Guests:

• Aaron Wright

• Priyanka Desai

Moderator:

• Spencer Noon

Moderator:

Please give a warm welcome to Aaron Wright, co-founder and CEO of OpenLaw who is leading the effort around The LAO (https://thelao.io), a limited liability DAO and Priyanka Desai, VP of Ops at OpenLaw!

As a reminder for everyone participating — please keep the discussion respectful at all times.

Aaron — could you start off by giving us a brief bio on your background as well as how you got started in crypto? And then a short overview of The LAO and a brief update on your progress to date? We’ll then be off to the races with questions.

Aaron Wright:

Thanks so much for having me @spencer. It's really an honor. We're excited about reviving The DAO and doing so in a way that aims to comply with US law.

As noted above, I have a background in tech and law, a bit of an odd combo. I've been in the bitcoin/blockchain space since 2011 and have worked with with some great projects like Ethereum.

Most recently, I co-founded and have been building a robust ricardian contracting system called OpenLaw, which makes things like building DAOs, personal tokens, smart derivatives, tokenized stock, easier.

Before starting OpenLaw, I sold a company to Wikia, the for-profit sister project to Wikipedia. And helped build one of the first open source search engines.

I'm also a full time professor at Cardozo Law School, where I research blockchain related topics. As part of that inquiry, I publishing a book, with a co-author, on blockchain law and policy (Blockchain and the Law), which Harvard published about a year ago.

Excited to dig in and discuss The LAO more 🚀

Pri Desai:

Also, hi! I lead Ops at OpenLaw and have been helping the efforts around The LAO. Prior to joining, spent a few good years in law school--working at the NYDFS (bitlicense stuff) and R3. Wrote a few papers on Ethereum + legal issues. Priot to all this, worked for Committee on Cap. Hill

Aaron Wright:

The LAO is reviving The DAO — a for profit decentralized organization that funds blockchain based projects and initiatives. We've been heads down developing The LAO for the past month or so and it will operate in many ways like The DAO. Folks will be able to purchase LAO Tokens, through a public sale, pool their ether and make investments.

Investment decisions are directed by the members. If a majority of members vote to fund a project, then the funding will happen shorlty thereafter, with all of the underlying paperwork automatically generated using the tools we have built with OpenLaw

Aaron Wright:

The DAO was the first great experiment in the Ethereum community and was spectacular. But, it ran into technical and legal issues. We're in a position to fix those issues. We now have the opportunity to start to not just create stable currencies, interesting sythentic assets, but also build organizations that are native to Ethereum.

Aaron Wright:

In terms of where we are, The LAO is getting close to launch. We've extended MolochDAO's underlying smart contracts with the help of Ameen and others so that a DAO can collect funds and also receive back tokens (tokenized securities, utility tokens, etc.) and are putting the final touches on a sale site and site to manage the operations of the DAO

Guest:

Thanks for coming in - can you all explain the general structure and setup of a LAO? What does it take from participating parties, and how does it enforce particular agreements. For example, in written agreements are addresses tied to identities?

Pri Desai:

awesome, def. thanks. i also wanted to add a sneak peek of what this is going to actually look like: https://medium.com/@thelaoofficial/the-lao-an-early-sneak-peek-a0c9be66a3ae. we have a video here

Guest:

Any plans to open to Reg A+?

Aaron Wright:

Great question. The LAO is structured as an LLC organized in Delaware. The LLC will have a legal wrapper — a legal agreement — that memorializes that members are agreeing to have their affairs governed by the Moloch v2 smart contracts and a related dapp.

Aaron Wright:

We have just released some docs that dive into the structure in more detail: https://docs.thelao.io/

Aaron Wright:

The nice thing about this set up is that is limits the liability of members to one another (to the extent permitted under US law), so that if anything goes wrong the rights and obligations of members are clear. The operating agreement itself will be enforceable in a court, abrbitration system, and all of those nitty gritty questions which members of the eth community have puzzled over just fall to the wayside

Aaron Wright:

Folks that want to be a member of The LAO and make investments will be able to purchase LAO tokens through a public sale that we're slating for the end of February. Folks can purchase blocks of 1% interests in The LAO, up to 9%.

Aaron Wright:

No plans to do that yet. The LAO will initially be limited to 100 members, all of whom will need to be accredited. We're exploring ways to permit folks outside the US to participate without having to go through that process too.

Alex Masmej ⚡️ (I don’t ask for crypto), [31.01.20 12:17]

Hi Pri & Aaron, big fan of OL. What’s the difference between thelao.io just released and MetaCartel Ventures, if they both choose to invest in crypto projects? Different investment thesis? Thank you

Aaron Wright:

Big fan of RocketNFT too. The investment thesis is up to the members of The LAO. We anticipate that the legal structure will be a bit more robust with The LAO, there will be a public sale, and we're ready to launch in a couple of weeks. We're beyond a whitepaper and everything is largely built, which is great.

But, I think it's great that there will be multiple for-profit DAOs coming to the market.

Guest:

But isn’t MCV a LAO itself?

Guest:

Are the types of investment opps that you think LAOs/DAOs are better positioned to go after than traditional VCs?

Pri Desai:

insofar that it's a limited liabilty autonomous org, but unclear as to the exact structure. it may look a bit different!

Guest:

Ok got it! Thanks. Also echoing Spencer question: is “decentralizing due diligence” something the LAO could bring over VCs? What else?

Guest:

How would the LAO have solved for the problems that plagued the DAO years back?

Also, are there any aspects of The LAO that are immutable/censorship resistant?

Aaron Wright:

The LAO will be better positioned for crypto related investments. Members of The LAO will presumably be deep into the crypto space and will be able to see emerging opportunities faster than traditional venture. For folks that have been in the space for awhile, we've seen traditional VC miss a bunch (case in point many of them missed Ethereum). I also think collectively we're able to spot the next promising crypto projects faster than VCs can act.

With The LAO, projects can apply, members will be able to vote, and funding will be delievered in DAI in potentially days. No more need to run to sillicon vallley or another major hub for funding.

Aaron Wright:

I also think The LAO will be an interesting structure to explore other forms of investment, like liquidity pools, etc. If there's one thing we've all learned in the cyrpto space, is that new opportunities come up fast and with pooled capital via The LAO we can begin to fund those initiatives faster

Julien Bouteloup | Stake Capital, [31.01.20 12:26]

Are the requirements for investors profile going to change? Or it will only be for accredited investors (Income of $200K ($300K with spouse) in each of the last 2 years

or Net worth over $1M) ?

Pri Desai:

For this first version of The LAO. For the second one, we're exploring creating a LAO for unaccredited investors. we also have delegated voting for The LAO. Meaning, if a member of The LAO does not want to make investment decisions, they can delegate that right to someone else, who doesn't have to be accredited.

Aaron Wright:

The DAO had a couple of issues, both technical and legal. On the legal side, as confirmed by the US and other jurisdictions, the sale of DAO tokens involved the sale of securities, which created liability for the members of The DAO.

When The DAO went sideways, it created a number of risks for members — since in most major jurisdictions it would have been considered an implied partnership and members would have been liable for other members' losses.

The LAO addresses these issues. On the legal side, by wrapping the DAO in an LLC, all of the liability questions fade away. If you participate, and things go sideways, you'll only be responsible for your own assets. On top of that, because everything is backed by legal agreements, there won't be any loss of value.

By limiting membership to accredited investors, you address securities issues and also create a place for folks to begin to explore eth-based funding, financing, capital raising, and deployment

Guest:

Can an accredited investor opt-in for auto delegate their right ?

Guest:

In a traditional VC fund, LPs invest in GPs and delegate deal flow selection to them. Since there’s no GP in the LAO, members have both LP and GP roles and are responsible for deal flow quality. A reasonable assumption is that the quality of the LAO deal flow will be as strong as the quality of its members. How do you encourage a high quality deal flow in the LAO? Will members of the LAO here have a say on who the other LAO members are?

Pri Desai:

Yes, any member can delegate their right to vote to any address they want

Aaron Wright:

That's a great point. The LAO will have more folks sourcing deals than a traditional VC fund (100 members + ecosystem of folks who may have received delegated voting rights) as opposed to a handful of GPs. The hypothesis is that a networked VC fund is as good, if not better, than a traditional VC fund in terms of deal flow. The LAO's deal flow therefore will be as strong as its network.

I also think that The LAO's ability to deliver funding rapidly to projects will be very attractive to folks in the Ethereum community. Many of the teams are not based in the same location as traditional VC, are remote first, and frankly getting early funding from The LAO may be the easiest path toward funding.

In terms of folks having a say in who is members, the public sale will occur on a first come first serve basis, which should be a decent barameter for interest in the initiative and the crypto community. If a member rage quits, then members will have the right to vote in a new member.

We opted not to create a "country club" model.

Guest:

Thanks @aaron. Also bumping this second question

Guest:

How do you guard against front-running of deal flow by other funds?

Aaron Wright:

Thanks for re-raising. I meant to address. All of the core operations of The LAO are going to managed via the v2 Moloch smart contract code — contributing, voting, allocating funds to projects / investments. At the same time, members will have the right to vote to change the smart contracts that they're relying on or any other operations.

Aaron Wright:

The LAO should be able to close deals faster. After a voting period, a project will be notified, click a button, and after some basic checks will receive funding—all of the paperwork will be handled on the back end and signed with evidence recorded on chain. The LAO will be incredibly agile.

Guest:

Is voting subject to quorum?

Aaron Wright:

If over 50% of the members (based on token holdings) make decision, then an investment will occur.

Guest:

Gotcha. The devil’s advocate here is that more parties involved + less time for diligence = fewer good investment decisions. I for one am super excited to see what actually happens over time. How will you ensure the quality of decision making stays high?

Guest:

Would it make sense to penalize non-voters?

Aaron Wright:

Members have the right to remove other members. If they want to implement a rage kick, it'll be on the table.

Guest:

How will the LAO protect against conflicts of interest with its members?

Aaron Wright:

(1) There's some self-selection here. If you're participating in The LAO, you're presumable pretty deep into the crypto space and have a fair amount of assets.

(2) delegation means that folks will be able to give others the right to make decisions on their behalf, which should help prevent voter apathy and also open up ways for people who are great at sourcing deals to show their meddle.

(3) OpenLaw will be sitting in the background here, and we'll be able to help build out tools, create channels, to make sure that members have all the information they need to make decisions and also have a bunch of ideas to give members a way to get a pulse on what the eth community thinks about various different projects too. The members will have support.

Guest:

Thanks. Is rage kicking a different action than rage quitting? Anywhere we can read about rage kicking on the docs?

Aaron Wright:

The members can sort that out pubicly (i.e., they won't vote for something if there is an obvious conflict of interest). However, since many of the member may be involved in other organizations or want to make separate investments, the organizational docs don't preclude those types of relationships (i.e., co-investing, follow-on investing, providing other services).

We think that's the right call, at least off the bat. But, members will have the right to change that rule, if they disagree, or if it becomes an issue.

Members will also have the right to rage quit, which is strong minority projection, so they can leave and get back their undeployed capital before any investment is made that rubs them the wrong way.

Aaron Wright:

It's in the Moloch v2 smart contracts that we helped put together. You can read a summary of those changes here:

https://medium.com/@thelaoofficial/the-lao-joins-forces-with-moloch-dao-and-metacartel-to-begin-to-standardize-dao-related-smart-b6ee4b0db071

Pri Desai:

If you're interested in becoming a member, we've just opened up the accreditation flow for approval to join The LAO today at https://www.thelao.io/apply. We've also just released some FAQs that summarize much of the legalise in the Operating and Sub. Agreement at https://docs.thelao.io. If you have questions that come up about anything here or the docs, we have a telegram: https://t.me/joinchat/FLvdBBVz3o9pfi-rfd9BqQ and weekly community call. Please join us!

As a side, we’re thinking about having a mentor/advisor portal tied to The LAO for projects seeking advice/help. If you’re interested in becoming a part of that advisor/mentor roster, please DM me here. If you want updates, follow us on Twitter at @TheLAOOfficial. We’ll also be at ETHDenver, so please get in touch!

Guest:

How will members participate in LAO ops? Is there a members-only website, Telegram chat, etc.?

Pri Desai:

Once we have the members, we'll have private channels on Slack. The LAO itself will also have features that will be available to members only

Guest:

This is great, thanks! Do I understand correctly then that there's no ragefiring in the LAO, only ragequitting?

Aaron Wright:

Both are available, technically. The intiial dapp will make "rage quitting" and delegation as easy as clicking a couple of buttons. If members want to kick someone, we can update the dapp to provide that functionality easily.

It's all member directed and I think we'll see an evolution of how these orgs operate, just like we saw an evolution of how joint stock companies develop and LLCs over the past several decades.

Aaron Wright:

In my mind, DAOs have always been one of the most—if not the most— interesting part of the ethereum ecosystem. We're rebuilding the commercial world and each time that's happened in the past there has been new forms of entities to support that and new ways to finance innovation.

We strongly believe that DAOs will be as important, if not more important, than all of these previous structures.

The headline here is we have the tools to experiment and watch these organizations evolve. Now that there is a structure to pool capital, we believe that it's going to be like throwing gasoline on the smoking defi pile. Assets are great but organizations drive the most value.

Moderator:

Alright guys, running up on Aaron and Pri's time here. Any final questions?

Guest:

what are your thoughts on private voting mechanisms like

https://github.com/barryWhiteHat/maci

Guest:

desirable? or bias towards transparency

Aaron Wright:

they're super cool; hopefully we'll get to experiment with that form of decision making too. Private voting —> capital deployment

Guest:

Clarification on assets under management, the design sets the LAO to have a max of $22.5M under management, correct? Is there a minimum contribution for each of the 100 members? Apologies if this was already covered.

Aaron Wright:

Minimum contribution is $25,000 for 100 members, so $2.5m. Once the first LAO is filled, we can create another LAO to continue to build out the ecosystem

Guest:

Thanks for your time/insights. Exciting project, best of luck pushing things forward!

Pri Desai:

thanks!

Pri Desai:

keep in touch

Moderator:

Okay - thanks for your time today! What's the best way for people to get in touch and stay up to date with The LAO?

Pri Desai:

If you're interested in becoming a member, we've just opened up the accreditation flow for approval to join The LAO today at https://www.thelao.io/apply. We've also just released some FAQs that summarize much of the legalise in the Operating and Sub. Agreement at https://docs.thelao.io. If you have questions that come up about anything here or the docs, we have a telegram: https://t.me/joinchat/FLvdBBVz3o9pfi-rfd9BqQ and weekly community call. Please join us!

As a side, we’re thinking about having a mentor/advisor portal tied to The LAO for projects seeking advice/help. If you’re interested in becoming a part of that advisor/mentor roster, please DM me here. If you want updates, follow us on Twitter at @TheLAOOfficial. We’ll also be at ETHDenver, so please get in touch!

Pri Desai:

just reposted from before ^

Pri Desai:

twitter / telegram, best way to keep in touch.

Pri Desai:

thank you @spencer for hosting

Pri Desai:

and moderating

Aaron Wright:

thanks everyone and thanks @spencer for hosting! we're here if you have any other questions. Let's rebuild sillicon valley on eth.