SailGP DAO Whitepaper Published.

We’ve been excited by the SailGP DAO project, an innovative experiment to try and leverage blockchain and Web3 to provide a more inclusive team ownership model and a more engaging experience for fans. Speaking with Tod Reynolds, Director of Web3 Strategy for SailGP in Dubai, we got a little bit more detail about the project, but there were still a lot of details that were unknown.

Now, the consortium behind the DAO has published a whitepaper, outlining some of those details.

A Web3 whitepaper is part prospectus, part business plan and yet neither. The Fan-Owned SailGP Team Whitepaper DRAFT 1.0 – issued on the 26th November 2022 fills in a few blanks, but also raises some big red flags…

Keep the following in mind…

VISION
Fans will become a part of sporting history, getting closer to the sport than ever before as owners and DAO community members of a new SAILGP Racing Team.
SAILGP DAO Whitepaper Draft 1.0

We are not lawyers or financial advisors. Nothing in this article should be relied upon or taken as advice. Please read the document for yourself and consult an expert before making any decisions.

Background

The Grand Tetons “perfect” Ski Resort doesn’t exactly seem like an obvious place for a hard-core sailing fan project to begin. Jackson Hole, Wyoming is approximately 15 hours drive from the nearest beach, but nevertheless, the faceless team behind the mysterious Bernoulli | Locke ran their own ‘Wild West” conference and got excited..

The basis premise is…

Experiences are powerful. Enabling better experiences increases engagement.
Certain experiences are more powerful because of passion. Fan comes from fanatic – a person filled with excessive and single-minded zeal, especially for an extreme religious or political cause. Of course, in our modern life, religion had been replaced by football teams and celebrities.
Web3 and blockchain offers new organisational structures and ownership models.

… and there is nothing wrong any of that thinking. Though if you had to choose a sailing event with passionate fans, SailGP might not be the first one that comes to mind – but, they do have a blockchain partner – NEAR.

But.. just because a new technology like blockchain could be used to construct a model for a fan-owned team, doesn’t mean it should be. There is a big disconnect between Web3 thinking and what is the reality of sports business.

Remember the vision. Fans, engagement, passion and… “Building a bridge to blockchain investing for the more traditional investor but compelling to crypto natives“ (Red Flag 1)

The Details Simplified

Simply, there will be not 1, not 2, but 3 entities created with catch names like WY DAO LLC (DAO) and Equity LLC and an unnamed offshore entity to sell ‘Season Passes’.

Fan NFT 1 – Owners

Equity LLC is the entity that ‘owns’ the team. This will be 2000 accredited investors paying $20,000 each to be a committee member.

Must go through a “know your client” (KYC) process. Documents required for equity tokens: Non-disclosure agreement, PPM, Subscription Agreement for equity tokens, as well as proof of accredited investor status – very Web3!
These are the only ‘fans’ who will be able to credibly use the tag ‘owner’.
IF there are profits from the team these MAY be distributed to this class of NFT owner.
Equity Owners are expected to be able to vote on proposals commensurate with their tokens, which suggests, you could buy more than one $20,000 share and have a bigger say in the team.
Equity Tokens will not be transferrable for 1 year from closing. After the first year of operation, a secondary market will potentially be provided through the DAO. (Red Flag 2)

So what do you get for your $20K?

A share of profits. The estimated budget for the first 2 seasons is $30M+. The initial raise will deliver $40M. Season Pass NFTs might raise another $5M over 2ears and if the team wins all the prize money available (unlikely), that’s another $8.6M. So best case that’s 23.6M in the bank at the end of year 2. Take out the money needed for year 3 and that leaves 8.6M to be distributed between 2000 owners. That’s $2150 per year per owner on a $20K investment… or 10%.
“Insider access to racing content, data and events as available.” Vague.
You get to be a volunteer and sit on a sub-committee. Seriously? The text of the document is this:
- Access to committees and “Sub-DAOs” that are expected to be created covering specific areas of need and expertise, in order to leverage the energy and passion of the community for the betterment of the team and the benefit of the DAO.
Connection and direct access to DAO ecosystem members and community. And?
The right to vote. But also to propose new votes and comment on votes. It’s all starting to sound like a lot of work. Of the 2000 owners, how many are really going to spend time voting in the SailGP DAO Telegram app?
First access to new efforts of commercialization including merchandise, Season Pass and other NFTs – wait what? I just paid you $20K, I don’t get any merch or a ticket?
You might get to resell your share, but with restrictions.

Fan NFT 2 – Season Pass Holders

Equity LLC will contract with an offshore entity or foundation to allow the sale of Season Pass NFTs. So the owners get to make money off the super-fans. These are expected to sell for $50 – $100. Given the price of a Platinum Lounge ticket at a SailGP event, that sounds cheap, so what do you get?

Proposal and voting rights within a sub-DAO. It’s starting to sound like this thing was dreamt up by those people who used to spend lunchtimes in the student representative council while everyone else was doing other things behind the bike sheds. It’s about as far away from fun and engaging as you can imagine.
Season Pass. Insider access to racing content, data and events as available. Vague. It’s not in the whitepaper – but on the website, the ‘Highlights’ of the Season Pass include – Specially priced access to events, so basically you’re buying a discount card.
Early window to purchase the next year’s season pass. Wow. I get to be first in line to prove I’m a super-fan along with tens of thousands of others. How is this a benefit exactly?
Season Pass NFTs can be sold and traded, but expire at the end of the season. This is only relevant once the actual utility is known and the NFT can be priced against a normal box-office ticket.

The DAO Itself

WY DAO LLC (DAO) has two members, Equity LLC and the Season Pass Entity, but in reality, the season pass NFT holder’s votes are a recommendation to the owners.

Remember the vision. Fans, engagement, passion, fun and…

The equity token holders will have votes in the main DAO, they can make any proposals they want.
Smaller subject area committees (marketing, technology and security, etc.) decide on which proposals go to a full vote, and if passed get executed by the appropriate owner of this decision (typically the management team).
Season Pass NFT holders have votes delegated to the NFT Sub-DAO. They can make proposals and all NFT holders may vote to pass or reject proposals. Passed proposals go to main-DAO for a full vote and final decision.
Some topics may be fully delegated to the NFT sub-DAO along the way, by a proposal or amendment to the Constitution.

So much fun…

Meanwhile, the DAO will pay Bernoulli | Locke $1M a year or 15% of the operating budget, whichever is lower to administer the massive overhead created by all of this organisational infrastructure. Bernoulli | Locke will also receive founders tokens for its role in establishing the DAO and shepherding this opportunity to completion. We can only assume that these are Equity Tokens and that Bernoulli | Locke may have a majority control of the DAO. Hopefully this will be visible on-chain for all to see. (Red Flag 3)

The Clock is Ticking

The SailGP Team DAO has set itself an aggressive timeline to get things done. This is not Web3 – you can’t just buy one of these NFTs by transferring a bit of NEAR from your wallet – though they ‘do accept crypto’!

Dec 2022 – Equity Tokens will be offered to ‘whitelisted’ investors and founders, but money will be kept in escrow.
Jan 2023 – Season Pass NFTS will begin to be sold (Red Flag 4)
Jan 2023 – Despite NFTS not yet being minted, owners with money in escrow will nevertheless become members of the DAO and start making decisions prior to the completion of the raise. (Red Flag 5)
Feb 2023 – Raise complete (maybe).

“Assuming this deadline is met:”

Team / Athlete selection will also be completed in February. While the appointment of the sporting director of the team is supposed to be a DAO decision, this is looking very much like a DAO in name only. Training and team operations will begin in March in preparation for the first Season 4 even in June.

But…

“Should the requested funds not be raised within this timeline, the DAO may choose to continue to raise funds to launch in Season 5. Once this decision is made, if requested within 30 days, individuals who have committed to purchase tokens, and placed funds on deposit shall have the right to receive their funds back.”

If the funds have not been raised, and the money is in escrow and there are no NFTs transferred, there is no DAO. At this point the whole thing can unravel very quickly and 10’s of thousands of fans who bought ‘Season Pass’ NFTs may be hung out to dry.