The LAO is a project piloted by OpenLaw to create a new wave of DAOs in the form of limited-liability autonomous organizations. With the LAO, accredited investors can invest in the fund along with others and, as an organization, reach consensus on investments the fund will make for profit.
Current for-profit DAO implementations run into security law issues in the US (as seen with The DAO) making it difficult for accredited investors to invest in such funds. Unlike current DAO models, the LAO circumvents these regulatory hurdles by forming the organization under a limited liability company.
OpenLaw, the project behind the LAO, was founded in 2017 by Aaron Wright and David Roon. The LAO itself was first announced in September of 2019, and is aiming to go live at some point between Q1 and Q2 of 2020.
The LAO is projected to raise $2.5M between up to 100 accredited investors. Each approved member will be eligible to purchase 1% blocks of LAO tokens for $25,000, and are limited to a maximum of 9% LAO Token blocks. This structure allows them to maintain healthy governance in the LAO without giving up too much control to any single individual.
The reason the LAO is attempting their own spin on DAOs is because of the hurdles and complications current DAO implementations face. With the LAO, investors don’t face the unregistered security risk that many DAO implementations face because of the regulatory approach they’re taking.
What if "legal engineering" was as simple as typing out . . .
[[Agreement: Clause("Standard Agreement")]]
[[Payment: Clause("Pay DAI")]]
— Ross Campbell (@r_ross_campbell) February 29, 2020
On top of that, because the LAO is currently only available to accredited investors it prevents one entity from controlling a majority of the governance. This is very often seen with current DAO implementations, partly because DAOs with tradable tokens don’t have any process to vet these investors from purchasing a majority stake in the voting tokens.
Even if a DAO imposes a strict limit per Ethereum address during its initial sale, nothing is stopping users from creating multiple Ethereum addresses. However, with the LAO, they’re able to ensure one entity is not buying more than the approved maximum of 9% because of the accredited verification required.
Investors aren’t the only ones that can earn money through the LAO, but projects can too! With The LAO, projects can simply apply for funding and let the LAO govern if the said project deserves funding or not. One problem with the existing way projects request funding is the expectation of a high level of technical knowledge, meaning the proposers could be at risk of not receiving funding due to investors not fully grasping the concept of their project.
To get around this, the LAO recently announced a mentor program which lets LAO members make use of a network of top-minds in the ecosystem to consult them on the project in question. This is important for both investors and projects seeking funding because it ensures that their project will be properly evaluated for funding.
The LAO has assembled an all-star team to help LAO-funded projects. @twobitidiot @rzurrer @CamiRusso @Defi_Dude @bramanathan @joonian @ricburton @AndrewDARMACAP @AmandaCassatt @AlexMasmej @DonnaRedel @samcassatt @MattCorva @evabeylin @mkriak.
— 👾 (@TheLAOOfficial) February 25, 2020
Currently The LAO isn’t live, so if you’re a project looking for funding or an accredited investor wanting in on the fun, you’re out of luck. Once you’re accredited, you will be able to invest in The LAO when the public sale opens up around late February or early March of 2020. You can begin the process for becoming accredited directly on the verify section of the website. For projects that are looking to get funded, you can apply for the funding once The LAO is live on the apply section of the website. Projects who are approved to receive funding will receive it in DAI.
EVERYTHING YOU NEED TO KNOW ABOUT THE LAO
— 👾 (@TheLAOOfficial) March 6, 2020