The announcement made 15 hours ago got very positive feedback from most. The few that had criticisms brought up excellent
points which made me think about it from different angles. What was not considered is the time we are living in. I believe there is a way to make the Music DAC better suited to the present which will consequently make it much MUCH more valuable down the line.
The model that was described in in yesterday's post https://bitsharestalk.org/index.php?topic=9459.0
is a great model for avoiding regulatory problems and launching a DAC without significant funds backing up the founders. Just use the toolkit, launch, and then dilute as you go to pay for expenses.
This method comes at a cost though. No up front capital.
This means as soon as the DAC launches and price discovery of it's shares happens, the founders must start diluting the share supply and/or selling shares on the open market. So as soon as a baby DAC is born and needs an influx of people coming in and supporting it (cuz iz goin' to da mooonnn ,etc...) is when the value of it's shares go down and down.
People unaware of the workings of this DAC's model will think it's a crap coin. People that ARE aware of the workings of the DAC would still most likely sell justifying it like so: "a lot of dilution is going to happen without seeing any results for the first few months. I will sell and park my wealth elsewhere until I get news that they are about to launch a working product".
This can mean the entire project can grind to a halt. For the founders to generate enough capital to develop, they will need to sell massive amounts of almost worthless shares, dropping the price even lower, requiring even more dilution, meaning the PTS and AGS holders will be left with tiny slivers of what used to be a nice large slice of pie. This downward share price spiral all stems from the fact that the founders have no initial funds. The never got a first round of funding, they went straight to what should have been a second round of funding technique!
Another small disadvantage is the lack of a crowd-funding hype. Storj and ethereum got massive exposure from their pre-sales. It brought many new users to their communities.
We all know what the dot com bubble was. "You have an idea and a website? Shut up and take my money!"
The crypto space is in a similar boom and we will have another year or two of angel an VC funds coming in no doubt. The BitShares community should take advantage of this. The model proposed yesterday is great for when the capital dries up and VCs/Angel investors move on to a new sphere. That model is perfect for launching a DAC without start up funds.
BitShares Music on the other hand is launching in 2014. Meaning it should take advantage of the hype and publicity a pre-sale can bring. It should use the upfront capital to pay for big corporate attorney fees and regulations and all that fun stuff. We are in the age of the start up war chest. Let's not switch to a model best suited for times of austerity just yet!
We should capitalize on the fact that the crypto world is booming.
We should capitalize on the hype a pre-sale can bring.
We should welcome and introduce a whole new demographics to the world of BitShares and our DACs.
We should also avoid the risk of using new features (unlimited dilution) that can change the entire nature of a very important DAC.
Here is the revised model I would suggest we use.
We allocate 35% to PTS, 35% to AGS, 10% to the Foundation and 20% to a pre-sale.
This means we have a pre-sale, our DAC gets tons in funding in BTC, we get publicity and exposure, we get new members to our community, etc.
Now when we launch the DAC, we don't need to sell off any Notes(Music DAC Shares) until we run out of Bitcoin. This means the Notes on the exchanges don't spiral down in price. People that are ignorant of the DAC's workings will hold on to or buy Notes. People that know of the DACs working WILL keep their wealth parked within the BitShares ecosystem since they know we are not going to dump a ton of freshly minted Notes on the exchanges, collapsing the price and diluting their %. We will merely spend bitcoins during the most crucial time of the DACs existence, it's first few months.
This is a hybrid model, so I am not saying we drop yesterday's concept entirely, no! I'm saying we have a hybrid model. Delegates could dilute, but there would be a cap and it would be no where near as inflationary and potentially problem causing as before. BitShares Music will be billion dollar DAC, it's a bit risky IMO (and Arhag's! and Frodo's!) to test out the infinite dilution model on it. Although dilution is an EXCELLENT tool for a second or third round of funding
, especially since it can be decentralized
and done by the delegates rather than the foundation.
To compare both scenarios.
PTS/AGS holders own 70% of a DAC that has Millions in it's coffers for making the product and value of their shares go higher and higher. They also have the capability to have multiple decentralized rounds of funding by voting for delegates that have a LIMITED capability to dilute. As Stan said: The one-two punch! (Pre-sale + dilution option)
PTS/AGS holders own 90% of a DAC that is broke and must dilute and possibly cause a downward share price spiral while shrinking their percentage of ownership.
Create hype, get publicity and new members to the community.
Once the chain launches, people that are already on the exchanges can buy the Notes sold just as anyone else would buy any other altcoin.
Capitalize on the time we are living through. We ARE in a crypto boom. Let's use this capital to change the world. We will be able to afford the lawyers + compliances. The capital is there, just waiting for a worthy project to fund.
Yesterday's model: Awesome model for removing the barriers to entry needed to start a business. No regulations or capital needed. Great to bring DACs to the entire world, no matter what the economy is like.