A Crypto-Crowdfunded Golf Course Venture’s $11M Raise Shows Why DeFi Still has Some Big Holes

ConstitutionDAO raised $47 million to buy a rare copy of the U.S. Constitution, with token buyers getting the right to vote to do, well, something with it.

Now a new DAO has raised $11 million to buy a golf course in the latest example of entrepreneurs crypto crowdfunding startups rather than seeking seed, angel or venture capital investors.

It’s being pitched as the latest trend in crypto, with Bloomberg announcing on Nov. 17 — two days after the plan to purchase the historic document at auction crashed and burned under the weight of a billionaire bidder’s wallet — that “ Crypto Crowdfunding Goes Mainstream With ConstitutionDAO Bid .”

CoinDesk, the largest crypto industry news outlet, called it the next gold rush .

Crowdfunding start-ups does work. Tracking device maker Tile and VR headset maker Oculus VR started that way, and tens of billions have been invested in platforms like Kickstarter and Indiegogo.

That said, crypto investing fads can sometimes be a little silly — which doesn’t mean they will fail, as Elon Musk tweet-powered joke memecoin Dogecoin’s $22.5 billion market cap makes clear.

This one is built on DAOs, or decentralized autonomous organizations. It is the vote-based, smart contract-powered governance mechanism at the heart of decentralized finance, or DeFi, projects.

See also: PYMNTS DeFi Series: Unpacking DeFi and DAO

It’s not the first time DAO-based crypto industry crowdfunding has been tried.

The DAO structure came to prominence in crypto back in April 2016 with the launch of The DAO, a crowd-funded, decentralized venture capital fund that was going to back projects selected by investors. It was hugely successful at launch, raising $150 million from more than 11,000 governance token buyers in less than a month.

A ‘Grand Experiment’

On New Year’s Day and Jan. 2, LinksDAO sold 9,090 NFT tokens on the OpenSea marketplace that act as membership cards in the golf course project.

To be clear, these NFTs do not bring any ownership rights to the course, or even a club membership. What they bring is the right to vote on the course purchase and design — the goal is to remake it into a top tier course — as well as things like prices and rules, as well as the right to buy a membership and various club perks like preferred tee times and discounts.

There is also a members-only Discord channel.

Those voting rights will come when the project’s $LINKS governance tokens are airdropped to NFT buyers, with Global Members who paid 0.72 ether ($2,700) getting four times as many as Leisure Members, who paid 0.18 ether (about $675).

In an industry in which fraud is till rampant and “rug-pulls” — starting a project and running off with investors funds — is a growing problem, LinksDAO has one big thing going for it: The project is headed by someone well-known and respected in the crypto community, Mike Dudas, who founded The Block, a well-regarded cryptocurrency news and research site, as well as several other successful startups.

Read more: Crypto Scams Fueled by DeFi-Friendly ‘Rug Pulls’

The timeline calls for a mid-2022 club purchase, early 2023 opening, and future club purchases after that.

While the LinksDAO’s project’s business plan is a lot more detailed than ConstitutionDAO’s (which is to say, it has a business plan), it is still very light compared to a traditional start-up seeking venture capital money.That’s something Dudas acknowledges, telling Golf magazine that it is “a grand experiment” that may never see an actual golf course opened.He added that the $11 million won’t even go to buying a course, but to managing, planning, and developing the project.That process is not very far along — certainly not far enough for angel or venture investors to plunk down $11 million.How far along is it? Dudas said he’d only started thinking about LinksDAO in early December — just weeks after ConstitutionDAO caught a wave of success by capturing the crypto public’s eye. Back to The DAO DAOs are ubiquitous in DeFi — it’s the only truly decentralized, human-management-free governing method crypto has come up with — with virtually all projects run by DAOs or by founders who intend to turn them into a DAO.However, in the case of a decentralized lending platform or exchange the basic business plan is well-tested.Which points to another hole in DAO-based crypto crowdfunding: Decentralized investing projects don’t necessarily have any professionals scrutinizing the business plan, or even the code of the DAO itself.The DAO model relies on knowledgeable community members to scrutinize things like coding and smart contract language — sometimes to ruinous results.Most […]

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