Marshall Lipman - Project co-lead. Former head of biz dev at jtv, former olympusdao contributor, advisor to Guardian Link, advisor to mempoverse. @lipmaneth, lipman#7206
Ivelin Ivanov - project co-lead: Open source contributor and serial technology entrepreneur. Co-founded or joined several early stage tech startups. Two had good exits, one muted, one crashed and burned. Former OlympusDAO contributor. @ivelini, ivelin.eth#2149
Shiv - developer: open source contributor. full stack developer for KaliDAO. law student. nerderlyne#7399
Yesi - designer: designer with Microsoft with focus on digital transformation, design strategy, UX design, envisioning, incubation, design systems, and visual identity and branding. Yesi#7030
We have ~20 contributors. Just selecting a few as examples above.
We’re creating a solution that enables for-profit DAOs to reward their contributors with ‘sweat equity’ tokens. The purpose is to create a new way for businesses to be developed from the ground up where your portion of ownership/governance in a project is the direct result of the value of your contribution.
In doing so, we’re also developing a new framework that offers tax, legal, and securities compliance in the U.S partially through using KaliDAO’s Delaware Ricardian LLC.
5.Quick pitch summarizing the proposal in 2-3 sentences.*
Because these companies are run and managed by their sweat equity token holders, it’s important we create an efficient way to keep token holders updated on actions requiring their involvement. EPNS can play a critical role in making these companies run smoothly by keeping everyone informed.
We believe upside and governance in a company should be earned by those who provide real value to a project - not just those who are in the ‘boardroom’. In order to provide an equitable environment for Sporos’ client companies and their contributors, we are creating the Sporos Equity LLC legal wrapper and sweat equity distribution system to assist for-profit start-ups during the initial stages of their company.
Our legal framework is intended to answer one simple question (albeit with a complex, and innovative answer):
How can a sweat equity token (SET) represent both financial and governance rights in a company while complying with U.S. tax and securities regulations and while eliminating the associated administrative burden for both the company and its contributors?
It’s difficult to attract, compensate, and retain contributors while bootstrapping a business.
Sporos makes this easier by providing a level playing field where everyone shares in the upside of the project based on the value they provide. This is true incentive alignment.
Many contributors are willing to be compensated with upside but doing so while complying with U.S. legal, tax and securities regulations is costly and complicated.
Sporos provides a simple, out-of-the-box solution designed to comply in the U.S and minimize compliance headaches for both the company and its contributors.
Cap table decisions are traditionally arbitrarily made by a concentrated few.
As such, it’s impossible for contributors to gain meaningful ownership in a project without being an early founder or investing capital. With Sporos, your ownership in a project is the direct result of the value you provide relative to other contributors. Further, to maintain your level of ownership and governance, you must continue providing value on an ongoing basis or risk being diluted.
Business needs are dynamic and can change at any given time. However, projects often find themselves with meaningful amounts of equity owned by people who are no longer helping build the business or not providing their expected value. As a result, incentives aren’t aligned and projects are unable to recruit new participants and reward them with upside.
Instead of being stuck with a poorly designed and static cap table, Sporos enables dynamic cap tables where projects can flex to new contributors and reward them appropriately.
In traditional companies, being rewarded with upside typically comes in the form of stock options with unvested amounts being forfeited if you leave the company. For employees/contributors, this results in being handcuffed to your employer and the opportunity cost of ‘sticking around’ waiting for options to vest in hopes of future potential liquidity. For companies, this results in a segment of disengaged employees who are not passionate about the business but instead are counting down the days until their equity vests.
Sporos flips this on its head. As a contributor, you immediately own sweat equity tokens outright. As a project, you ensure only people that care about your project are working on it. Said another way, if you don’t care about the project, why spend time earning illiquid sweat equity tokens in it?
While investors traditionally get to diversify risk by placing multiple bets with limited restrictions, most employees are significantly restricted by noncompete agreements and forced to make concentrated financial (and time) bets on the success of their employer.
Sporos enables contributors to earn upside in multiple projects simultaneously when contributing to projects that reward in sweat equity tokens.
As a user, you will create your own Delaware Series LLC under KaliDAO’s Master Ricardian LLC through KaliDAO’s dAPP. Once created, you will use the Sporos dAPP to adopt the Sporos Equity LLC Operating Agreement for your company, which outlines how your business will be governed and controlled using a sweat equity distribution system. The Sporos dAPP also provides additional tools to help you manage your business and reward contributors with your company’s SETs, such as a project management solution with integrated sweat equity token payments.
Contributors make proposals on-chain (typically weekly) for their requested SET compensation based on the work they’ve completed that week. Other SET holders vote to approve the proposals. If approved, new SETs are minted and rewarded to the contributors. EPNS would serve as a major tool to notify token holders when proposals are open for voting.
For the project management system, a PM would make a proposal on chain for a project to get approved by the DAO and would ask for an project budget in SETs. SET holders would vote on-chain whether to approve the project, and if approved, the PM would have autonomy on how to use the SET in their budget. EPNS would be a very useful tool to notify SET holders when a new project is open for voting.
Core tenets of the Sporos platform
- Intuitive formation process. The Sporos platform enables a “self-service” Company formation process which requires no lawyers or third party involvement.
- Cost-Effectiveness. Setting up a Sporos Equity LLC through Kali costs less than $500.
- Compliance. The Sporos Equity LLC is designed to optimize and prioritize compliance with U.S. Securities and Taxation regulation.
- Protection. The Sporos Equity LLC provides liability protection for all SET holders.
- Dual rights. SETs have both financial and governance rights in the company.
- Privacy. No doxxing required for SET holders until Graduation. (note: Graduation is generally defined as a liquidity event that would cause the SETs to turn into securities).
- Tax minimization. There are no tax liability implications for SET holders until Graduation, and minimal tax reporting overhead for your company (your company is taxed as a C-Corp and does not need to submit K-1s to each SET holder nor will you need to perform 409a appraisals).
- Securities Minimization. SETs are non-transferrable, should not be considered securities, and require minimal registration overhead until the time of Graduation as 1.) there is no investment of money, and therefore no investment contract, and 2.) There is no reliance on the effort of others, as the only way to earn SETs is to contribute time and energy personally. Further, tokens are distributed under a compensation plan that is approved by founding members of the DAO LLC and accepted by each new contributor prior to receiving their first SET.
- A level playing field for all. Companies formed using the Sporos Equity LLC are SET holder managed, not Member managed.
Value Proposition to EPNS
Sporos’ sweat equity solution (and its affiliation with Kali) presents an opportunity for business formation and governance to shift dramatically to a more equitable and fair system. If successful, Sporos has the opportunity to become a standard legal wrapper and equity distribution system for bootstrapping for-profit DAOs. EPNS would be a central notification feature for these companies and all of its contributors.
We will provide notifications that users will want to receive from on-chain events for the DAO. Initial setup and research is 2 weeks. Each incremental notification type is 7 days to add, unit test, and document.
Notification types will include: new proposals, new votes, new sweat tokens issued, new contributors added to the DAO, new projects passed, member removed, proposal ending soon, etc.
Relevant Links & Attachments