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Background
Mint Season 4 episode 26 welcomes Yury Liftshits, Founder and CEO of SuperDAO, an all-in-one DAO formation platform that recently raised $11.5M in seed and pressed funding. Before Superdao, Yury has started four companies with one major exit, is a YCombinator alum, Ph.D. in Computer Science, and was teaching grad-level cryptography courses even before Bitcoin was invented. A long time ago he also won two gold medals at International Math Olympiad.
In this episode, he shares why creators should leverage DAO models to build fan clubs, and why owning your monetization channels and incentivizing aligned participation is the future foundation for building a community.
In this episode, we discuss:
- 00:00 – Intro
- 02:05 – Yury’s Previous Startup: The Discord Killer
- 05:39 – How Yury Got Started With DAOs
- 17:16 – Building Products In Web2 vs Web3
- 22:57 – Thoughts on The Emergence of Creator DAOs
- 31:53 – How To Do an SEC Complaint Token Raise (Not Legal Advice)
- 33:41 – Strategies for Generating Revenue in DAOs
- 42:59 – Why Creators Should Build DAOs to Monetize Super Fans
- 48:35 – DAO Trends for 2022
- 54:26 – Outro
…and so much more.
I hope you enjoy our conversation.
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Intro
Yury, welcome to mint. My friend. Thank you for being on, how are you doing? How are you feeling?
Yury Lifshits: Think great. Thanks, Adam. I excited to be here and share what I know about DAOs.
Dude, I’m excited to have you, you made a lot of noise online in the last few months, one from the race two from the product that you’re building three from a different Twitter posts that you’ve kind of like circulated online and your thoughts and opinions on what’s happening around DAO. So an exciting time to be in crypto. I always like to start with a quick intro. Okay, who are you? What does the world need to know about you? Because you have a lot of credibility as a startup founder. So I’d love for us to, for you to tell us more about your background, and then how you got into crypto and we can kind of go from there.
Yury Lifshits: Awesome. Awesome. Yeah. So I grew up in the family of mathematician. I was also in math early on, won two gold medals and international math olympiad was like professional competing mathematician as a kid. I did PhD in computer science. I was teaching grad courses about crypto before crypto was crypto. So I was teaching about cryptography things like zero knowledge proofs and Byzantine general tolerance. The things that back in the day felt like completely theoretical and useless. That was before Bitcoin was invented. And I was like, Yeah, cryptography is just for math nerds. It’s completely useless. But turns out that is more useful than I thought. And yeah, then most United States, was a scientist at Caltech and Yahoo, and then started four startups before Super DAO, all my startups are kind of all my kind of life. theme is about community. So every startup that I build was about community infrastructure in some way. So I’ve built co working spaces have built big events up to 100,000 people together. I’ve built education projects I’ve built, most recently a direct competitor to discord. So chat for communities. That was backed by Y Combinator, and it is now open sourced both on GitHub and figma. So you can kind of borrow our designs and our code, and most recently started super DAO this fall in October, and it’s been more or less a rocketship trajectory. It’s nothing like I ever built the company before.
What’s so different between building like DAO infrastructure to the last four startups that you did?
Yury Lifshits: Market timing, right now like it’s really the thing that needed pay like the market pulls the product from us if we don’t need to push anything, if everything comes to us.
Yury’s Previous Startup: The Discord Killer
Got it. Can you talk more about your time building the discord competitor, I feel like a very common sentiment is a lot of people don’t like discord. And a lot of people are trying to go to competitors to discord as a way to build up their communities. Walk me through what your like your learning processes were. Why you decided to sunset the project and open source everything, and how like the different points of things that you’ve learned from building the chat application that you’re applying now to this down infrastructure.
Yury Lifshits: Yeah, so discord competitor was almost like our organic story didn’t it started that way, and was in big part led by my co founder, who was previously at telegram, lead developer at telegram. So he’s building messengers his whole life, and his dream was always built in next grade messenger. And so a lot of the ideas behind the previous company that was called open land, or coming from him. We tried a bunch of stuff. We tried chat communities for creators, like YouTubers and tick tockers, we try the you know, pay walled communities where you need to pay to join, we tried business to business messaging where like people from different companies would message each other and like build a partnership channels between companies like guest channels and Slack I guess, but just much better in like a single inbox where unlike discord and enlighten, it’s more like telegram in the way where it’s like everything comes to you a single inbox, you can create a sub folders if you like. But by default, it all comes to a single inbox rather than you know, switching between 100 workspaces which like you know, no, no one has time for, yeah, but we couldn’t we couldn’t get the traction it was before the NFT boom, primarily and before the crypto Renaissance let’s say and so the timing was not great and like we couldn’t wait, like we build a great product people praise the quality was all platforms like super performant fast and really clean design, but not enough momentum and back then. So our pure company was probably something like circle.csr, which is another community platform less chat oriented, the more like workspace and content sharing, but circle is doing all right, and then follow the journey. But another thing was like my co founder was much more drawn to b2c approach while maybe the successful beard in the in community messaging was b2b and that And then convinced them to move more b2b. Much more sales and marketing. Oh, I didn’t do a good enough job to convince him.
Sure. Okay, so now you’re building down from okay. I feel like a lot of discord today, a lot of chat applications that are obviously necessary for 1000 Online organizations to live and thrive. So if you like there’s a lot of learnings that you took from building like BTC communication to now building a data infrastructure to host online communities but in a different form, right?
Yury Lifshits: Yeah. Yeah. People would, some people describe dollars as communities with shared bank account or community with financial layer on top. It’s like social layer plus community layer. It’s very powerful.
How Yury Got Started With DAOs
Yeah. So, when you kind of like transitioned out of the chat application, how did you find yourself jumping into DAO? Like why DAOs?
Yury Lifshits: Yeah, so the last three months, and on open land, were basically a sale process, we’re looking whether we can sell open land for any, like meaningful way. And so one thing we’ve learned is like our best acquisition offers are all coming from crypto. Number two is like we couldn’t, we struggle to convince those crypto company to buy a seven for like 1% of their capitalization. And I felt like I can do no worse than them. I like I felt like I can build a comparable business, not a 1% of their business. So I was like, secretly started exploring. If I go to crypto myself, as opposed to selling ourselves as less than 1% of the acquiring company, how that can look like and what I can do in in crypto, and there was an NFT boom at the time, and I saw that most NFT, most successful NFT collections become in Dallas, and DAO infrastructure is missing. So I went through this process when I was list like five to 10 ideas, and I will go talk to smart friends and say, Hey, I haven’t thinking about those five ideas. Like if you would be me, which one would you pick? And they’re like, Yeah, idea number three. Sounds good. Idea. Number five is like no way and like whatever. And so I would rotate those, like, put another five ideas. And then some of us are like, Hey, I’m gonna build something like Shopify for dollars, like all in one tool that is make it super ridiculously easy to start and operated DAO. And as soon as introduced that idea, it was always number one. And like no other idea was seemingly comical. Everyone will say, do that. And not only that, but some of my friends were like, not only this is our favorite idea, we will be your customers. And I’m like, All right. That’s there was something there. And then the other thing I realize is that soon there will be you know, a few 100 of people with, you know, teams, startup teams with this exactly. Same idea. It’s not a very original idea. It’s the right timely, it’s a very timely idea, but not very original. And so it’s all about execution. And I felt like execution is something that people know me for, other startups who would not maybe business wise, the most successful, but execution wise, they were good. And this is a time when the idea is obvious. And the one who will win is the one who executes the best. So I like that type of market.
Yeah. So how do you think about the different types of DAO. There is service DAO, investment DAO, creator DAO, this DAO, that DAO? All these different DAOs each have their own needs and wants, but are the underlying themes behind all of them?
Yury Lifshits: Yeah, so I would say there is a playbook on how you go to market. And that is generally like repeatable across many verticals. So this is probably one of the most important bits in this podcast. So essentially, if you have a DAO idea and you just starting and you have the audience and maybe you have the presence, and maybe you you know, have the following and expertise and recognition in your professional or creative and artistic field. So this is generally the steps that you do, the first you do free Airdrop for founding DAO members. So you have kind of our allies, the people who like more engaged who will put work in, who would put effort, who would spread the word who might be even you look up to whom, is like people who are even more famous than you and or at least the same pure level and you give them free NFT of your future DAO, you say hey, I want to recognize you. And you call it not just the NFT but some extra level of NFT, like VIP NFT and if to like legendary epic limited black diamonds, will you name it, you can be very creative about this is like super extra double, triple mint. Yeah, and so you give it to them, they feel very special and say at some point, I will ask you for one tweet. And then you’re done that and then the second thing you do, you do NFT sale. So this point you introduced, you extend the same NFT collection from like the founding epic to your to regulatory or like couple of regulatory, different price points. And you say we’re selling the NFT is now for money. And we give three things in exchange. We give governance rights, we give social benefits and we’ll give product benefits.
So governance rights is like hey, we’re still in the you know, building process of the DAO, if you grant what’s the value that we bring to the market and we want you to guide us, like choose between A, B and C between covers of our album, cover art or like our, you know the name of our conference or like the shirt design for a soccer team or something like that. Number two, you say, Well, it’s a it’s a social club now you will meet other people including those from legendary tear. Like we all hang out, we’ll have like, you know, private zoom events or Twitter spaces or discord meetups, whatever physical meetups in big cities. So you kind of bring people together, they basically the NFT acts as a pass, like you know, is a member pass to certain kinds of social events. And number three is, you promised the future product based benefits. So if it’s music, you’ll you know, you will be the first to hear it though if it’s a book, you will send the free edition, like a free copy of a book or like premium edition of the book, if it’s like, a concert is free, free tickets, if it’s like co working space, it’s like five free days of work, things like that. So it’s not like a distributed Hottel chain, or we work type stuff. So again, maybe three, three free nights for every NFT holder in this country.
So that’s what they offer. And that’s a pure utility promise, you don’t promise a percentage of future profits, you don’t promise that NFT will grow in value, you say, Hey, you buy this NFT as an early adopter, like similar to Kickstarter, like purchase as like utility, governance and social benefit. And then that’s kind of number two, and they typically sell anywhere from a few 100, a few 1000 of total sales volume from few 100,000 to a few millions of dollars, maybe like you sell for a million or five million and then it might be not enough to fully kind of deliver on your vision. So then you go to professional venture capitalists and investors and say, Hey, we just sold a few NFTs, we got a few single million dollars in the bank, probably not enough, we want more capital, can they give us more money? And they say yeah, fine, but we don’t want your NFTs, give us something more. And you’re like, Alright, all right, but I’m not fully ready for the token stuff, it feels like very high pressure. And I need to promise like the growth of the value of the token I don’t want that. So you sell them equity in the operating, operating entity with token words. Say right now I set up like Delaware C Corp or LLC or Cayman Islands or British Virgin Island or whatever, I already have an agency or whatever an existing operating entity, I’ll sell you equity in the existing entity, traditional entity and then I’ll give you promises of future tokens when and if I’ll have the tokens and investors typically say yes, they will buy the equity in your operating entity with token warrants for the future kind of foundation slash, you know, ecosystem and then it’s fine and then you also might promise future tokens to the core team from operating entity and to some strategic partners if it’s like you know marketplace kind of chicken and egg kind of situation. And then you do work now you have a bunch of capital from professional investors, a bunch of capital from NFT sale. Yeah, you also leverage the firstly epic collections for people to promote your sale and maybe to help you out with investor interest as well and investor credibility.
So yeah, it’s kind of NFT drop first, NFT sale second, token warrant sale to professional investor third, then you do a bunch of work, then the next step can take anywhere from few months to a few years, where you actually build the the actual product and utility or like record the album. So should they feel more built the building or city or village or whatever you’re kind of building. And then once you build it, you can reintroduce the token now available for trade available for everyone to buy and sell as a utility token, because you can make it as a form of payment for your actual service, now that you have, like, the book is only sold for the token or the like I didn’t the music only available for the token or something. And then then the token become tradable either on uniswap decentralized exchanges like uni swap or centralized exchanges like coin base or you know FTX finance. You can also instead of going with like tradable token and going to exchanges you can merge. So you can say yeah, we have the token, we about introduce you but there are three other token based projects. They also have this private pre exchange token, let’s all get together and introduce one token for five projects that we have and become a single network. So there are actually up and coming wave of m&a between token based projects when they all kind of merge together. So general idea is fewer tokens and a lot NFT collections. So if you have 10 artists and each working on their DAO project, they can all start with an NFT collection to NFT drop them, then NFT sale, If they feel strong, if the small artists join them, they can keep going as a single token, multiple artists and multiple NFT collections. If they feel like they become a too small of a fee, like, you know, too small of a pond, they will merge with other. Remember, like early 80s, I guess 70s When they were virtual record labels, and then they were merging and merging and merging and merging. And there was like big three, like Universal Music and whatnot. So basically, I would say, DAO can survive as a small and medium sized operation with private token. But if you want to get listed, and if you want to have a high like solid kind of low volatility, high liquidity trade of the token on exchanges, you need to be big, like valid the billion plus and or like half a billion plus.
And I think, by the way, that’s a great place to kind of end the podcast, like you just gave everything away like that entire playbook. I mean, it’s really it’s really well said.
Yury Lifshits: Yeah, there was some modifications, if you like doing like investment DAOs or Metaverse or whatever. But the general playbook is always start with the roadmap, then the free airdrops, then NFT sale, then private tokens for teams, strategic partners and investors. And then you introduce the actual product and you make the token form of payment. And then you’ll listen exchanges.
So it sounds very much like what we talked about on the podcast is a lot is like building a minimum viable community, right? You said find your people that can help spread the message is right. And that align with the theme and build a core.
Yury Lifshits: Borrow. Build the borrow.
Build the Borrow?
Yury Lifshits: Yeah, so if you’re a complete, unknown, but you have 10 friends who have big following, and you can convince them that you’re high energy, like running trains on time, kind of project management person, and you can actually make things happen. And then you say, I’ll give you the like this premium and N. And they give you the future tokens, and you need to support me on the social media and they want I’ll produce most of the content and most of the activity, but I need the following, your credibility from other people. So you can, it’s like conference organizers, you confirm like high prominence speakers. Who knows? Who know personally? Do you know like, I don’t know, organizer of web three, summit or something? Sure.
Building Products In Web2 vs Web3
Sure. Okay. Makes sense. So, you know, it’s what’s cool about your background Yury, like you have a very traditional startup background of producing products for web two, and you’re building something in web three. And I’m curious as a builder in web two transition to web three, what are some of the biggest differences or similarities that you’ve kind of come across with building? Let’s say, for example, DAO infrastructure building for decentralized organizations versus building more centralized products for example?
Yury Lifshits: Yeah, I would say there, there are cultural differences, because there are technological. So the first one is a culture of speed. So the the web three is insanely fast. Market. I remember like when I was starting to, you know, scaling sales calls and people were scheduling primarily next day, or the day after, when someone’s scheduled with you next week is almost like an insult in web three is like, I’m not important, they are not important. Like this is not really a serious conversation here. So people expect people and response next day and like telegram or Twitter, DMS, like if you reply by a week later, you have to apologize. Like in the web two, if you reply by email in one, like seven days after, it’s a norm, like thank you for reply. But in the web three is like, what are you doing here? Like, what are you sick or like something, did something bad happened to you, So people exceptionally fast. Another one is the spirit of collaboration over competition. So no one feels competitive to each other. It just feels silly. And so you can build on like nearly the same thing. And they still feel like there is so much more you can do together rather than competing. So it’s channel speed. And because it’s like things on block chain, they’re more transparent, more open, there is a less culture of, you know, holding secrets. So it’s, and then you’re still still in the minority, like majority people still don’t have wallets, majority of people still not in crypto. So we still feel like the early pioneers, we’re still a call on the kind of same side. So the this camaraderie of web three, I guess. So those are great things. violations are better. Yeah. So you can like easier to raise as a web three company. So you’re like the same idea. And you say you’re web three or your DAO and your gap like, like, try to say that your direct competitor to YouTube and your web two company. You probably wouldn’t raise $1. And you say, well, we’re distributed web three native version of YouTube. And now you have a line of investors.
So you guys, you guys actually raised 10 and a half million, right?
Yury Lifshits: Yeah. 1 million precede and then 10 and a half seed, so 11 and half. So, yeah.
At what valuation were you public with the valuation?
Yury Lifshits: Yeah, we weren’t like, this is pretty unusual. We were public with a valuation, the valuation on the seed was 160. And that’s equity valuation. So the implied token violation is even higher.
So how, how, I think everybody’s asking like, what. Everybody in web two that’s looking at this is like, what the fuck is going on? This is madness. Everyone in web three is like, Oh, just another valuation, another race? Yeah, no big deal. How do you? How do you make sense of that?
Yury Lifshits: Yeah, well, a few things. One is the the late game looks very healthy. So the the endgame for token base, the token bound project is to be listed at Coin base and, you know, FTX and binance. Devaluation for late stage mature projects, like you know, Solana and polygon and Neo or an avalanche. And I’m primarily naming you know, chains, but also like uniswap, or one inch or things like that. So there are no single billions 10s of billions, sometimes approaching 100 billion and that’s just the start. I don’t think that this Solana reached the peak or polygon or whatever, I think they still have 10decks, 00 decks ahead of them, you know, not maybe tomorrow, maybe 10 years, 20 years, but I don’t think they reached the peak. And, and so, and they get become public in 2, 3, 5 years, not seven to 10 like traditional, so investors thinking All right, so yeah, it is, you know, it is very unproven, it is very early on, is like pre revenue, but the winner in data infrastructure space will be token traded probably within three years, probably within two years. Who knows. So our investment will be liquid or partial illiquid any anyone who is a category winner is probably traded towards 10 billion or more like, you know, look at Metaverse like sandbox or decentraland. They are not that hard, like far along in terms of product, they have strong ecosystem and brand and snowball network effects. But product wise, it’s not really a fully polished product just yet. And how many people like really as users, not as you know, speculative investors, so builders are really going their daily basis. It’s not like comparable with traditional gaming or anything. But the promises there, but so the trading at the late stage, or mid stage project is very high, and it’s liquid. And so investors like, do we believe that this project within two years will be token only, like exchange listed and be a category leader in their, you know, respective category, if you can make a case that you will be the category leader, you’ll be exchange listed, and you will be traded at the levels that you know, other category leaders on. So my comparables are like, you know, decentraland and sandbox which are traded like close to 10 billion or sometimes above, sometimes below and fully go to coin market cap. And, yeah, I’m thinking like, the number one dollar infrastructure projects will be token listed and will be traded similar numbers of higher. I think the DAO infrastructure is as important if not more important than, you know, one of many meta verses. And it has strong network effects. So.
Thoughts on The Emergence of Creator DAOs
Yeah, make sense. I hear you, I hear you. I want to talk more about like use cases. Okay. We’ve seen a lot of, I guess, like social clubs, social DAO form, we’ve seen a lot of investment DAOs form for the most part, and we’re seeing more and more creator DAOs form. This is something I’ve been talking about for like the last year publicly, but we’re really starting to see it come into shift in the last like, three, four months. And I know one of the things that you guys offer on your platform, part of the infrastructure play is catering towards creators. Yeah. So how do you think about the Creator DAO space? What’s the current state of creator DAO, for example, and played me some use cases like that you’ve seen work, not work?
Yury Lifshits: Yep. Yeah, so creators, I think the endgame here is platform DAOs. So the two tier system does. This is what I’m gonna talk about is not the same proven by this is in development. So like maybe it’s a developing story where like the, the trend, the recommendations might change for the next few months. But this is what I see today. The platform level is more like at this distributed record label or distributed metaphor, like a Metaverse or distributed like I don’t know the platform for virtual characters or something. So it’s not a single artist, it’s not a single character. It’s not a single like virtual city, it’s not a single game. It’s not a single event. It’s not a single book. It’s more like a publishing house. It’s a look at distributed you know Penguin Random House or something or distributed YouTube or distributed like Activision Blizzard or distributed Spotify or something like that. So, there is a platform level play when you say we are a set of technologies and distribution kind of ecosystem for artists or you know writers or filmmakers and so on. And then and then there is an artist level and the artists level or creator level is a single individual or a single small group that will produce certain content on brand, like under their full creative control and whatnot. And so, for individual creators, the dollar setup that’s recommended, is purely NFT based, so no token or token later. So don’t try to emulate like rally or bid cloud. I don’t think that’s the direction where things are going. And instead, like, introduce NFT collection, give special premium grade and NFTs for supporters for free, who will support you on the distribution side and on the creative side, and then sell NFT’s to super fans for governance, like, you know, helping you design like the name of your album or you know, the sort of like level? Yeah, yeah, kinda like, yeah, cosmetics level or like, you know, declaration level, let’s say, like, what to wear, like, things. It’s like, if you like, it’s like a sports theme is like, selecting short designs and things like that.
Yeah, so it’s kind of lightweight governance, and then product based utility, and then social kind of membership of being the early or super world class kind of supporter of that. And then if these can be tradable, but they can grow in value of the artists become more popular, but they are not designed to be like the equity in the artist work. So I don’t recommend sell the NFT’s for artists that will take a percentage of artists driving. What they can do though, is the artists can direct the percentage of their revenue to the DAO treasury, but not to be distributed to the DAO members, but for DAO members to vote on how to spend the money. The artists can say okay, 5% of my revenue or 5% of my like album sales goes to the DAO and you guys decide to together, maybe we will give grants to superfans, who create additional artwork, who write remixes, who write like local performances. Who will you know, for example, like let’s say you have Tik Toker and you invent like a new type of dance. And you like invented 10 moves and you say, Hey, I like this, like I’m getting my, you know, advertising revenue. I created DAO for my superfans. And I put like 5% of my advertising and whatever revenue to the DAO. And then if you helped me to fill the invent those dances and like expand or record them, or like, teach them or whatever, then the DAO can pay you, you know, from the grant program or from contribute on a budget, the salary. So it’s more like for DAO members to earn money from you. But for the effort, not because they just hold the Dow you know, NF T’s. It’s not as an investor’s, but more like as a contributors. So the DAO Yeah, so that’s kind of the individual artists setup, set up a DAO, selling NFTS distribute free NFT’s and then eventually create the community government treasury. Together, you can also say, Hey, I put 5% of my revenue to the DAO. And then I let my superfans to decide which charity will be supported. So instead of Lady Gaga saying, Okay, I put 5% to charity, and I decide as Lady Gaga where to go.
Y’all decide?
Yury Lifshits: Yeah, my superfans will decide where my revenue and so now you know that when you support Lady Gaga on social media, you actually will be in charge of 5% of your revenue that goes to individual causes and you actually decide which causes to go the the the real world example for that would be green brothers, Jonathan green on YouTube. So they have this thing called project for us on which is an annual fundraising campaign on YouTube and they do half and half, so I think the half of raised money, the green brothers decide where to go. And the other half is the community that decide where the money raised, which charities they go.
Got it. What does it cost to set something like this up for creator?
Yury Lifshits: Yeah, so right now, like we were about introduced the pricing, super DAO and it will be super like, the basic tier will be super affordable something like 50 to 100 bucks per month.
Okay. And it does include all the legal fees and all the legal setup, everything that’s that comes into play with the abnormality.
Yury Lifshits: The basic. The basic plan doesn’t require you to have a legal setup. So, this is how it typically. There is like three levels or three levels of complexity. The basic setup is just DAO, especially if you don’t have a community treasurer, you just sell in and distribute and NFTs for free. You just you know, you set up a DAO, you issue NFT’s, you have smart contract, you describe the ownership and membership structure, you’re good to go. You can do it just with us. You don’t need any lawyers. Step number two is like you have a DAO and then you have the operating entity. The operating entity can be already pre existing. I think most successful artists they have a certain LLC or whatever, so existing LLC, existing Delaware C Corp, existing entity on Cayman Islands or British Virgin Islands, so or like whatever you have, all good, so it doesn’t need to mirror the ownership structure, the core team owns the operating entity maybe alongside within like professional investors and then the DAO members they are members of the DAO but not the operating entity. Like Solana has Solana labs and polygon has its own room and you know, every like, x infinity has I think sky mob, so yeah, so they’re like every like big, you know, crypto project has a big operating entity behind it, or many, or several. And I think Brain Trust, which is a recruiting decentralized recruiting network has like six operating entities behind it. And yeah, so that’s kind of step two, you can use any service to register operating entity can be like Legal Zoom, or corp base or quirky, or whatever you like, and a lawyer friend. And then the step three is when you create a special purpose. at DAO oriented legal company, it’s typically a foundation, and typically Cayman Islands, Singapore, or Switzerland, or something along those lines, typically not United States. And that is for issuing an exchange bond tokens. This is very late stage, this is like, long after you have the NFT’s and you sold token warrants to investors, this might be 1, 2, 3 years down the road, we can recommend some, you know, legal providers for that. And that’s when you like actually polish your tokenomics and figure out the allocations and number of tokens and whatnot. So you don’t need to do that day one because you can run as a DAO or DAO plus operating entity for a very long time.
How To Do an SEC Complaint Token Raise (Not Legal Advice)
Makes sense? Okay, so I’m starting to think of like so then how do you run like an SEC compliant token race. So for the membership, NFT’s is just utility based, you get cosmetic, you get cosmetic features and whatnot. But when it comes to actually doing a token distribution, doing a diversification round a lot of DAOs like to call it and taking it to like the next level raising money. What’s the process of doing an SEC compliant token raise? It’s setting up that formation going through those steps, like you just outlined?
Yury Lifshits: Yeah, so sometimes you do this extra step. So you, you do like roadmap and free AirDrop and NFT sale, then token warranty on operating entity equity, and then you do a private token round. And then you do exchange listing. When you do private token round, then yeah, you can sell it a little more broad. By that time, you’re very close to exchange listing. So you have already built the utility case, and you say, Hey, we’re just about introduced the token, as a form of payment for future services and smaller, selling gift cards for your future, you know, future token that has now utility value. Typically, still, people who do private rounds, many cases, they explicitly exclude the United States. So they will do a private round that doesn’t allow the United States based people to buy it to kind of be outside of the purview of SEC. But generally, yeah, don’t sell tokens early to anonymous public buyers, especially in the United States before you have utility value of already fully built the product and before your token, it can be used as a form of payment for the actual existing functional value? Because that case, it is like super close to unregistered security, which is not generally speaking illegal.
Strategies for Generating Revenue in DAOs
Yeah, yeah. I want to talk more about like revenue sources for DAOs, a lot of sourceful DAOs form because it’s fun to form a social organization. And then yet once they have like minded people, they try to build something and ticket next level. Okay, first thing that comes to mind is FWB. Another one that comes to mind as forefront, is all communities that I’m a part of. And I think now FWB has kind of explored the product route doing event ticketing, plus much more forefront has a myriad of different services that they provide. But what is like the most common form of like, revenue models, for example, that you’ve seen DAOs initiate from the Creator side, I’ve seen artists start their own DAOs, right, all the revenue, part of their artist share their catalog sales, sound XYZ sales, whatever, NFTs sales, go back to the Treasury, right. And that empowers the entire community. But it doesn’t really directly correlate to let’s say, like the governance token, per se, that’s a whole another kind of form of value accrual. Right. But when you when you think about revenue generation, what are some examples that come to mind?
Yury Lifshits: Yeah, so by the way, I like what you just described, so when basically the artists, so I think we need to change the mental model. And so I think I’m gonna introduce something modestly controversial, and I hope that it’s like, really like.
Let’s do it.
Yury Lifshits: Yeah. Yeah. So, I think the narrative was wrong on creator DAOs, like completely wrong. The , the DAO is, was pitched as a way for fans to buy equity in an artist, when artists works and fans are kind of investors in an artist, they give money to the artist. And then they share profits from the artists. That’s kind of the narrative. You give the money to the artist early, help them get off the ground, support them socially, promote them. And an artist becomes successful, they share back the share of success to the DAO and DAO shares, a share of that to superfans. So do you like, so the metaphor was, you invest in in artists. I think it’s the wrong metaphor. I think the good metaphor is employment. Think of that, like, I’m Lady Gaga, I’m already rich. I don’t need investment. I don’t need like, you know, like, get more money from fans. So however, some of my fans are amazing. They just incredible. They they invent the answers and costumes and memes and they are awesome. I want to give them career opportunity. So but you know, I’m not Lady Gaga LLC. I don’t have management time. I’m not gonna you know, manage people. So instead, so I’m getting like, so I don’t know if you know, like Lady Gaga has the nickname for our fans, little monsters. So you don’t do Lady Gaga.
Are you a little monster?
Yury Lifshits: Not like partially? Yeah. Okay. Yeah, I’m like, how to say, associate. Yeah.
Monster associate.
Yury Lifshits: Like, associate little monster. Yeah. Yeah. And so yeah, so, yeah, so you do little monsters DAO. And so Lady Gaga will fund it, Lady Gaga is the investor, not the recipient of the investment, Lady Gaga, we’d put would put 1% of the revenue to the DAO, and then your most engaged fans can buy the NFT or like join the NFT for the effort or like through giveaways and, and then they together will produce extra value. So they will do more album designs and costumes in advance. And these and then they can also create revenue streams that no longer from Gaga, but maybe from like licensed Gaga concerts by cover bands, right, or like the local concert. So supporting aspiring musicians from the fans, like, you know, scholarships, like musical scholarships, and then that becomes like a musical college or that becomes like a school of music, like alternative Berkeley college, you know, and, and that thing, and so the people who and then when you introduce a token, you introduce the token as a form of payment out of effort. So you can’t buy a lady monster token, you can only earn it if you’re actually a real contributor there. And then, and then, then the revenue can be shared to the token holders, but only to those token holders who actually worked for basically a little monster DAO and together created mobile. So it’s a way, because for, if you look at essentially, what I’m trying to say the big creators can create the career opportunities for early career crimes through the brand of theirs is another like, like a famous rapper will start a record label and try to grow up the the next generation of, you know, street artists and bring them to the next level. And yeah, so that that’s kind of the mental model that we should.
So let’s, let’s play on this for a minute. Okay, I’m gonna share my screen for a second. Okay. Let’s try to take a an example of what’s happening now and how they can conform to what you just described. So we’re on Facebook right now we’re looking at different Facebook groups, we see.
Yury Lifshits: Go closer to the screen.
Yeah, I’m gonna go like this. Okay, so this group is called, I’ve met Lady Gaga has 6.1k members. This one is just Lady Gaga has 22k members. This one is Lady Gaga 28k members, Lady Gaga 50k. Okay. There’s 1000s of people creating different fan clubs on behalf of Lady Gaga.
Yury Lifshits: Yeah, exactly.
But the problem is Yury, how do you create a coordination effort to bring all these people together to let them realize that wait a minute, they don’t just need to be posting for fun. There’s also monetization involved, right? Lady Gaga can kind of get involved because personally, I don’t know how involved Lady Gaga is today, with all these groups. These are just like independent fan clubs around her brand and what she’s created. Right. But what you’re suggesting is that these people feel in love and actively posts in these existing communities can use DAOs primitives as a way to kind of take it to the next level.
Yury Lifshits: Yeah, exactly. Yeah. So I think the model here is very, very much similar to Facebook group. So Lady Gaga is not initiating those groups. What she can do is she can endorse one of those groups as an official group and say, I will work with that group. And together we like, I will put either, l’ll give the preliminary access for future music or private concert or like this and that and so on. So essentially with DAOs I would say something similar. So I would say Lady Gaga can make a single tweet saying, Hey, I love this new concept of DAO, I want to start a little monsters DAO, I don’t have time to recruit and select the core team. So what I’m looking for is a core team bits. So you can organize your own core group on any platform like discord or Twitter or Google Docs and notion or whatever. And make a tweet about your organizing core group, how you want to do a little monsters DAO and ask your all your friends to retweet, I will review Top 10 DAO competing bids that I feel like most credible and best done and most retweeted, and then I’ll select one or two. And I designate them as an official lady monsters kind of DAO project, and I will feed it with my like exclusive content and private dances and performance rights, licensing rights and things like that.
But there’s a problem here. Okay. The problem is, is that all these people have been doing it for free. Yeah, they’ve been they’ve been loving doing it for free. That’s what gives them energy. There’s actually an interesting like component to this, once you introduce mining to the picture, it gets complicated and weird. It’s not as fun as maybe.
Yury Lifshits: So you can do it softly. So you can introduce money that is not going to the contributors and say, I’ll put the money in your DAO and you guys decide how you want to spend it. So you don’t need it to give it to yourself, you can send all of that to charity, you can sell it to, to scholarship, you can send it to grant making program, let’s experiment with, I’ll give you like, you know, 50k 100k to play with the grant program, season one, you can vote for what you want to spend it on, you can spend it on salaries, on core team, you can spend it on, you know, supporting young musicians or like artists exhibition or, you know, find that like more imaginative, like higher budget, installation. So it’s like a money to play with.
Yeah, and that makes a lot of sense. But we’ve yet to actually see this used case, this actually very cool. And scalable and powerful used case being practice. I haven’t seen as an artist do that. Have you seen an artist kind of execute on that in theory?
Yury Lifshits: Well, I’ve seen a lot of like L1, L2 chains who have like a system font or grant making? Or? Yeah, so basically, if we’re talking about software creators there like a huge amount of companies who would initiate essentially. So another close analogy would be actually creator funds from platforms like tick tock or YouTube or reels, like Instagram reel. They would put a creator funds, so it’s like, it’s like a creator funds for little monsters creative, right?
Why Creators Should Build DAOs to Monetize Super Fans
Makes sense. Makes sense. So that’s for a more of established artists that has a fan base. What about for a lot of the independent artists, which honestly, the market tends to favor more, intensive support more? What about the everydays of the world that are coming into the space, trying to use web three primitives as a way to build monetizing on the audience? They don’t have the pleasure of 1000s of people creating groups on their behalf, they have to form that excitement. How can they use a platform like either like super DAO or general, these DAO, primitives to kind of, to kind of move forward?
Yury Lifshits: Yeah. So I would say you need to find an idea that is already recognized and understood that is bigger than the artist. So for example, you know, there is a political event, and you want to save the victims of some big tragedy. And so you want to build a DAO that helps the victim of this big tragedy in the moment. And so if you’re like foster Sargon, artist for X, artists to support, like, for example, some time ago, there was you know, border crisis in the United States, and they were like kids in prisons, like separated from parents and you know like, artists for kids or artists for immigrants or something, so if you build that and you bring me in even more established artists, is like second order contributors and whatnot. So yeah, so basically, you find an idea that has a Zeitgeist so that have a temporarily high demand to high need or high attention. And you try to rally up a lot of artists around certain thing it might be, might be something like maybe there was a big premiere of like, you know, Marvel film and you want to do something around that or like cardboard or something or something like a fanfic type of stuff. So you can attach yourself to bigger movement or bigger theme. So that’s, that’s something. Let’s see.
I think that’s a good example. You know, another example that comes to mind is referencing what has already worked and Bring back in Daniel Island again in the overstep down, okay? Where his, his crowdfunding mechanics are questionable in terms of legality, but a lot of it was betting that he’s just, he’s very small and the SEC is chasing like, like, dollar, billion dollar issues like the Bitcoin shit that happened a while back as to. But so that’s an interesting example to where you’re able to actually share the ownership, the upside, the financial upside, where it’s questionable, okay from a legality point of view, but it’s actually a very favorable.
Yury Lifshits: There is a very easy hack to make a super illegal so you just split your audience into like hands on contributors to whom you have free.
A proof of work that kind of thing.
Yury Lifshits: Yeah, yeah proof, yeah kinda free NFT’s that will receive the revenue from the DAO based on the contributors, contributions and the paid and FTEs that act more like tickets. So you either have volunteer on event or like oh, like contributor to event or your ticket holder who is more like you know, receiving benefit from it. And using your sell the utility and NFTS and you distribute effort and NFTS and they effort in NFTS can receive the revenue.
Yeah, so proof of work that comes back to that verifying your effort, right to be able to actually receive a contribution proportionate to whatever it is that you’re on, which is also an interesting thing. We’re seeing platforms like royal, for example, exploring the boundaries in the gray area behind tokenizing, ownership decent XYZ. But we see other platforms like catalog and sound XYZ just experiment with, with collecting wav files that were collect art. And I’m very much in the boat of, I see the opportunity for both. But I think once you get more mainstream, and you bring in bigger artists into the picture, and the bet is that they’re going to be building up their own DAOs and bringing their fans and having them kind of share the upside of whatever it is that they’re doing. It kind of makes things more complicated in that matter. And while there’s issues with like a coordination effort, I see like the opportunity behind doing it, but I’m skeptical a little bit as to what that looks like on a scalable level. And I don’t know if it’s going to be this generation of artists or the next generation of artists that are more technologically native that spend a lot of time on the computer more than this, the millennial generation or whatever, but I don’t know, these are just some of my thoughts. What do you think?
Yury Lifshits: Yeah. So there are again, there are two use cases that I am very bullish and one that I’m bearish. Okay, so the things that I’m bullish is the utility buyers, right? Well, when you buy and NFTS or memorabilia or governance rights or future product rights, or from artists, it can be future books and music and film and Premiere access and behind the scenes and decision power over a small details of the creative work that artists are doing, like you know cover art and naming and things like that. So I’m bullish on that so it’s like pre buying design edition of a book you get a special token of special connection with an artist and the artist you believe you believe like you know like have a signed first edition of Beatles first musical album is like you know cool stuff. And so I totally see that and the second one that I believe is that super fans become loosely employed by the the favorite artists is like the top 100 believers I don’t know are the making money from believers DAO, whatever. So yeah, I’m aging myself by giving reference.
Are you believer?
Yury Lifshits: Before, I grew up, I’m MTV generation.
DAO Trends for 2022
Yeah, I feel you, I feel, so what are other like big picture things that people need to like keep an eye on in 2022 for DAO? Like what are some trends that we should keep an eye on? Maybe like, like regulatory things that may or may not have been filled me on.
Yury Lifshits: yet. So the first thing and I help myself from what I hear myself a little bit is free, free and NFTs Airdrops like if you like doing small projects, large projects, medium sized project, free NFT AirDrop is a good starting point. It can be a single artwork, you don’t need to generate 10,000 Like differently shaped boards, you can have a single artwork and you distribute it to 100 people, you can update the artwork later, individual personalize it later. It can be like a like an image of a key if it’s like a pass to a secret kind of society of your theme. And super DAO, my platform allows to do that. So you can do free airdrops, currently for free with us. So basically, you know, name your DAO, send us one image and send us you know, 100,000 wallet addresses where you want to airdrop that you can collect them you know, privately in Facebook’s and Twitter, DMS and discord and whatnot. This will catalyze the community and brings that to web three. And so if you’re listening to that podcast or viewing us and you can excited about the future web three, your Creator and you haven’t use any of the products that discuss on that podcast, you can DM me or direct message @ SuperDAO on Twitter, or fill the form on SuperDAO.co. We’ll get in touch and then you just set up just the name of your DAO project and then you do the airdrop with you know, 100 close friends. And that, now the 100 people are thinking okay, we now want to sell NFT, now we want governance, now we want Treasury, now we want grant making program. So now you’re no longer alone and you have other people who are as excited as you are about making this thing work. So free airdrops is basically a tool that every creator should master. Because it was hard you like it before Super doubt, you need to like, hire a smart contract developer and figure out like as highly customizable artworks and think about everything in advance. So the smart contracts that we provide are upgradable, modular and extendable. That means you can start with a simple kind of smart contract. And then you can customize the artwork later, even for the NF T’s that you already distributed. And then they add governance and that Treasury and add this and that and tokens and raise more money privately in public in a variety of ways. But the free AirDrop is always the starting point. And if you want to not just to listen to podcast, but you know, play with actual tool, you should start working, like this is the easiest tool to master.
Go it, free air drops, that’s going to be the number one trend. I think another trend is, I think 2020. Yeah, 2020, 2021 we see a lot of people experimenting with ERC 20s as a form of access, or we’re gonna see membership passes as a form of access.
Yury Lifshits: Oh, yeah. NFT fills DAOs. Yeah. So this is another difference. And this is, by the way, why super DAO was so successful, fundraising wise, is the competitors that were in DAO infrastructure before us. They were all token for us. What else? They were assuming DAO is something that is built around tokens, while the older new DAO second generation DAOs, which I call flexible DAOs because they don’t start decentralized or autonomous. They all run by humans and by operating teams initially. You know, they always NFT fillers token later.
Yeah, makes sense. I’m also curious to see like, one how super DAOs kind of evolves and the different solutions and services you guys provide to all different types of DAOs? I think we’ve only scratched the surface of what type of DAOs kind of looks like we see a lot of like reoccurring ones like services, media DAOs, investment creator, etc. But it’s just the beginning. I’m also super excited to see, like I said earlier, the membership side of things and how they kind of prevailed from offering free mints to payed mint what tiers of access look like and how a governance token gets introduced down the line and what that kind of plays. And if governance tokens needed to say will they die out, liike Will they die out eventually? Or will the NFT kind of poison the most of the value? Are you are you agreeing to that? Are you referencing something else?
Yury Lifshits: Yeah, yeah, I would say I agree that early stage DAOs will be NFT fillers and the early stage DAOs will have NFT based governance, the late stage DAOs that have billion plus and value, they will have token based governance.
Yury before I let you go, anything else we should cover that we should keep an eye on for Super DAO or in general that you’re focused on specifically?
Yury Lifshits: Yeah, and so for DAO, Yeah, we’re gonna introduce our smart contract framework more publicly, we’re gonna produce more educational content, we actually host weekly private workshops for traders. So if you just apply as superDAO.co, you’ll get an invite right away. So basically, if you need more educational help, and advice and personalized kind of case, so basically host the AMA.
You host it yourself?
Yury Lifshits: Yeah, yeah.
Cool.
Yury Lifshits: Oh, yeah. Every every week, a couple times a week on zooms. We have typically 50 to 100 projects each night. And it’s pretty cool.
Amazing.
Yury Lifshits: In terms of like the general. Yeah, I would say NFT fill DAOs. That’s a huge turn for this year, as I say. And another one is, I think there will be even more excitement from investor side. So there will be more investment in DAO. And basically if you’re a startup and you are not a DAO, you’re not, don’t have a DAO strategy of how DAO factors and what you’re building, you’re probably missing out. So again, you know, apply on SuperDAO.co, go to a workshop and we’ll figure out something together.
Outro
Amazing here and where can we find you online personally?
Yury Lifshits: Yeah, I’m pretty active on Twitter, Yury Lifshits, in one word and super DAO on discourse. Yury is our corporate handle. I kind of ghost manage that as well alongside with my team. So DM so open, pretty active.
Amazing.
Yury Lifshits: I’m also active on telegram, just my last name Lifshits
Okay. Yeah. And I can subscribe to that, you are very active on telegram. Yury. Thank you so much. We hope to do this again soon.
Yury Lifshits: Yeah, good luck, everyone. Let’s build DAO.
