Crowdfunding Lessons from the Spice DAO

What if we get a huge bunch of people together and buy something that lets us do fun things with a book that we all love, while making it accessible as never before? Great idea, isn't it?

If that sounds familiar, maybe you've heard of Unglue.it, a web site we launched 10 years ago? We asked people what book they wished was free to everyone and the number one answer was Douglas Adams' Hitchhikers Guide to the Galaxy. We talked to the literary agent for the Adams estate, and long story short, the rights entanglements made that impossible for any amount of money. We had a success with a seminal Anthropology book, but the intersection between books people were excited about and books that authors were willing to license openly was small. Probably you haven't heard of the site, but while it has focused on building a catalog of open-access books (now over 100,000 titles!) we still crowd fund a book here and there, most recently an academic monograph.

Probably you HAVE heard about Spice DAO, a "Distributed Autonomous Organization" that sprinkled some magic blockchain dust on an auction for a copy of Alejandro Jodorowosky's movie treatment of Frank Herbert's novel.

Web3 enthusiasts came through for Spice DAO, "crowdraising" enough to win the auction for €2.66M, though Christie's estimate for the item was only €25-35,000.

Spice DAO vows that:

Instead of letting it remain hidden away in private collections, Spice DAO crowdraised funds ... to collectively explore options to digitally preserve the manuscript, make it accessible to the public for the very first time, and develop creative projects inspired by the vision Jodorowsky set forth.

Predictably, the success of Spice DAO led to widespread ridicule , because:

• The price paid was 100X the esimate
• Nothing about the item purchased gave them any rights to "make it accessible" or "develop creative projects" it inspired.
• Images of another copy were already freely available on the internet. But no more. Ironically, the publicity around Spice DAO seems to have knocked the images off of the internet!
• Even the DAO's website https://dune.foundation/ is no longer online, most likely trademark infringement. (archived version linked above.)

One crypto lesson: a DAO constructed this way may get ripped off in an auction. Even if the seller was not using shills to see inside the DAO and bid up the price, the DAO was vulnerable to crypto-pranksters (or arbitrageurs?) who knew exactly what the DAO was forced to bid by its "smart" contract to avoid dissolution.

Despite all that, the 2.1 Billion "Spice" tokens given to crowdraise participants are still worth over 800,000 "dollars", according to Coinmarket, so maybe the product here is a convincing story for unregistered securities that apart from representing something tangible, can be used for tax evasion and money laundering. And the team seems to have had a crash course in copyright law:

After two months of outreach, conversations with former business partners and consultations with legal counsel we have not been able to reach an agreement with any of the rights holders involved in the creation of the contents of the book of collected storyboards of Jodorowsky’s Dune. (medium)

Spice DAO, like most successful crowd-funding projects, had a good story, and clearly that's worth a lot. There's still a big difference between a good story and an honest, well informed story. Crowdfunding services such as Unglue.it are limited by all the facts they have to deal with. But magic crypto dust has a certain reality. The crowd-raise generation of tokens that can be bought and sold in free markets allows participants to dream that their tokens will increase in value, and they very well could. In the real world, Spice DAO spent the equivalent of $300,000 to create the liquidity pool needed to distribute the SPICE tokens. Which makes credit card fee seem like a bargain! But dreams are priceless. 

At least with "conventional" crowd funding, you know there's some accountability if you're investing in a nightmare!