Fractional Ownership and the Tao of DAOs
Signal: The number of active DAOs has increased by ~132% since September last year, and their combined assets under management have ballooned from $290m to $14B+ today.
DAOs --- organizations governed by computer-encoded rules and controlled by organization members, rather than a central government --- have evolved out of blockchain technology, and are quickly rising in significance.
A group of crypto investors recently established a DAO to crowdfund enough money to buy one of the last surviving 1st-edition copies of the US Constitution, which went on auction last week.
While the DAO lost out, it raised $40m+ from 17k contributors in less than a week.
*Source: *Twitter
The Big Picture: The ConstitutionDAO initiative is an interesting case study on the future of DAOs and fractionalized ownership/governance more generally.\
Startups that facilitate fractionalized ownership of assets are receiving record funding, particularly in real estate where companies like Pacaso, which offers "a modern way to own a second home" through co-ownership, recently raised $75m at a $1B valuation.
Source: Crunchbase
We see opportunities in 4 niches:
1\. Real estate: Fractional ownership has democratized 2nd home ownership in ways beyond what Pacaso currently offers.
For example, startup Kocomo aims to modernize the timeshare model by using fractional ownership to open up cross-border vacation home ownership with the added benefit to owners of being able to "rent out" their weeks.
Kocomo's pricing model includes upfront and ongoing service fees (Source: Kocomo)
Opportunities are not limited to residential properties. Entrepreneurs could apply the model to commercial real estate (a concept which has already taken off in India) or even agricultural land.
Farm Together* allows investors to become fractional owners of agricultural land*
2\. Transportation: Co-ownership is not a new concept, especially when it comes to private jets --- NetJets has been using the concept since the '60s --- but as technology makes the model more accessible, other opportunities in transportation will emerge.
Think yachts, boats, Jet Skis, motorbikes, super cars, bicycles, e-bikes, and even thoroughbred horses (which is the only way we get around here at Trends).
3\. Other collectibles and the culture economy: Companies like Masterworks and Otis are already enabling consumers to buy shares in fine art and other unique collectibles like comics, baseball cards, and sneakers.
There are more attractive collectibles that you could explore, many of which we wrote about last year:
Otis also offers fractional ownership in NFTs. They're not the first to pioneer this model; Belgium-based startup Wunder has been offering investors the opportunity to co-own digital artworks since 2017. Art owners earn income from their pieces when corporations and hotels display their digital art in lobbies.
As more real-world assets enter the digital realm (e.g., music, fashion, patents and intellectual rights, gaming moments and memorabilia, etc.), there will be more opportunities to help investors diversify their portfolios through fractional ownership of digital assets.
4\. Adjacent opportunities: A range of other opportunities will open up as the world becomes increasingly fractionalized, including:
- Lease-to-own models: Blockchain technology could be leveraged to facilitate lease-to-own purchases by allowing tenants to own fractions of their property/car as they pay rent/installments. The same model could be applied to other lease-to-own assets, like expensive equipment.
- Insurance: We could see the emergence of niche insurance products, which take into account the different risk profiles of multiple asset owners.
- Employee incentives: A company in Hong Kong is already using fractional real estate as part of their employee incentive scheme. Employees can convert points earned into perks like vouchers and hotel stays, or fractional ownership in the company's commercial property. The same model could be applied to other assets.
