in, uh, some of the amazing funds or funnel structures that we've, we've seen over the past 20 years. And the early evidence is

SPEAKER_150: we were kind of there, you know, like the decision.

SPEAKER_87: Well, I mean, you're also, your evidence is in the craziest boom in any equity since Tulip. So and dot com socks. So I would, uh, wait till the tide goes out and then see exactly what you've proven.

SPEAKER_207: It would be my best advice. That would be like me, you know, judging myself just on the Uber or

SPEAKER_00: Robinhood investment. Like it's been a hell of a run for crypto the last 18 months. Um, how much does it cost to set up a doubt today? Uh, if I wanted to set one up with you, is it a hundred

SPEAKER_01: thousand? Is it a million dollars? Is there a setup fee? We have the 2% fee per year. Um,

SPEAKER_109: or do you just do them when you want to do them? Yeah. So we actually do it. The, the members of our

SPEAKER_72: existing dows, uh, decide what future dows we set up. So it's much more like a curated network. Um, but we, yeah, we think that makes sense just so, uh, we actually have like a pretty strong signal that this is the right opportunity. This is like the right area to focus our resources. Um, we're not, uh, as convinced that an open platform will work as well. Again, we're aspiring to, to kind of have, you know, the top, uh, performing, uh, kind of vehicles that are out there, not just, you know, another open platform like AngelList, which is amazing.

SPEAKER_124: Well, even AngelList was, uh, by invitation for turning on people's syndicates in the beginning.

SPEAKER_92: So they may have opened up a little bit later, but yeah, so you definitely want to curate this a bit.

SPEAKER_109: Yeah. Yeah. So, but, but in terms of the raw costs, I mean, we've automated all the legal setups. So

SPEAKER_72: that costs us nothing outside of the filing fees. Uh, the major cost is just deploying the smart contracts. That's usually about three, 400, $500, depending on the price of ether at any point in time. Yeah. So it's, it's super streamlined and that I think is pretty amazing. Joining the DAOs once it's set up and you've gone through compliance, it's just a couple of clicks. All the paperwork gets automatically generated. We opened up a Metaverse DAO. Um, I think that was last week. Uh, so it's about a $20 million vehicle. It took 40 minutes from end to end to open and close. So you can pull capital incredibly fast on in crypto and, uh, it's a pretty good use

Chamath Palihapitiya: case for it. Yeah. That's unbelievable. And, but there's a minimum to join most of these. What

SPEAKER_72: is the general minimum to get in on these? Yeah. It's usually about 60 ETH. Uh, so at current

Chamath Palihapitiya: pricing, that's about $300,000. Got it. So that would be like being, uh, in an LP and a venture fund, which typically starts at 250 or 500 K is the minimum check. So amazing. Uh, well, this

SPEAKER_04: has been a great conversation. You are the most qualified person I've had on discussing DAOs. Uh, it is still early days. Uh, but thank you so much for, for sharing so much with us. Uh, I know Kevin Rose is part of the Flamingo DAO. He's talked about it a bit on his program, uh, and continued success. I'm, I'm really fascinated by the space and just on the, on the issue of accredited investors. I think we both share, um, you know, that this should be, uh, more equitable and more democratized and more

David Friedberg: fair because you have all these amazing ways to, um, own equity in high performing assets and we're limiting it, uh, to people who are doing offshore betting or an offshore accounts and, you know,

SPEAKER_04: buying crypto, but really it should be like licensing. Uh, you can drive an experiment. You could drive a motorcycle. You can fly experimental planes and you can buy guns all with a license, but private company stock is not available to be purchased by a license. We're participating in these kinds of DAOs. Why not create a licensing and a certification? So, so easy right now you're Ethereum based. What about Solana? You've been thinking about that and all the hype around Solana?

SPEAKER_72: Um, so we definitely are not, uh, wedded to any one blockchain. Um, the underlying smart contract based systems are written, uh, for Ethereum. Uh, so if we wanted to do something on another chain, we'd have to kind of rewrite it and go through a similar security related, um, review. You know, there's efforts on Solana to make it, uh, compatible with Ethereum. They say that's like EVM compatible. It's still early days there. I think with a lot of the new layer ones or layer twos, depending on how you're kind of classifying it, uh, it's a little unclear if the hype is getting ahead of the, you know, technical achievements. I think it's pretty, I think it's pretty clear.

SPEAKER_25: It is. I mean, there's eight people working on something. No dick to Solana. It just,

SPEAKER_04: there's eight people working on it full time, right? Like, I mean, these things are going to take time and, uh, we have a lot of people who want to place bets, uh, and many more people placing

SPEAKER_109: bets than building. And that's, you know, yeah. So, you know, and for us, there are people building on Ethereum. That's where the core innovation is. That's where the developer ecosystem is. That's

SPEAKER_72: where we're seeing the most interesting things. So we're dedicating our time there. But, you know,

SPEAKER_74: if another blockchain based ecosystem, uh, wants to go in that direction, we'd, we'd obviously be

SPEAKER_225: open to exploring that. Yeah. Obviously it's like asking you if you were on, you know, Google's cloud

SPEAKER_01: or Azure or AWS, if you wanted to try the next one coming out and it's like, well, of course, I'll try another one. And we're, you're indifferent. It's, if there's another platform that works better, cheaper, faster, you would embrace it. Of course. I mean, that, that is part of the promise

SPEAKER_28: of this as we wrap here is that these things are going to be able to be set up and up and running

David Friedberg: globally. And if you're doing $70 million ones today, $20 million ones today in 40 minutes, it's possible a $10 billion Dow to, you know, sure, uh, to get rid of, uh, you know, some global crisis.

SPEAKER_01: We didn't even talk about Dow's for nonprofits or saving the rainforest, but many things could be

David Friedberg: created. If you said, Hey, we're going to create a Dow to buy, uh, you know, uh, land and make it, um, not, uh, not developed just to preserve wetlands or Amazon or, or, you know, middle of America,

SPEAKER_01: whatever you can, might be able to set that up. And if it catches fire, all of a sudden, you've got $10 billion to buy, you know, uh, land in the world and everybody just votes on it in the Dow. I mean, the possibilities here are truly inspiring. Yeah, completely, you know, and those

SPEAKER_72: are the types of days that I think you'll start to see coming from our network. Um, we've been thinking about, you know, land-based Dow. There's other projects that are doing that too, uh, you know, tying it once you tie kind of the internet to a legal entity, uh, it really opens up a lot of, uh, potential. And I think that that's the headline, right? The headline is we're moving beyond an era where people get together just to chat with one another or post or get to know each other via social media. But now we're arming them with a bank account where they can take collective action. And that's really encouraging. If you believe this thesis that most people are generally good people, and that's just something I believe, and you enable them to work together, provide them the tools to do that, uh, then you can start to see the internet, not just be used, um, you know, for conversation, but actually for collective action. And that could be to make a profit. Um, if it's focused on investments, that could be to, to help with all these charitable causes, like you were describing before. Yeah. Make impacts. Yeah. Yeah. And make an impact, but that's great, right? If we, if we can imagine this world where there's, you know, people from around the globe that are passionate about a topic that can now make an impact together. I mean, that, that is, um, I think the, one of the fully expressed versions of, of what I

SPEAKER_74: think many of us have wanted for the internet from the beginning.

SPEAKER_92: Uh, amazing. Thanks, Aaron, right. For coming on the program. You can follow Aaron on the Twitter,

SPEAKER_01: awr, I G H O one. And, uh, you can visit open law.io. You can visit flamingo dow.xyz, uh, or the lao, L A O dot I O. And, uh, I don't know, do you have a new, uh, distribute labs,

SPEAKER_93: have a domain name now? Yeah. Uh, you can check out tribute dow.com to see a dow framework and the rebrand is coming in the next couple of weeks. Oh, fantastic. All right. Thanks so much for

SPEAKER_137: coming on the program. We'll see you all next time. Bye. Bye.