The Digital Economy is Building a Novel Ownership Model for the Masses
This is edition #3 of The Ownership Economy newsletter
The technology industry has been quietly building a global digital ownership economy. Ownership, inclusive of everyone involved in building digital companies, from the founders to the employees and beyond. Some people call it Web3, the Creator Economy or the new Internet.
It can be difficult to see the digital ownership economy being built. I didn’t see real-world applications initially. All I heard was Cryptocurrency, Bitcoin and Punks and Apes. If you pull up the hood and look past the entertainment angle you will see real world use cases. Valuable business applications that support an equitable based ownership model.
DeFi, Blockchain, DAO’s, Cryptocurrency (Coins), Tokens, NFTs are the building blocks of the digital ownership economy. They are slowly impacting the world. Below is how I view each.?
In the digital ownership economy, the participants that build, promote, market, buy and sell, in the organization have an opportunity to be an owner. Ownership opportunities are inclusive of everyone that participates.
Generally, everyone involved in the business or organization has an opportunity to be an owner. This is a fundamental change from the previous digital business models that are controlled and owned solely by founding teams and investors.
DAOs Facilitate an Equitable Member-Based Ownership Model
You can think of DAOs as similar to Co-ops (Business Cooperatives) in that they provide a membership-based community where the members own and manage the organization for a specific purpose or goal.
There are thousands of Co-ops throughout the US, many in rural areas that bring smaller businesses together to create scale for buying and selling. DAOs are a digital version of the Co-op. The DAO organization was conceived for doing online business globally across borders.
It’s important to understand DAOs are not legal entities, like a corporation, partnership, co-operative, limited liability company, limited company, or sole proprietorship. As I understand, no US state recognizes DAOs as a legal entity. This is a big downfall for the novel organization, yet individuals are investing and spending time building out the entity structure implementing their own laws and rules. It’s the wild-wild west of company formation. A true decentralized form of ownership.?
DAOs Value
A startup requires investment (funding) and trust between the people building the business or organization. On the Internet, you can build an organization or business effectively with people you’ve never met in person. The Pandemic and WFH movement have spurred DAO creation and membership.
The DAO organization is social in nature. Structured in a way that makes people feel they can trust one another. Centered around like minded interests. To join a DAO, members join for free, invest or pay a Cryptocurrency or token to the DAOs digital treasury.?
Most DAOs are investment oriented. Some are more social, collectible clubs and entertainment driven. DAO’s have a digital treasury (like a bank account). Accessed only with the approval of the members or a voting mechanism built into the governance model of the organization.
Organizational decisions and actions of the members are governed by proposals (like RFPs), member voting and pre-established agreements and rules. The actions of the members are executed automatically through agreements, called “Smart Contracts''. The contracts are computer code that gets stored on the Blockchain database. You can think of an online DAO as a bunch of online contracts and agreements between the members.? Executed by the members, with forums or private chat groups for communication. Most organizational activity is public and transparent to the members.???
The brilliance behind the DAO, is that the novel organization is effectively facilitating individual ownership for the masses in the digital economy.?The DAO creates a more equitable ownership structure.?
Ownership in the Digital Economy
You can have individual ownership in the digital economy by joining a DAO, owning a cryptocurrency, a DAOs token or an NFT.?
Here are a few DAO organizations and DAO projects in their infancy that I’ve found interesting.
YAK DAO - https://www.yak.camp/ A DAO for recreational properties, offering membership ownership in camping and glamping properties. I had the chance to speak with David Woodbury, the founder and CEO. They’re doing something very unique in the travel industry and claim to be one of the first organizations to combine real world assets and experiences with digital assets.
Krause House - https://www.krausehouse.club/#Gameplan A DAO working on buying a minority interest in an NBA basketball team. The idea is that members of the DAO will be collectively as a whole a minority member in a team.
领英推荐
Bored Ape Yacht Club - https://boredapeyachtclub.com A popular DAO for owners of the 10,000 Ape NFTs (digital JPEGs). The community of ape owners is building a media and entertainment brand and a metaverse. The last Ape sold for $165,000 USD on OpenSea, a marketplace for NFTs.
Seed Club - https://www.seedclub.xyz/ A DAO that builds and invests in communities. The members are investing in DAOs, run an accelerator to help DAO startups and some members are building DAO organizations. I am currently looking to join this DAO.
Electric Capital - https://www.electriccapital.com/ A VC fund that says they will invest $1B in DAOs and digital ownership companies and businesses.
FWB - (Friends with Benefits) https://www.fwb.help A popular DAO for artists and musicians to socialize and build a community supporting crypto investing and building community owned projects.?
?DAOs gaining traction have a large community component that is the driving force behind their initial success.
DAOs on Main Street America
What interests me the most is figuring out how to make American Small to Medium size Businesses (SMBs) employee owned. The digital ownership economy is being built. The real change to help save American Capitalism has to come to fruition at the main street level.?
The average American company has fewer than five employees and generates less than $1 million in revenue. INC Magazine
I envision a much better country when the majority of businesses in America are owned by the employees.? American SMBs, especially in small town communities have a huge opportunity to create a new ownership structure as they live and breathe community. Community is already backed into their culture.?
Is the DAO possible for a non-digital main street business???
Hybrid Online DAO/ESOP
DeFi entrepreneurs and startups can potentially attack this massive opportunity to create a new legal entity for main street America, enabling wide-spread employee and community ownership.
It could be a financial engineering hack, drawing from the DAO and the current ESOPs (Employee Stock Ownership Plan) model. A new entity for startups and existing businesses that draw on the strengths of both DAOs, and ESOPs, formed quickly and legally and governed through Smart Contracts and online tools.?
The closest thing I’ve seen to a Hybrid DAO/ESOP, is Fairmint, a digital startup company. I’ve spoken to Joris, the founder and been on a demo webinar. Fairmint.co says they are “community ownership made easy.” A platform business, providing a white-label online portal for startups and companies to raise capital from investors (VC, angels). The ability to grant equity to employees, suppliers or anyone helping build the business. Equity is granted through a token.
Unique features include a rolling fund raise (evergreen) for companies raising capital and a transparent company valuation. Your company can accept funding from investors in real-time, ongoing, no set closings.?
Through a dedicated company token, you can grant equity to companies and individuals. Each time you raise capital or grant equity, the company valuation changes and is published for everyone to see.?
The digital ownership economy is the first wave to bring ownership opportunities to the masses with Crypto, Tokens, NFTs and DAOs. The latter being the most transformative potential in my view to help save American Capitalism.
The most impactful opportunity for our country won’t be the digital ownership economy. It will be an ownership economy for main street America, where employees have an opportunity to become owners.
Bio:
Matt Zito is a M&A Broker, Business Advisor and Investor in travel technology companies. He is interested in building an ownership-based economy in America and the world. He can be reached via WhatsApp 1-207-460-0740 or email: [email protected]
[1] ?https://www.sec.gov/litigation/investreport/34-81207.pdf