About

The LAO is a for-profit limited limited liability autonomous organization that enables members to invest in Ethereum projects and earn a return.

History

The idea of a decentralized venture fund was first conceived with the now infamous "The DAO," which raised over $150 million to invest in projects based on votes from its members. Anyone was free to contribute capital and become a part of the fund, however, before it was able to go live a vulnerability was exploited draining 3.6 million Ether. A year later the SEC released its first guidance regarding their views on crypto in which they state The DAO tokens would have fallen under federal securities regulation.

Since then there have been examples of DAOs used to coordinate behavior around aggregating and allocating member funds such as MolochDAO, which avoided the SEC regulation by offering no upside to members since it solely offered grants. While Moloch was successful in raising around $1 million and allocating to various projects, questions arose around its sustainability as it was funded through the goodwill of the members.

The LAO looks to improve upon prior attempts at creating autonomous funding organizations by offering members an explicit upside in the success of investments while remaining compliant with securities regulations. ConsenSys spoke OpenLaw started the LAO, (Limited Liability Autonomous Organization), which ties smart contract execution to legally binding agreements. It allows investors to pool funds and vote on how to allocate them in return for tokens or a tokenized version of traditional equity. Membership into the LAO is restricted to accredited investors, however, anyone fitting that classification is free to join. Similar to the MolochDAO construction, members will be able to ragequit at any time and claim their pro-rata share of the collective funds.

In order to receive funding, projects need to submit an application and create a Delaware legal entity that will have its equity tokenized. OpenLaw will provide documents to submit the application and will act as the administrator.