How to set up a DAO: the legally compliant way - Setting up a legally compliant DAO involves choosing the right jurisdiction, considering KYC/AML procedures, and ensuring transparent governance for successful operations.

[GENERAL] Name and surname of main applicant

D.Jur. Nicola Massella [on behalf of STORM Partners Sàrl (CHE-435.083.916), a limited liability company duly incorporated under the laws of Switzerland.]

[GENERAL] Email address of main applicant

nicola.massella@storm.partners

Additional applicants

D. Jur. Rocco Impecora (rocco.impecora@storm.partners) on behalf of STORM Partners Sàrl.

[GENERAL] Please specify how many months you expect your project to last (from 2-12 months)

2

[GENERAL] Please indicate if your proposal has been auto-translated into English from another language.

No

[GENERAL] Does your project have any dependencies on other organizations, technical or otherwise?

No

[GENERAL] If YES, please describe what the dependency is and why you believe it is essential for your project’s delivery. If NO, please write “No dependencies.” .

No dependencies

[GENERAL] Will your project’s output/s be fully open source?

Yes

[GENERAL] If NO, please describe which outputs are not going to be open source. If YES, please write “Project will be fully open source.”

Project will be fully open source

[METADATA] Category of proposal

Education

[METADATA] SDG rating

SDG goals: 4) Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all. 8) Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all. 9) Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation.

SDG subgoals: By 2030, substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs and entrepreneurship.

Key Performance Indicator (KPI): Proportion of youth and adults with information and communications technology (ICT) skills, by type of skill.

[IMPACT] Please describe your proposed solution.

Perception of the problem 

Setting up a DAO while ensuring legal compliance is crucial to enable such organisations to participate in the economy and bring their disruptive potential to our society. Establishing a legally compliant DAO requires careful attention to various aspects. First, determining the appropriate jurisdiction is essential, considering regulatory frameworks and their compatibility with DAO operations. 

Next, the DAO's legal structure must be defined, considering factors such as liability, taxation, and decision-making mechanisms. This may involve creating a legal entity, such as a limited liability company or a foundation, to serve as the DAO's legal representation.

To enhance compliance, implementing Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures can help mitigate risks. Additionally, adhering to securities laws is crucial, especially if the DAO involves the issuance of tokens or fundraising through Initial Coin Offerings (ICOs).

Furthermore, DAO governance should prioritize transparency and accountability, defining roles, responsibilities, and voting mechanisms to ensure member participation and decision-making.

Ultimately, establishing a legally compliant DAO requires a nuanced understanding of blockchain technology, legal frameworks, and ongoing regulatory developments. Adhering to these guidelines can help navigate the legal complexities and foster the growth of a compliant and successful DAO ecosystem.

The Approach

Our proposed solution will address the challenge by providing educational materials composed of a manual (circa 40 pages) and a video summary on legal and compliance matters specific to DAOs. 

The Effect

The impact of this project on participants will be:

1. Enhanced knowledge and skills: Participants will acquire in-depth knowledge and practical skills to navigate legal and compliance challenges and implement effective strategies for their DAOs; and
2. Increased compliance: Participants will better understand legal frameworks, ensuring compliance with regulations and reducing legal risks.

Targeted Audience

The event will be open to the all Cardano users and communities and suitable for all DAO builders who will benefit extensively from a legal-detailed workshop led by experts.

[IMPACT] How does your proposed solution address the challenge and what benefits will this bring to the Cardano ecosystem?

When designing this project, we focused on the value the challenge aims to bring to the community and answered it in a meaningful yet very pragmatic approach. 

How can we make Cardano the go-to choice for building DAOs? What tools can we provide to enable effective DAOs Creation and Operation?

The Cardano DAO ecosystem can be improved by the outstanding support of DAO growth, operation and governance from a legal perspective. STORM Partners aims to fill this gap and offer unique legal advice to Cardano DAO builders through our framework. The latter will give Cardano a unique competitive advantage compared to other chains, attracting more communities to build on Cardano. 

The educational materials will also align with the following KPIs:

1. Number of communities engaged in collaboration using Cardano DAO creation tools.
2. Number of DAOs that use Cardano as a governance/management chain in 6 months.

As mentioned, the successful outcome of DAO creation resides not only in the effective implementation of software development/no-code services but also in the ability to select appropriate legal & compliance frameworks. These aspects ensure the long-term survival of DAOs, allowing them to mitigate legal & compliance risks and nurture a solid community to leverage their participation.

Equipping DAO builders with pragmatic and professional advice in these areas will increase the long-term success of each project. Consequently, bolstering the number of DAOs in the Cardano ecosystem.

[IMPACT] How do you intend to measure the success of your project?

1. KPIs:
2. Demonstration of Impact: the impact will be demonstrable both qualitatively and quantitatively. STORM Partners will be tracking the number of DAOs that have benefited from our content and training and answering any follow-up enquiry there may be.  
3. Attendance: We aim from 200 to 500 Cardano users to read the manual and from 1000 to 2000 to watch the related video.
4. Quality of Content: All the members of the Cardano ecosystem will be able to leave feedback through a dedicated form while ratings will be shared; and
5. Number of DAOs set up after 6 to 12 months from the delivery: Calculation of the % of successful participating DAOs compared to market data. 
6. Metrics: 
7. Community engagement and attendance:
8. Attendance;
9. Number of readers/viewers; and
10. Number of social media shares for the event.
11. Outcome:
12. Feedback received: opinion on the quality and the relevance of the delivered content;
13. Engagement post-event: Up to 25% of the participants following up with additional questions; and
14. Numbers of Cardano user downloading the manual: Up to 1200 download withing six month of the material being uploaded;
15. Number of users watching the video: Up to 3500 views within six months of the material being uploaded.

[IMPACT] Please describe your plans to share the outputs and results of your project?

Cardano Community: Shared with multiple relevant community channels, such as the Cardano Town Hall, F10: DAOs <3 Cardano- Telegram, Project Catalyst Chat – Telegram, etc.

Cardano Youtubers: Promote the initiative to their audience, resulting in a highly targeted campaign of users already interested in Cardano’s development.

STORM Partners News Section: We will share each milestone update on our website with detailed information about each step undertaken towards the project's completion.

Social Media Channels: The report published on the website will then be shared through our social media channels, including our LinkedIn, with 9k followers, and Twitter, with 4k followers.

Reports and Documentation: All the research and project update reports will be created and attached to each article so that the Cardano community can freely check on the project’s progress. 

A final article outlining the metrics and KPIs achieved and the consequent impact on the Cardano community will be published. We are confident that our targets can be reached and that we will deliver outstanding value to Cardano. We will use the feedback and results to continue providing excellent educational content to the Cardano community through the following funding rounds.

[CAPABILITY/ FEASIBILITY] What is your capability to deliver your project with high levels of trust and accountability?

STORM Partners has played an active role in the development of DAOs for many years now, from a participation, governance and strategic level. Our clients include innovative DAOs we have supported from a legal, compliance, and marketing perspective. 

Legal & Compliance Department has extensive experience with the legal recognition (and related regulation) of DAOs. We have incorporated several DAOs in Switzerland and abroad, registering them either as foundations or as associations (depending on the intrinsic characteristics of the projects and the different governance structures), and we are always up-to-date on regulatory changes to mitigate our clients’ regulatory risks.

As a founding member of DAO Suisse, we seek to strengthen leadership in Web3 by focusing on overcoming the challenges faced by DAOs operating here and abroad.

We are also highly active in the Cardano ecosystem and have contributed through various initiatives and events to strengthen and shape its community and ecosystem. Some of our Cardano contributions and initiatives include:

1. Host at the Crypto Valley Conference 2022 & 2023, welcoming Frederik Gregaard.
2. Executive Leadership at Crypto Valley Association coordinating activities with Cardano Foundation to promote the ecosystem in Zug and abroad; and
3. Contribution to CIP-1694 workshop in Zug in June 2023.
4. Early-stage private investors in Cardano projects such as MELD.

We understand the importance of financial planning, budgeting, processes and accountability for engagement we perform. Specifically, we will deploy:

 

Progress updates: as previously mentioned, the team will regularly update each milestone with detailed explanations of a given task, with hours employed, outcomes and measurements. The updates will include reports on KPIs and metrics reached and strategic and implementation adjustments due to emerging issues or changes in the Cardano DAO ecosystem.

[CAPABILITY/ FEASIBILITY] What are the main goals for the project and how will you validate if your approach is feasible?

The main goals of our educational materials are to address the unique challenges and complexities presented by decentralized autonomous organizations offering our solution strategy. Such materials aim to provide regulatory clarity by establishing clear guidelines and definitions, helping to navigate the evolving landscape of DAOs. By ensuring compliance with applicable laws, the legal framework promotes transparency, accountability, and protection of participants' rights and interests. Our work also aims to mitigate potential liabilities for founders and participants, providing a level of legal certainty that encourages their full engagement and commitment to the transformative capabilities of DAOs. Additionally, the educational materials seek to foster responsible growth and innovation by setting standards and requirements that support ethical practices, good governance, and risk management within the DAO ecosystem. We will share and democratise niche industry knowledge that is often costly and, thus, overlooked by early-stage projects with scarce financial resources. 

Our success will be determined by the number of Cardano DAOs directly benefiting from our legal. It will be measured by performing an analysis with all the builders participating in the course after six months to a year and quantifiable by at least 30% of participants stating the course has helped them to knock down barriers to legal, marketing and fundraising growth. 

STORM Partners already possess the necessary internal capabilities to deliver the project in the timeframe, cost and deliverables set, making the proposal feasible for our organisation and the Cardano ecosystem.

[CAPABILITY/ FEASIBILITY] Please provide a detailed breakdown of your project’s milestones and each of the main tasks or activities to reach the milestone plus the expected timeline for the delivery.

As we aim for the course to help the Cardano ecosystem reach the challenge KPIs, this will be delivered promptly and effectively to maximise its chances of positively affecting Cardano DAOs’ success outcomes. Therefore, the team is confident that they will be able to prepare and deliver the educational materials, composed by a manual and a video, within an 8-week timeframe. The manual and the video will be uploaded and shared on the Cardano and STORM Partners channels so that everyone will have access to the content in the future. 

The educational materials will include a 40-pages manual, divided into chapter, one for each specific area, as: 

1. The legal concept of a “DAO”;
2. Incorporated and unincorporated DAOs;
3. Legal capacity of a DAO;
4. Legal structures available to DAOs from a cross-jurisdictional perspective;
5. Comparative assessment of the benefits and pitfalls of various DAO’s legal structures;
6. The governance structure of a DAO;
7. Contractual relationships of the DAO members;
8. The DAO as a token issuer (DAO tokens, their characteristics, features and legal qualification);
9. Regulatory risk mitigation measures for DAO founders; and
10. Oncoming regulatory trends: the future of DAOs. 

The video will be 20 minutes long and will analyse, in an outline and summary manner, all the points covered by the manual to give even those who do not wish to read the document in full a general understanding of it.

There will be also a marketing and communication efforts to ensure that both the manual and the video are well-received by the community and that a diverse and wide range of participants attend. The course will be communicated on all relevant community platforms and our social media channels, as previously described. 

Finally, a playbook of the dos and don’ts for DAOs of the areas explored and its material will be created and shared, serving as a consistent summary of what has been taught. 

First Phase: Week 1 and 2

Legal and Compliance content research; and

Event advertising and subscription link creation.

Second Phase: Week 3 and 4 

Legal and Compliance content creation;

Continued advertising efforts; and

Graphic Design of content.

Third Phase: Week 5

Content adaptation; 

Delivery of the manual; and

Recording of the video.

Fourth Phase: Week 6

Recorded video uploading; and

Communication of event outcomes.

Fifth phase: Week 7 and 8

creation and publication of the playbook; and

Content feedback gathering.

Sixth phase: Month 6

Quantitative measurement of outcomes.

[CAPABILITY/ FEASIBILITY] Please describe the deliverables, outputs and intended outcomes of each milestone.

1. Milestone 1: First Phase (Research and Educational Materials Organisation): 
2. Deliverables: Research on all the legal and compliance documents and organise the educational materials.
3. Intended Outcome: Developing particularly targeted and relevant topics to set up a DAO on Cardano.
4. Milestone 2: Second Phase (Advertisement and Content Creation):
5. Deliverables: All content preparation. Slide design. Continued marketing efforts; 
6. Intended Outcome: Successful preparation of slides and educational materials content. Obtainment of clear and succinct content slides from graphic designers. Increased awareness and interest in the event through continued advertisement; and  
7. Measurement: Easy-to-navigate content. Increase in number of interested participants. Number of communities and channels promoting the event. High click-through and conversion rate through marketing campaigns. 
8. Milestone 3: Third Phase (Content Adaptation and Educational Materials Delivery):
9. Deliverables: Last modification of content to ensure its relevance to the ever-changing environment. Delivery of a 40-pages manual and a video summary.
10. Intended Outcome: Relevant and up-to-date content delivery. Delivery of practical and valuable content for Cardano DAOs. High attendance in keeping with KPIs Successful recording of online workshops; and
11. Measurement: Number of attendees. High engagement in Q&A. Follow-up requests.  
12. Milestone 4: Fourth Phase (Event outcomes): 
13. Deliverables: Spread of the educational materials outcomes and numbers. 
14. Intended Outcome: Successful upload of material and share of relevant link. Successful legal workshop outcome in line with KPIs and Metrics set. 

Measurement: Proof of recorded material upload. Number of downloads, views and watch.

[RESOURCES & VALUE FOR MONEY] Please provide a detailed budget breakdown of the proposed work and resources.

1. Legal & Compliance Framework:
2. Research and creation of material: 1’450 ADA /h*20h = 29’000 ADA;
3. Manual preparation and delivery: 1’450 ADA/h*25h = 36’250 ADA; and
4. Video preparation and delivery: 1’450 ADA/h*10h = 14’500 ADA.

Subtotal= 79’750 ADA

1. Project Management and Coordination:
2. Coordination of team: 1’450 ADA /week

Subtotal (8 weeks) = 11’600 ADA

1. Miscellaneous: 4’600 ADA (5% circa of total sum)

Grand Total: 95’950 ADA

[RESOURCES & VALUE FOR MONEY] How does the cost of the project represent value for money for the Cardano ecosystem?

The cost of creating comprehensive educational materials for DAOs within the Cardano ecosystem represents value for money in several ways.

Firstly, well-designed educational materials provide regulatory clarity and compliance guidelines, ensuring that DAO participants and projects can operate within the bounds of the law. This reduces legal risks, potential liabilities, and the associated costs of legal disputes or regulatory penalties.

Secondly, robust educational materials will enable DAO builders to foster investor confidence by establishing clear rules and protections. This can attract more capital investments into the Cardano ecosystem, leading to increased growth, innovation, and economic opportunities.

Furthermore, a solid legal stracture for DAOs facilitates partnerships and collaborations with traditional financial institutions, regulators, and other industries. This integration can open doors to new markets, create synergies, and contribute to the overall expansion and mainstream adoption of Cardano and its associated DAOs.

By providing legal certainty, protecting participants' rights, and enabling responsible growth, the cost of a educational materials on DAOs in the Cardano ecosystem represents a worthwhile investment. It helps create a secure and trusted environment that fosters innovation, attracts investment, and promotes the sustainable development of a vibrant and compliant ecosystem.

STORM Partners have applied competitive Swiss market rates for the types of expertise and quality of the delivery in the context of a leading Web3 consultancy firm.

[IMPORTANT NOTE] The Applicant agreed to Fund10 rules and also that data in the Submission Form and other data provided by the project team during the course of the project will be publicly available.

I Accept