The 'pre-' Token

A critical component of the Venture Window is the introduction of the preToken concept, which we will explore in more detail here.

DAO Fundraising Status Quo

Currently, when DAOs do fundraising, the process goes something like this:

-A moderator distributes a Google Form.

-Members fill out the Google form with their interest/commitment amount, wallet details, and transaction ID. The moderator then has to track this on a spreadsheet somewhere.

-Later, upon token generation event (TGE), the DAO wallet is issued the project token.

-Now, the moderator has to distribute the token in the proper amounts to all the contributing addresses, less the DAO’s carry and gas fees.

This is all quite cumbersome. Alternatively some DAO's use the Investing Club model which has been very well done by Syndicate. This model may be ideal for some, but ultimately many users find it suboptimal to lock themselves 100% into the whims of the group and many DAO's seek a model by which their investors can pick and choose their participation in a more measured fashion.

Using our Venture Window, the workflow is significantly automated:

-The DAO creates a ‘Window’ on their venture landing page for XYZ project.

-Members contribute their funds and receive a ‘receipt’ in the form of preXYZ tokens.

-There is no additional work to be done until the TGE, at which point, the DAO deposits the final XYZ tokens in the Window, allowing users to exchange their preXYZ for XYZ at the determined exchange rate whenever they want.

Enter the 'pre-'Token

So how does the preToken work?

A good parallel for understanding is the vote-escrowed (ve) tokens issued by many DeFi projects. In this scenario, users deposit the project’s tokens into a staking or locking mechanism and receive veTokens in return. The veToken is usually less liquid but accrues certain benefits.

A similar mechanism is at play here. With the preToken, users are depositing stable coins into the Window. (Note: Window has whitelisting features to enable various levels of compliance/control from the DAO who created it, so they are NOT public Windows.) In return, they receive some amount of preTokens. These preTokens are functionally a tokenized claim on the user’s share of the DAO’s SAFT note or other similar agreement with the project.

Let’s walk through some important features/considerations:

-The preTokens are not 1:1 with the final project token. This would create undue limitations if the project were to change token economics or SAFT terms later and result in a need to remint every time that happened (which is frequently in early-stage deals).

-Rather, the preTokens are minted in limited batches that equate to 1:1 with the total capital being raised. A $100,000 USD capital raise will correspond to 100k preToken mint.

-In a simple scenario, the DAO has no carry, so 100k preTokens get deposited in the Window, and the end-users get 1:1 preToken back for their stable coin when they deposit. This is customizable. For example, let’s say the DAO has a 10% carry. The DAO will still mint 100k preTokens, but they will keep 10k in their wallet and deposit 90k into the Window resulting in a 10:9 exchange rate for stables to preTokens for their end user.

-At the TGE, the DAO will direct the disbursement to their Window address. It will deposit the entire disbursement into the Window, set the appropriate exchange rate, and then both the DAO and the users can claim their final tokens by merely exchanging the preTokens.

Obviously, this is a much more elegant solution than an admin manually distributing tokens. It also has the added benefit of the preTokens being relatively liquid assets in the custody of the members.

This feature solves the problem of DAO admins needing to escrow portions of deals when members want to do OTC transactions amongst themselves, as is common in most venture DAOs.

And, it’s the feature that gives rise to our next big innovation—an OTC/secondary marketplace for preTokens which completes the cycle and revolutionizes the lack of liquidity previously inherent in early-stage venture investing.

We call it The Playground and we cover that next.