A carnival has thrilling rides, amusing games, delicious concessions, and a ticket to get in.

Krause House is best imagined as the world’s greatest curated carnival, focused on sports. Krause House is an ecosystem to facilitate fun & revenue to support our mission of fan ownership.

• Our rides are our ownership positions.

• Our games are our apps for access and governance.

• Our concessions are our collectibles & merch.

• Our tickets are our NFT-access to the community.

Let’s explore these concepts more deeply:

Rides

Each real ownership position serves as a “ride” in the Krause House carnival. The north star is to get as many people on the ride as we can within the rules & regulations. Additionally, we aim to build on-ramps for people who aren’t eligible to get on the ride today to become eligible tomorrow.

At a real carnival, different rides have different restrictions such as age / height / weight & additional costs. These restrictions have been put in place from a combination of regulations, safety concerns, and revenue opportunities. Krause House too will have to be mindful of restrictions enforced by leagues/teams, nations, & majority owners.

Games

Games in the Krause House carnival are to allow people to earn their way to amazing access or governance in the teams we’ve been able to work with. Imagine a GM-simulation game that rewards the winner, opportunities to work with the actual GM. A college basketball scouting app that rewards the top contributors with access to team draft workouts with prospects.

Carnivals have carnival games, transacted in an in-carnival currency token (think Chuck E. Cheese tokens). Krause House’s games are designed for our community to demonstrate unique talent to earn access or governance in the team’s we have ownership positions in, transacted in a native token.

Concessions

Carnivals have concessions stands for the basics, transacted in local fiat. Krause House’s concessions sell merch & tickets to teams that are in the Krause House network; transacting in local fiat, stablecoins, or ETH.

Tickets

Carnivals often have tickets for access. Krause House already does too.

Carnival Co-Op

Building a carnival as a cooperative is a superpower, it allows us to build the carnival collectively & with a mission larger than profit. The roles between operator & patron become blurred. We believe this model works with culturally powerful assets such as sports, music, and entertainment — anything that inherently has a powerful fandom. We can work collectively to invent new rides & games, while also enjoying the hard work of everyone else in the collective.

Come one, come all; welcome to the Krause House carnival!

Very dope.

We jumped on the phone to discuss. Our initial excitement didn't match the inbound messages. After a year+ of talking with NBA insiders & private equity funds we had come to the point of view that our best bet was buying a minority share in an "off-market" deal. Our goal has always been to work with a team who understands our long term vision of building the internet's first home team. A team that fosters a global sense of belonging and pride in its fanbase, creating a vibrant and supportive environment that produces higher engagement while driving the value of the franchise for the long-term.

An open bidding process is the opposite.

Who could Sarver sell to for the most amount of money and do it quickly? Big names, big bags, & big urgency. An owner that could act quickly and deploy capital immediately.

We didn't get discouraged, but we needed a new angle. Yes, the odds of winning this particular bid were low given the names already rumored in the mix: Jeff Bezos, Larry Ellison, & Bob Iger. But what if we used this as an opportunity to tell our story? What if we used this time to educate the media, the public, & future NBA team buyers?

You learn quickly that who the media reports are in the mix, are often not actually in the mix. Looking at oddsmakers in Vegas is an interesting source, NBA insiders are even better. We started hearing more names with bidding aspirations: Shaq, Floyd Mayweather, Laurene Powell Jobs (Steve Jobs' widow), Jahm Najafi (Suns minority owner), Ernest Garcia Family (Carvana founder), Byron Allen (entertainment mogul), Larry Fitzgerald (NFL), & more by the day.

"First, think. Second, believe. Third, dream. And finally, dare." — Walt Disney

One name that jumped out to us was Bob Iger. His name continued to get mentioned from a few interesting sources. We were excited about getting the idea of Krause House in front of Bob given he was the rumored favorite to win the bid & he might personally resonate with the magical fan experience we're building given his Disney background.

We sent countless of these messages. At the risk of blocked numbers and the "is everything ok?" replies, we stayed in pursuit of introduction paths to the shortlist of contenders. You went to Ithaca College in 1973 with Bob? You got one of these messages. Interned at Disney in 2004? If you exchanged a friendly 'hello' with Bob in the line at Starbucks, we're asking for an intro.

We spun up a Twitter thread explaining why we're the highest value-add minority ownership group you could have on your cap table & we were hoping to talk to Bob Iger. If there's one meta insight we've learned, it's the value of putting your wildest aspirations into the universe and working backwards from there.

Crazy thing is, you send enough of these and you've been careful to maintain credibility and a handful of the responses are different.

One of the beautiful things about web3 is the power of networks of networks. That's not a typo, it's a network that is made up of networks. This is something Krause House can tap into with allies like Seed Club in our network. We reached out to Seed Club where Krause House was a participant of their accelerator program. Ben Jacobs had an intro for us, he wanted to know more about our ask. A few minutes later we're connected to someone close to Bob Iger who's plugged into the professional sports world.

Who might want to buy the Phoenix Suns? 🙋‍♂️

1. Bob Iger

2. Larry Ellison

3. Floyd Mayweather Jr.

4. Shaquille O'Neal

5. Krause House DAO

Take a moment to soak that in. CBS News wrote an article musing about who might buy the Phoenix Suns. They included two of the most accomplished business executives in the world, two of the most successful professional athletes in the world… and Krause House. Freaking Krause House!

There are two amazing things about this list:

1. The first four entries are people. Krause House DAO is a collective. The fact a collective is even on the list is incredible and illustrative of the trend of our concept. A collective owning a professional team makes sense. It's a matter of when, not if.

2. Not even a year prior did Krause House DAO officially exist. Not a single dollar token in the treasury. Just a few crazy NBA fans that actually thought they had a chance to own an NBA team. What seemed like a moonshot all of a sudden seemed well within reach. How things can change in a year.

Shoutout to Khristopher J. Brooks for including us in his article. It was another step of validation that we could reference & build upon for our conversations. We outlined in our original strategy that this phase of Krause House is all about building credibility. This small nod of support did just that. People were beginning to take notice.

Bob Iger Returns to Disney

We had a few conversations with Bob Iger's team on their interest in a potential bid. Each bidding group has to balance a dance between revealing too much while often needing to raise some capital along the way to help round out the bid. The valuations of these NBA teams are now so large, there are only a handful of individuals in the world who can single handedly afford one. The Suns' rumored valuation was continuing to rapidly rise, Bill Simmons even suggested the team may go for $4b… $2b more than the "outrageous" price Steve Ballmer paid relatively recently for the Los Angeles Clippers.

The vibe of conversations was that Bob was very interested in buying a team, but there were some material issues to sort through before committing to that path. As we later found out, Bob would return to Disney as CEO. That opportunity closed, on to the next.

A Cryptic Discord Handle DM

We received a DM from a cryptic Discord handle. That's not the abnormal part, we get DMs from cryptic Discord handles every day. This particular DM was looking to talk to someone at Krause House about joining an NBA bidding group. They had heard Krause House was designed to do exactly just that.

Putting out your audacious mission and working in public has some beautiful advantages, this is one of them.

We quickly hopped on call to learn more. The ownership group was looking to increase their bid after hearing about the rumored leading bidder. They wanted to increase their bid by about 25% and were exploring who might be interested in joining.

One of the most challenging things about Krause House's pitch is that we're different from just silent money. In fact, that's our value proposition. We believe we're the highest value-add minority owner you can have on your cap table. The way we position ourselves to NBA owners is that we're the legal structure of a private equity fund, but we come along with a digital global community. This community is a conduit to unlocking the team we're partnering with to become the "Internet's Home Team".

To pull this off correctly, you need the majority owner to fully believe in the mission & empower that community through delegation. That's why it's so important for us to talk to & work with a majority owner who's excited about what we're building.

In this particular case, this bidding group was focused first and foremost on assembling the capital required to make the successful bid. The subtleties of our pitch being "the internet's home team" needed to wait. This is part of the reason that we originally were skeptical about being involved in a "market deal". The pace is too fast, the process is focused on increasing the bid amount, not plotting on how to grow the valuation post-sale.

With that being said, we're always open to find ways to simply start by getting on any cap table. The big challenge with this particular ownership group was that we needed to talk to the controlling interest first, before we'd be willing to sign a LOI for tens of millions of dollars to join the ownership group. If there's one thing we've learned in this space, it's that reputation is everything.

Venture Capitalists Explore The Suns

We woke up to a message from one of our Jerrys, who goes by the handle Dluxe, with a rumor regarding a bidding leader for the Phoenix Suns. Venture capitalists were allegedly in the bidding process. Interesting. Commodore & Flex both come from the tech startup ecosystem with a fairly strong network. We began outlining the people involved in the bid from this newly discovered ownership group.

This is one of the most challenging aspects of working with a market deal, there are ownership groups forming silently & coming together quickly to get a deal done. The only way to know who's in the mix is to be in the mix or have NBA insiders feed you information.

We got to work quickly mapping out potential introduction paths. To add to the fast paced work, Flex & Commodore were in the same city preparing for a big meeting for Krause House while this was ongoing. Commodore found two personal connections from his startup days.

"Hey, it's been awhile since we last caught up. Hope you & yours are doing well. Do you happen to know [ ] [ ] from [ ] [ ] well enough for an intro? I'm looking for introduction paths to discussing his rumored Suns bid."

We've sent countless of these types of messages over the past year+. We're sure that our friends & colleagues get a little triggered when seeing an inbound message from one of us.

A few hours later Commodore received a reply, "We met a while back at a conference. I wouldn't say I know him well, but enough to send your blurb along."

This is the most complicated response to get. Every time you ask for an introduction, you spend a little social capital. All it takes is one introduction to get a deal done, but all it takes is one low affinity introduction to potentially tank your entire pitch. The goal is always to have a high affinity & strong introduction, but with a time crunch — beggars can't be choosers.

"Okay, let me try one more path and I will get back to you."

Commodore sent off an email to another introduction path with a similar message.

No response.

Do you take the low affinity introduction? Do you wait? Do you tap more lower odds introduction paths? This is the game that is played in these high level stakes.

We chose to wait.

That evening we got an email from [ ] introducing us to [ ] [ ]. "Meet [ ]. You should follow up with him ASAP about the Suns opportunity."

At this point, our meeting had concluded & Commodore was on a flight back home working 36,000 feet in the sky. "I'd love to talk as soon as tonight."

At this point, we've already talked to a few bidding groups. The conversation has generally been the same: "How much money can you bring to the table?", "Your idea is super interesting, but let's talk post-close about it more in-depth."

This call was different.

[ ] immediately understood the value proposition. He was excited about the prospect of implementing it for the Phoenix Suns in a deep & meaningful way. We talked about many of the different ways we could execute this, diving deep into the idea of remixing access / equity / governance for fans to become more deeply engaged with a team.

One particular comment got us really excited about all of the hard work that's been going on at Krause House. "Of all the private equity funds pitching me to get in on the bid, this is a private equity pitch that jumps out above all the rest." Let us explain more about what this means & why we were so excited to hear about it.

In the past few years, the NBA has allowed private equity funds to join the ownership groups as minority owners. Since the "Jay-Z Rule" (2015), the ownership group has to be ≤ 25 owners & each owner must own at least 1% of the team. The rule notoriously came out of the New Jersey Nets selling Jay-Z 0.15% of the team in exchange for publicity & co-branded ventures affiliated with the Nets move to Brooklyn. Allowing private equity funds materially opens up the accessibility to one of the world's most exclusive assets, NBA ownership. The LP (limited partners) of a private equity fund that's investing in a NBA team, now have access to ownership without a minimum $25m check.

As of the founding of Krause House, this became the focus of our legal work. How could we use a private equity fund structure with a twist that is fully NBA by-laws compliant (and of course, federal regulations) along the way? Our strategy is to use a standard private equity structures that is made up of Krause House members & work with the majority owner to delegate access & governance to areas they're comfortable with to the broader collective. We'll incorporate the team's existing fan base into our ecosystem. With this in place, we'll build out experiences like decentralized scouting networks, analytics, engineering, & design to grant community members access & governance to the team.

Said plainly, Krause House uses the blueprint of private equity with the power of community.

This concept is a game changer. There will always be a place for silent money private equity, but this idea of private equity powered by community is disruptive. It's disruptive to private equity's business model. We believe that any asset that is culturally popular (art, music, sports) will be disrupted by this model. Aggregating capital is no longer the unique differentiator of a private equity fund, creating unique value with a community in tandem with the capital is the future.

We ended that call ecstatic. We'd just delivered one of our best pitches, the ownership group 100% gets the value proposition, & wants to work together. This ownership group is the leading bidder in a process to fully own one of the most interesting teams in the NBA.

"Let's start figuring out details next week."

Wojbomb Part Duex

Almost 3 months to the day, another Wojbomb explodes our world.

Seemingly out of nowhere, Mat Ishbia is allegedly purchasing the Phoenix Suns. We later learned that Mat offered a fantastic price to Sarver directly, he accepted. On February 6th, 2023 the NBA Governors voted 29-0 to approve Mat Ishbia as the newest owner in the NBA.

"The only limit to our realization of tomorrow will be our doubts of today." - Franklin D. Roosevelt

When we started working on this idea, most people thought we were stupid & crazy. Some people still do. Every day that goes by, this idea is becoming more probable. Valuations continue to soar, the group of potential buyers dwindles, NBA owners need new types of capital. The new owners buying in at high valuations need new novel mechanisms to grow their valuations in the future. Mid-market & small-market teams need new ways to drive outsized valuation increases to compete with NYC & LA. NBA teams lack significant direct relationships with their fans, they've been mitigated by ESPN / Instagram / TikTok / etc.

Web3 is unlocking new ways of organizing. New ways of capitalizing. New ways of engaging. Krause House sits as an idea at the intersection of these trends & offers a compliant path for aggressive NBA owners — especially in the mid-to-small markets.

Krause House is the future of sports ownership. We will prevail. This story isn't over, but we felt compelled to share with the broader community how close we flew to the Sun.

Taking a second to remember why we started: there’s real value to democratizing ownership to a global fanbase. We’ve heard from multiple credible sources, the fact ownership is willing to engage with the “kids on the internet that want to buy an NBA team” is an accomplishment in itself. In just a year, we’ve gone from “what if?” to “when?”.

Our goal is ambitious. Our approach is novel. Our strategy is unconventional. Yet, we’ve made massive strides in making sports history.

The purpose of this piece is to summarize the insights we’ve learned from meeting with owners and/or ownership groups from around the league. DAOs by nature require a high degree of communication in order to succeeed. While we can't bring 6,000+ members to meetings with NBA owners, it’s important to deliver findings and insights from these meetings to the rest of the community that had such a profound impact on getting us to where we are today.

Listed below are areas of opportunity for Krause House based on the hours of valuable discovery directly from front office, owners, and ownership groups. In addition, we’ve outlined exemplary projects produced by community members that have helped build our case and prove our capabilities as a collective. Lastly, we’ve provided some open-ended questions to help provide inspiration for the next wave of projects to help reach our lofty mission.

Opportunities

The opportunities based on our conversations can be categorized into four buckets (pun intended 🏀):

• Fan Engagement

• International Expansion

• Additional Revenue Streams

• Distributed Talent Pool

The first three have been atop the owners’ minds for a while. For a few reasons we’ll go over, each of these have seemingly increased in priority over the past few years. The rise of social media creates wider distribution channels for content, thus franchises are looking for innovative ways to engage and grow their fanbase. This opens the opportunity to increase loyalty in existing fans, develop new fans, and in turn, drive more revenue for the franchise.

The last opportunity mentioned is not as intuitive to owners until we’ve had a chance to explain the unique value propositions of Krause House. Tapping into a distributed talent pool of working professionals is promising, albeit challenging. However, owners are interested to hear ways we can tap into the potential energy of the fanbase to help with team initiatives.

The structure of each opportunity is as follows: Owner’s Thoughts - Summary of the problem space and how owners/front office think about the opportunity for success.

Krause House’s Advantage - Ways in which Krause House offers a distinct competitive advantage over traditional prospective owners and/or ownership groups. These unique selling points have been landing nicely when talking to owners as well as front office.

Exemplary Projects - Examples of projects built within Krause House that show evidence to support our ability to solve said problem.

Food for Thought - Open-ended questions that hopefully inspires Jerrys to continue to build and develop towards the mission based on the respective opportunity.

Fan Engagement

For some time, the relationship between franchises and their respective fans has been mostly abstractive. By giving fans the opportunity to contribute to success off the court, teams can deepen the connection and loyalty of their supporters.

Engaging fans is more than just t-shirt cannons and seat raffles. Demand to engage local and global fans before, during, and after games is higher than ever. There’s significant opportunities to offer more exclusive content, behind-the-scenes access, interactive features on websites and social channels, as well as developing new mobile apps that allow fans to engage with the team and each other in new and exciting ways.

Owner’s Thoughts

It's likely that the use of technology will continue to play a significant role in enhancing the fan experience. For good reason, owners are obsessed with delivering the highest amount of value to their fans.

The front office recognizes that the fan experience is a constantly evolving concept. They committed to staying at the forefront of new trends and technologies in order to offer fans the best possible experience. Krause House provides something that hasn’t yet been seen from an ownership perspective: a digitally native network of die-hard fans to assist with research and development, partner with cutting-edge technology companies, and work with industry experts to stay ahead of the curve and offer new and exciting experiences to our fans. We are the fans, and that serves valuable to the leader of the franchise.

Krause House Advantage

The goal of fan engagement is to create a deeper connection between fans and the team. The fan experience should always be rewarding. As a community of 6,000+ fans, there’s no better entity on the cap table that could speak to the benefits of fan engagement. Ownership and front office has been impressed with our ability to mobilize a community of basketball fans to execute around a specific function or task.

The distributed nature of our community is a superpower. The ability to plan, coordinate, and execute high quality events, experiences, products and services remotely adds a distinct advantage that few (if any) front offices provide.

Members of Krause House provide a litmus test that is highly correlated with the “everyday fan”. The ability to swarm talent around fundamental fan experience problems is a strong value proposition to any owner/ownership group.

Exemplary Projects

The Pig Pen Contributing Member(s): Uncle Jon Details: IRL fan activation for The Ball Hogs, a Krause House owned and operated BIG3 Team.

Heat Check
Contributing Member(s): Mario Lopes, Boosh, Denny, Kevtae
Details: Blending digital & IRL challenges, Heat Check rewards basketball fans for their daily actions

Gameday Contributing Member(s): greg_, Crabtree Details: A decentralized media platform powered by the world's greatest basketball community

Food for Thought

• What areas of fan engagement is Krause House uniquely suited to do better than current teams?

• What does digital fan engagement look like? In what ways is it better than local/IRL activations?

• How do we leverage our reach to attract in partner and sponsor opportunities that will directly benefit the fans?

International Expansion and Exposure

Over the past few decades, the NBA has experienced a significant rise in popularity outside of the United States.The proliferation of social media platforms like Twitter, Instagram, and Facebook has allowed fans all over the world to follow their favorite NBA teams and players in real-time, regardless of their geographical location.

In the past, international NBA fans had limited access to games and highlights, often relying on TV broadcasts that aired only a handful of games per week. Fans from all over the world can now follow their favorite clubs and players on social media, watch game highlights, and even stream games via streaming services.

This newfound access to NBA content has not only increased the league's global audience but has also created a sense of community among international fans that is still largely untapped by the franchises. Fans from many nations can now communicate with one another and share their passion for the game, fueling the expansion of NBA basketball abroad.

• Average League Pass viewership this season is up 42% internationally compared to a year ago.

• The NBA has 2.1 billion followers globally across all leagues, team and player platforms. Among those followers, 70% are from outside the U.S.

• The NBA dominates social media presence with over 210 million subscribers / followers worldwide which is more than any other league in the world.

• In 2021-22 the NBA generated 13 billion views across social media platforms worldwide

Owner’s Thoughts

Every owner in the league is actively exploring opportunities to expand their team's presence internationally. The plan is to invest in building the brand in both thriving and emerging NBA markets by playing more games overseas, partnering with local businesses to create marketing campaigns, and building relationships with international media to increase global awareness.

Front office and ownership have been very keen to see how Krause House can help with overseas exposure. They’ve been impressed at our ability to experiment with local-language content and community activations, all while establishing a presence on social media using fan-generated content.

Interestingly, most owners view international growth opportunities as vital to the long-term success of the team; however, it needs to be done with calculated and thoughtful execution. All of them recognize the potential of international expansion, but most are taking a cautious approach to ensure it’s done in a way that makes sense for their respective team. When asked how they see Krause House assisting, their main focus was on identifying key markets that are a good fit for their brand, and developing targeted strategies that resonate with local fans.

Krause House Advantage

International fanbase is divided and team-agnostic Fans of the NBA outside the US have the highest affinity towards players, not teams. This provides a massive opportunity for small market teams to acquire and engage fans in thriving international markets. By pairing the existing fanbase with newly acquired global fans, Krause House can turn a local NBA franchise into the internet’s home team.

The community that never sleeps Fandom is a 24-hour lifestyle. Lucky for us, Krause House is an international, digitally-native organization.

Roughly 50% of our community is based outside of the United States. Our members are located in thriving basketball markets such as Southeast Asia, China, and LATAM. The diversity of people within The House embodies the perfect representation of the NBA fanbase. Basketball is a global game with global fans. What better way to understand the needs of international fans than allowing a global community agency over non-operational components of a franchise?

Exemplary Projects

Philippines Court Refurbishment Contributing Member(s): Uncle Jon, DBag, Mike Swift Details: Uncle Jon, DBag, Mike Swift | Official KH activation in the Philippines

Casa de Krause Contributing Member(s): Josh Phelps Details: Washington, D.C.-based youth leadership and development nonprofit organization that gives at-risk youth from D.C. a once-in-a-lifetime opportunity to spend a month during the summer in the highlands of Guatemala. KH sponsored the camp tournament.

Food For Thought

• After doing activities in Central America and SE Asia, how can we continue our momentum in emerging basketball markets such as Brazil, Portugal, and Spain?

• Can teams leverage the NBAs global reach on social platforms to attract new fans? How?

• Are there ways we can assist with creating localized content and establishing partnerships with local media, businesses, and charities in international markets?

Additional Revenue Streams

NBA teams earn revenue through a variety of means, including ticket sales, merchandise sales, corporate sponsorships, and media rights deals. In recent years, teams have begun to investigate alternative revenue streams such as virtual and augmented reality experiences, streaming services, web3/crypto products, and non-endemic corporate sponsorships. Teams will have greater opportunities in the future to monetize their digital assets, including social media, websites, mobile apps, and other digital platforms. Additionally, as technology advances, clubs may experiment with new ways to communicate with fans remotely, perhaps even put them in game.

It’s worth noting, the aforementioned opportunities are tightly correlated with our ability to drive revenue for teams/clubs. In other words, our ability to drive fan engagement and expand a global fanbase in turn will increase revenue from current lines of business and allow teams to create new or improved sources of income.

Owner’s Thoughts

Player empowerment is a catchall for the fact that the league has done a terrible job of empowering teams. The players have all of the leverage in every situation. -- Unnamed NBA General Manager, The New Yorker

As player contracts get more expensive each year, and inflation continues to have an impact on professional sports franchises, the owners' interest in ancillary revenue streams are higher than ever.

During our meetings, emerging opportunities like esports and sports betting were mentioned a handful of times. Front office and ownership are considering partnering with companies in those industries and leveraging the existing fan base to create new revenue opportunities.

More traditional revenue streams with opportunities were also mentioned: ticketing, merchandise, and sponsorships. Owner’s have expressed interest in learning how Krause House can take traditional revenue streams and apply innovative solutions to help drive profits.

A few examples:

• Dynamic pricing – adjusting prices in real-time based on factors such as team performance, opponent, and time of year, to maximize revenue

• New ticket packages and subscription models – flexible ticket plans that allow fans to choose the games they want to attend, and season ticket packages that come with additional perks such as access to exclusive events and merchandise.

• IRL fan experiences – In-stadium mobile apps for wagering, ordering food, and real-time statistics.

• Personalization for the fan – exclusive access to players, personalized merchandise or customized food and beverage options.

The consensus amongst owners and their respective front office is the belief that emerging technologies have the potential to disrupt the traditional sports industry. All of them wish to be at the forefront of that disruption.

Krause House Advantage

It can be argued that Krause House is just a curation layer for NBA fans all over the world. Our bench of talented working professionals and problem-solvers make us the most value-additive ownership group on any given captable. Our unique perspective gives us an advantage when it comes to developing new sources for revenue generation.

As we continue to define (and redefine) best-in-class governance and coordination models, owners will lean on us to surface novel ways to drive new and existing revenue streams.

Exemplary Projects

Krause House NFT Sale Contributing Member(s): KH Core Team Details: Initial target of $1m was hit in less than 15 minutes. Entire collection was sold out within a few days), generating ~$4.5m USD total.

Leverage Krause House Talent Pool

We like to think of ourselves as a dam — Krause House is a structure harnessing the chaotic power of your fan base to be used in specific ways helpful to an organization.

You can make an argument that fans, up until now, have been widely viewed as “fungible” assets. Fans fill the stadiums, watch games, and buy merchandise. However, each fan offers their own set of experiences and talents that could potentially bring value to the franchise.

Krause House supports next-generation owners through unparalleled bench strength in developing and executing team-tailored fan-engagement initiatives.

Owner’s Thoughts

The ability to leverage a distributed pool of talented professionals is unintuitive at first. However, after a number of conversations with ownership groups, they quickly realize this is a distinct competitive advantage for first-movers.

Krause House is presenting a fundamental shift in the existing relationship between a franchise and its fans. Over the past year and a half, we’ve learned there’s no better community on the planet that can service the needs of incumbent owners and tackle this eminence challenge.

The biggest pushback we have seen around KH human capital has been around one central idea: trust. Proving that individuals/teams within our community can continuously deliver results is certainly a headwind; however, quality projects like NFT NYC and KH Analytics will help build legitimacy when done consistently.

Krause House Advantage

Wisdom of the Crowd There’s a seemingly large cognitive dissonance between billionaire owners and the everyday fan. Sourcing innovation from a community of fans is the pathway to becoming the internet’s home team. Krause House has spent hours developing and refining ways to surface the brightest ideas to move basketball culture forward on road to fan ownership.

Our unique structure demonstrates diversity of opinions and perspectives, the ability to aggregate information effectively, and produce results around a specific task or decision that the group is making. This type of ownership has never been seen before in the NBA.

Talent Swarm Once the best ideas have been sourced and discussed, how do we allocate the best talent to turn ideas into reality? Similar to a coach pulling players off the bench based on roles, Krause House can source labor through its international distributed community of contributors based on team-specific needs.

Projects/Teams that are projected to have the most impact are those that are deemed important, but not critical. This presents a unique talent arbitrage opportunity for initiatives that the owner feels will help increase the value of the franchise, but isn’t willing to hire in-house. For example, media, events and product engineering.

Krause House offers a variety of skills and talents that can be easily deployed into front office to produce or supplement initiatives beneficial to the organization

Exemplary Projects

NFT NYC Contributing Member(s): Jonez, DBag, Shanny, Alex Brands, +more Details: In less than 60 days, the KH Experiences Team came together to pull off what was widely regarded as the best event of NFT NYC

KH Analytics Contributing Member(s): BayesianBaller, greg_ Details: a front-end dashboard data visualization based on a report created by Krause House Analytics (using the Indiana Pacers as an example)

All in for Sport Contributing Member(s): Shanny, DBag, Lewwwk Details: An experiment to coordinate development of a perpetual funding mechanism for inclusion and empowerment in and through sports

Food for Thought

• What areas of front office operations are important, yet underserved?

• How do we determine what individuals and/or teams are the most qualified to assist?

• How does Krause House build trust with owners to allow for the deployment of Decentralized Sports Operations (DSO)?

A Goal Within Reach

We are building talent and a reputation that’s too good to be ignored. Krause House’s unique value proposition becomes more obvious by the day. This powerful new integration between franchises and fans unlocks dimensions that fundamentally changes the landscape of sports.

Although there have been, and will continue to be challenges ahead, the greatest accomplishments are often achieved by those who refused to accept limitations. If there’s one takeaway from our meetings, it’s that success is well within reach. Let’s keep going. Let’s make history.

Generative image AI models like Midjourney & DALLE2 are game changing tools for individual creators, but at Krause House we see something different. These generative image AI models are single player, but the future is multiplayer.

We've recently seen the idea of multiplayer proliferate in tooling such as Figma, Pitch, Google Docs, & countless more. Social DAOs broadly are part of the multiplayer movement, but even more specifically with tools like PartyBid. When we see a field, such as design, that has been predominately single player & prescriptive... we get excited about applying both generative + multiplayer to our use cases at Krause House.

Decentralized Design

Krause House is a DAO — but we're also a visual vibe. We've had incredibly talented designers help us form this vibe (shoutout to Peacenode & Applied Arts), but we've struggled with applying our vibe to the world.

We've mostly seen two models in the wild: centralized and license-based. Both of these models exist as predominately single player.

Centralized Centralized is the model that most humans are familiar with. The firm finds a talented designer, the designer designs. They may or may not get feedback from others (typically a smaller group and/or their superior) & then a decision is made on what to do with the creation (typically from their superior).

License-based Projects like BAYC & Moonbirds experiment on the fringes with this model. We too have licensed KH's brand, but typically to existing Jerrys working to propel our mission forward like at our event at NFT.nyc. While the distribution of the rights to use our designs is decentralized, the second order work built upon the license is often still centralized.

A new entrant: Generative There's a flurry of excitement around the power of DALLE2 & Midjourney. The power it unleashes for a new wave of creators is immense. Pixel pushers' value just went down, but dreamers' value is sky rocketing. We'll call this new wave of design: generative.

While these new tools are incredibly powerful, they're still single player. We believe the incredibly exciting future is inherently multiplayer. We've built an example to showcase our philosophy: Drip Factory.

What is Drip Factory?

Inspired by Eugene Wei's Status as a Service, we began exploring the idea of implementing "Proof of Work" constrained intentionally for our community. Instagram famously made a new user feel like a pro: take a photo, pick a filter, now you have a beautiful photo to show off. We wanted to create this same feeling for our community.

We abstracted away the lengthy optimized prompts behind a mad-lib of emojis & buttons to generate your design. Now anyone is a merch designer, pick a few variables & let the AI do it's thing. If you like it, publish it for the collective. People can remix your design & inject their own flavor.

As the community creates & remixes each other's designs, this gives us a stream of designs to start reacting to. What's fire? What's trending? What do we as a collective love? What rises to the top is what we should spend time & resources bringing into physical reality?

Why is this important?

As collectives begin to own & manage complex assets, tools like Drip Factory help amplify the right voices, the right designs, the right work. One of the biggest concerns we hear from pro sports teams' front offices is having 100,000 voices shouting a mess of different opinions. What we're building at Krause House is a way to harness the collective's power & talent. It's about building apps like Drip Factory to collectively & meritocratically make decisions.

In the future, we will deploy this project to the NBA team that we own. Millions of fans of a single team will come together to create fan-designed merch. The ideal system takes contributions by not only talented designers, but by an army of AI-assisted designers. It's the evolved form of crowdsourcing.

This is a sliver of the vision we're working to bring to reality at Krause House. In this case, building tooling to harness the power of millions to assist with design & merch for an organization. In future cases, it will be solving for decentralized scouting networks, decentralized analytics, & so much more. Krause House is building a future where we're giving ownership experiences without ownership responsibilities.

The future is generative. The future is multiplayer. The future is Krause House.

It’s been nearly a year since we showcased our initial Flightpaper, we’ve been putting in work on our Credibility phase. We’ve bought a BIG3 team, built the world’s first NFT basketball court at NFT.NYC, & designed novel financial structures to have a DAO sit on a cap table of professional sports teams — yet it’s still just the 1st quarter.

Where We’ve Been

BIG3

Owning a BIG3 team in the Ball Hogs has allowed us to experiment with fan access & fan engagement. Captained by Jerry Uncle Jon we’ve delivered by far the most fun seating section inside at BIG3 games. Our top community members have been able to earn access to courtside tickets & a VIP experience for our team’s games. We even tapped our community for best-in-class scouting + analytics for our team & opponents. Building grassroots community in multiple cities has provided deep learnings in fan engagement that inform how we build out our playbook for working with future teams.

NFT.NYC

The magic of a self-organizing DAO was in full display — 8 Jerrys with event planning experience came together to throw the best event at NFT.NYC. We hosted premier 3x3 ballers on top of our world’s first NFT basketball court. The KH Jam basketball court was designed by incredible artists and was both a digital NFT & physical piece of art.

https://twitter.com/KrauseHouseDAO/status/1545141263309078531?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed&ref_url=notion%3A%2F%2Fwww.notion.so%2Fkrausehousework%2Fv2-Manifesto-e6478da8c97f47cbb4e24edfe15009ad

We delivered a 🔥 IRL event, debuted a new way to crowdfund physical assets, and brought basketball x web3 together. This is just the beginning of Krause House exerting itself into the physical world, look for KH collaborating with incredible brands all around the world.

Novel Financial Structures

Over the last 9 months we’ve been hard at work developing a novel legal structure that meets the needs of both the NBA and KH Jerry’s. We think we have a solution — this will most likely require several separate legal structures via a sub-DAO model to hold any equity. These entities will be made up of “Jerrys” & will be in full compliance with the league + local jurisdiction’s rules. It will depend on each actual position, but the strategy is that governance & access continues to be delegated upwards to $KRAUSE & NFT holders to involve our core broad community.

Using a sub-DAO model only accessible to NFT holders (Jerrys) is one component of our novel approach. We don’t want to give away our “secret sauce” here, but the high-level context is that the NBA recently approved private equity firms to own equity within NBA teams which allows for new interest groups to become minority owners in an NBA franchise. There are novel legal, operational, & financial vehicles to interact with DAOs. Krause House is sitting at the forefront of this behemoth effort that will continue to evolve over time. There will not be a single “fits-all-sizes” solution to our journey — we’ll build evolving solutions together.

Ultimately these innovations are composable fan participation and ownership as a protocol. The ability to generate derivatives, social staking, & NFT-based ownership will serve as foundational features of a protocol empowering equity, access, & governance.

Where We’re Heading

The idea that is Krause House will happen, it’s just a matter of when. Yet we have a limited amount of treasury to bring this idea into reality. As crypto navigates a bear market & we work against a shortening runway, we need to make tough prioritization choices to bring the vision to reality. We’ll be looking to scale back expenditures that are not core to our first major milestone — acquiring a NBA minority position.

We believe if we can successfully acquire a NBA minority position, the ability to generate revenue and/or do a treasury diversification materially improves. Additionally, we’ve invented a new capital structure to work with to accomplish the many (and often competing needs) of our situation. We’re calling this entity: KH Capital.

When most people hear the word “ownership” they imply 3 things rolled into one:

• Equity

• Governance

• Access

A traditional “owner” has equity in the team, control via governance, & access to owner experiences. Krause House is deconstructing & remixing these 3 concepts for sports. A common misconception about our mission is that it would be chaos to have 5,000 members telling a team what to do. We fundamentally believe in a participatory governance model to influence decision making & access to a professional team.

What KH Capital empowers us to do is to bring in capital at a scale (8 figures+) that believes in Krause House’s mission & community. This gives us negotiating legitimacy & leverage to secure positions within professional sports teams around the world. Jerrys would be able to participate in a portfolio of teams and/or invest in positions where they are eligible to (meeting league + regulatory requirements).

In minority ownership positions, partnering with the right teams is paramount. Delegated governance & access to interesting functions of a team can then be extended to the Krause House community.

International basketball opportunities thus far have been less aligned with our mission than expected due to shaky business fundamentals for all leagues outside of the NBA. We’re learning that our approach to bringing value to NBA positions applies equally to all professional sports. Soccer has emerged as an interesting space for us to build credibility. Not all of our Jerrys are into soccer, but many are and the insights from ownership within the sport are applicable to KH’s credibility phase. We’re not officially committing to adding soccer to our portfolio, but we continue to explore high quality ownership stakes that align with our mission & phase of our roadmap (credibility). It should be noted that European & Asian leagues continue to be on our horizon, but we need to focus on teams that are running better than breakeven + have a real path to general management influence.

The Future

Krause House is the best minority owner a NBA team could have. From PhD level data scientists that are ready to assist front office analytics teams to a worldwide community that will serve as a supplemental scouting network. Krause House is a dynamically talented community that can ebb & flow with the needs of a NBA team — that’s the beauty of a community.

We’re no longer just a game plan. It’s the first quarter, we’re playing well — we’ve got a lead. The second quarter game plan is to acquire a NBA minority position. This goal is within our reach, there is a path to accomplishing it. We need to stay focused & close out the first half with a big lead. Let’s give it everything we’ve got — WAGBAT!

In just one year, we’ve attracted talented and driven members from all over the world to achieve the ambitious mission. We’ve spoken with front office and ownership groups, current/former players, and agents. With thousands of members and hundreds actively contributing, we are indeed becoming The Internet’s Home Team. 

To bring this idea to life, our team has spent the last year heads down working towards a new era of decentralized community governance and fractionalized sports team ownership. 

Over the past 60 days, a group of “Jerrys” have been curating the physical manifestation of how web3 technology and the real world can intersect. We planned to do something no one’s ever done before - create the World’s FIRST Physical NFT Basketball Court.

Now, as NFT NYC approaches, we invite you to join us IRL to witness what will go down as a historic basketball event, showcasing a pro 3x3 tournament and a chance to mint history. 

How We Got Here

For the undrafted, Krause House is a decentralized autonomous organization with a mission to own and operate an NBA team. What started as a late-night idea with a few internet friends, has now turned into a growing community of over 5,000 strong. From day one, we’ve harnessed the power of our collective minds and community network to make waves in the sports industry. 

On our roadmap, we believe that we need to prove credibility which includes minority positions in major leagues & majority ownership in smaller leagues like our recent purchase of the BIG3’s Ball Hogs, a team coached by NBA legend Rick Barry.

Over the last year, we’ve assembled, by definition, a “group rallying around a mission that coordinates through a shared set of rules enforced on the blockchain.” But to us, we’re just a community of hoop fanatics that are crazy enough to buy an NBA team. Through our first NFT sale in November 2021, we welcomed over 2,000 “Jerrys” (community members) into the fold and raised a war chest of 1000 ETH to hit the ground running on our path towards making history. 

Despite our impressive advancements, the most beautiful part of the journey so far has been the ability to bring together so many like-minded people. Our global community is made up of members from all walks of life, each with their own unique skill set. But regardless of our past experiences, cultures, or socioeconomic backgrounds, we have one thing in common: 

Our love for the game of basketball.

Bringing the Court to Life for NFT NYC

Our goal was to bring something into the world that neither the sports or web3 world has ever seen.

We wanted to introduce something that the world could touch, see and feel while still acting as a gateway to our basketball community. 

For our Crypto friends, we wanted to share a new application for web3: Fractionalizing a full-sized, physical basketball court curated by 25 different artists.

For our Basketball and Sports friends, we wanted to not only introduce the concept of fractionalizing team ownership but also create a basketball experience beyond their wildest imaginations. And the best part, a frictionless experience powered by web3 tech.

The Krause Court Collection

This physical full-size court is currently being built in NYC getting ready to reveal IRL at our Krause House JAM. Right after our event, we plan to break the court up into one-foot squares and turn it into NFTs that can be minted with a wallet or using your credit card. Once minted, not only will you receive a digital membership to our community but you will also be shipped the same physical piece of the court that was randomly minted to you.

“NFTs are an incredible solution to digital scarcity. Obviously, the NFT market is flooded with JPEGs that don't have much utility, but that's what makes Krause House's experiments so powerful. We're packaging atoms (the court) & bits (NFTs) woven with the culture of basketball. We're incredibly excited to be a part of history bringing this concept to life.”

- Commodore, co-creator of Krause House

“Collectibles and sports fans have made a great pair for decades. It’s hard to describe the feeling you get when adding a rare piece to your collection. Drawing much of our inspiration for Krause House from the ‘90s era NBA, we fell in love with the concept of coupling the feeling of physical collectibles with the utility of digital ones. Couldn’t think of a better way to kick-off our first big IRL event.”

- Flex Chapman, co-creator of Krause House

The World’s 1st Physical NFT Basketball Court

A Game Plan From Way Behind the Arc:

2. Krause House JAM: On June 22, 2022, from 3-9 pm at the Classic Car Club Manhattan, we will be hosting eight pro teams for a single-elimination 3-on-3 basketball tournament on the world’s first custom-designed and built NFT court. After the tournament, the court will be fractionalized into over 1,000 pieces and sold as NFTs. You can RSVP here.

3. The public mint will take place on June 15th, 2022, prior to the June 22 event, ranging in price from .25 to 25 ETH. All artwork will be revealed at the tournament with holders receiving their physical court piece in the coming weeks. All holders will receive access to the Krause House community, future basketball team ownership conversations, and management opportunities.

4. A portion of all NFT sales will be donated to a basketball-focused charity of the community's choice, and all artists, players & partners will receive a % of total court NFT sales for their generous time & love given to this project.

Perhaps the most significant of all, this NFT mint marks only the second time we have opened our doors to new members. As we embark on this exciting event and welcome a new cohort of “Jerrys” into the DAO, we wanted to take a moment to thank our existing community for their support and share with the world what makes this KH community so special. We can’t wait to see you all on the 22nd.

Special thanks to everyone involved to make this happen. This truly couldn’t have happened without understanding our crazy vision :)

Pink House Club - @0xdbag

One of Once - @JusJonezin @NarayMusic

Applied Arts - @aarts_agency

Shanny - @imjust_nft

AlxBrands - @AlxBrands

Album Trading Cards - @____ATC

Snap Sports - @Snapsports

71 Visuals - @71visuals

Nav - @navinramharak1

PERCS - @getpercss

Garage XYZ - @GarageXYZ

SNKRHUD - @snkrhud

Hip Hop Archives - @nftwithattitude

Ball is Life - @Ballislife

Ultimate Hoops - @UltimateHoops

Huupe - @huupeofficial

Ebbs Brewing - @drinkebbs

BLVKHVND - @blvkhvnd

In the Lab - @InTheLabBrand

Dev In The Lab - @DevInTheLab

Ballerz - @BALLERZ_NFT

Kirby Porter - @KirbyPorter_

Chibi Dinos - @DinosChibi

Tech Runs - @techrunsdao

CRAZE - CRAZE

Ostertag - @ostertagmademedoit

Khalid LeShawn - @khalidleshawn

Steven Paris - @sparisgraphics

April Walker - @iamaprilwalker

Kelsey Amy - @NFShme

Blake Jamieson - @athlete.portraits

Peace Node - @peace_node

Adam Jason Cohen - @adamjasoncohen

Danii Pollehn - @daniipollehn

Strickner - @overglowartwork

Antonio Rodriguez Coe - @itstonycoe

Mawdoods - @mawdoods

Tomes/Good Metacn - @goodmetacn

Helen Eve Ratner - @helenratner

Hadj Dieng - @hailtheart

Misha Libertee - @mishalibertee

Ken Forbes - @kenforbesart

Blanco - @robertblanco_

Calicho - @calichoart

Lucine - @lucinevisions

The Black Kristoff - @TheBlackKristof

Princeton 3v3 - @Princeton3x3DAO

India Rising - @IndiaHoops

Team Big Mac & Waldo - @bigbad_mac @waldo_abawi

Jordan Southerland - @1footgod

Zayy Soblessed - @ballislifezayy5 

Maxwell Pearce - @maxwellpearce

Christopher Spell - @againstoddsathletics

OS Sync - OS Sync

Classic Car Club Manhattan - Classic Car Club Manhattan

Krausehouse.club September 3, 2021

Author: @GladRobot

Contributors: @thycommodore, @karsenthil, @benschecter, silkeyj#6827

INTRO

Owners, media, players, and fans each play critical roles to make the business of professional sports go and flourish. While fans are arguably the single most indispensable party to this equation, they are the lowest on the totem pole when it comes to ownership by an order of magnitude or higher. We define ownership both as equity (participation in the upside of the business) and influence (having a say in strategy).

Historically, the reason for this disparity is that there hadn’t been ways for fans to coordinate or communicate at scale. Technology has begun to disrupt this model by giving fans a common voice, first through talk radio in the 90s, online forums in 00s and more recently through social media. Fans now have more influence than ever before - but it’s still lacking. This is because without ownership, fans are seen as just a noisy consumer who has to be appeased without a real seat at the table.

Web3 changes all that by consumerizing ownership. With web3, consumers finally have the capability to collectively own and coordinate at scale. This changes the game. In this document, we will share our vision for fan ownership in professional sports, explore the various approaches available to accomplish this, outline key risks and offer our recommendation on next steps.

Vision

Our long-term vision is to empower fans of every professional franchise to collectively have real ownership of the organization. To us, this means both: 1) equity (e.g. own X% of shares), and 2) influence in governance - not just one or the other.

We understand the reader’s first instinct may be to scoff at this and say owners will never let this happen. It’s important to understand that there was a time not too long ago where players were at the same place on the totem pole where fans are today. Through the use of technology, savvy, and understanding how critical they are to the business, the ownership by players (both tangible and unrealized) has grown immensely within the last 10 years. There’s no reason fans can’t do the same if organized correctly.

Approaches:

1. Majority Decentralized Ownership (DAO)

In this model, fans would organize themselves as a Decentralized Autonomous Organization (DAO) whose ownership rights, funding, and governance would all live “on chain” (on the blockchain) and purchase the majority rights (50%+) to a franchise.

Given a majority stake, we would strive to have DAO members vote on as many parts of the team’s strategy + execution as possible.

We believe the fan community would provide the most value-add by having final say in the following areas:

• Ownership decisions (e.g. buying or selling additional equity, allowing other investors + new valuation, etc)

• Team Location

• Approval of Key Executive Hires (GM/VP Ops/Head Coach/etc)

• Marketing + Events (team uniform, player events, etc)

We do not believe the DAO will provide value-add by participating in these areas:

• Player personnel decisions

• Contract decisions

• Assistant coaching/training staff

2. Minority Decentralized Ownership (DAO)

• This model would be organized identically to #1 but the DAO would own a minority stake of the team. Given our goals on both ownership + influence, this model only makes sense if the DAO retains final say but in a more restrictive set of areas than model #1. These would include:

• Team Location

• Marketing + Events

• At least partial say in key executive hiring decisions

3. Minority Decentralized Ownership (Social Tokens)

This model is where the team will create social tokens for fans to hold. These tokens will likely provide holders with benefits via digital goods (NFTs), special player + event access, and more. We anticipate that big market teams will not extend ownership or revenue sharing (see Royal for what 3LAU is doing in music), whereas small market teams may innovate more here to collect a digital + worldwide fanbase. In this model, it is unlikely fans will have any governance on team operations + strategy.

Recommendation

We believe #3 will be the end-game for every sports franchise as web3 grows. KH’s responsibility is to not settle for this, and use technology + enthusiasm to think bigger.

Our recommendation is to go with approach #2 as we anticipate the NBA will not be favorable to giving majority ownership to any faceless DAO/corporation in the near or medium term regardless of $$ offer. We believe small market teams that have been bottom dwellers and who struggle for fan enthusiasm, specifically Memphis, NOLA, Minnesota, Sacramento, and others, are ones who should be targeted.

Our approach should be to accentuate the franchise as the NBA’s first metaverse native team. It’ll be the team of the internet, NFT & memes galores, token drops, discord rooms, community managers, etc - the best that web3 + the metaverse to offer.

WHY NOW

Blockchain technology unlocks new types of ownership, specifically decentralized ownership. This technology is a prerequisite for fans to own their favorite team & we’ve finally built out enough of the infrastructure to apply this to sport ownership.

It’s not just blockchain technology that makes this timing finally here. Team ownership requires coordinating large groups of anonymous people in an efficient manner. The technology & the platforms to do this are finally here.

This is our moment.

We are entering a new age of ownership & governance. In today’s ownership economy, attention is dominated by where we put our dollars. Teams that are able to drive the largest share of attention, drive the largest shares of valuations. Teams that embrace decentralized ownership tap into a previously untapped source of new attention — and subsequently an untapped source of driving up the value of the team.

But would the NBA allow something like this?

10 years ago? Probably not — but today’s NBA is changing. Recently, the NBA has made the first step to embrace ownership by granting institutional investors the right to purchase minority equity stakes in teams. Dyal Capital, through the HomeCourt Fund, is the first of several financial offerings which serve as a vehicle for regular public investors to purchase shares in a team. In the summer of 2021, Dyal closed a 5% acquisition of the Phoenix Suns and plans on capturing additional shares in other teams. By design, financial products are driven to be operationally lean and prefer not to take on any team governance as that would be management overhead.

Krause House changes this.

Krause House’s vision is to enable fans to become owners with governance to give them a seat at the table on team decisions. By unifying the Krause House under a social token, members can be sure that the team is in fact, their team. When passion is tightly coupled with property, the league will unlock true prosperity.

Our idea is inevitable. A professional sport team will be owned by a decentralized organization in the next 10 years. We believe it will be Krause House.

Time is of the essence. The first sport and team to move into this white space will reap first mover advantages by unlocking network effects through social ownership. The compounding effects of social ownership create a path to capture the maximum value available in the market. Other teams may continue their traditional approach to governance but with each action they take some fans will be unhappy and eventually they may feel disenfranchised and leave. DAOs provide an alternative that welcomes all fan voices to be heard and elevates the best ideas to action.

DAOs

A ‘Decentralized Autonomous Organization’, better known as a DAO, self organizes to accomplish a grand mission. Members of the DAO collectively decide on what they’ll do and how to get there. In contrast to traditionally geographically concentrated groups of individuals, anyone with an internet connection can contribute to a DAO. This approach grants a huge improvement in collective resources. The Krause House will leverage blockchain coordination to transparently manage the objectives of the ownership pool, enabling collective decision making in place of a single owner (or small ownership group).

In order for an action to be made, some form of majority or reputation would need to vote in its favor. All votes would be held on an open ledger so that members can have confidence that the will of the majority is always carried forward. The DAO will benefit from Liquid Democracy vote delegation where a member can assign their votes to other members. In this case, votes are transitive so if A assigns B and B assigns C then C determines A and B’s vote. This method allows owners to delegate certain governance decisions to specialists who hold domain knowledge about a particular topic such as scouting or community relations.

GOVERNANCE

While institutional funds look to avoid team governance, a DAO excels at making governance efficient. The Krause House has the self awareness to recognize that massive collective ownership expands a team’s fanbase. In an NBA where revenue potential is dictated by geographic regions, a small market (sub 2 million residents) struggles to compete with a large market team with a population of 7 to 20 million. Imagine if ‘small market team X’ could quadruple its fanbase by offering fractions of ownership through a global DAO. While the original owner has reduced their stake in the team, the newly realized fanbase expands the market and brand value leading to the creation of a much more valuable asset. Simply stated, DAOs expand the size of the pie far beyond any dilution which occurred.

As existing ownership stands to greatly profit by working with a DAO, the value exchange must be fair. The Krause House will never act as a silent partner. As shareholders, we expect a vote in all affairs that matter from a fan’s perspective. It’d be currently infeasible to orchestrate individual roster moves but voting on a General Manager and defining principles or strategies for success is feasible. Weighing in on large decisions like extending a max contract extensions are opportunities for direct democratic input.

In a traditional organization, decisions are made in a top down fashion and occasionally a small sample set of customers are surveyed to see how the product is resonating (a slow and imperfect process). In a DAO, the customers are empowered owners that deliver the product they want. This is instant product-market fit and a primary reason why DAOs are today’s fastest growing companies. By opening up governance, a team will access a wider knowledge base and ultimately reach the best solution.

Throughout the NBA, owners are known as hyper competitive in the game of business. But making decisions can come at the cost of alienating or destroying a portion of their market. The owner who leans into decentralized governance will operate with a new found confidence that they are now always aligned with fans. The reward for this new efficient business model is unlocked when they activate a new massive global market.

TEAM REVENUE POTENTIAL

Teams activating fractional ownership stand to benefit in three ways:

1. Market Expansion: An expanded fanbase will drive demand for existing products and services.

2. Revenue Diversification: The new fanbase will be interested in new Web 3 product offerings like NFTs and virtual experiences.

3. Valuation: As revenues rise and team tokens are traded, the franchise valuation should increase faster than any other team in the Association.

The following graphic illustrates the opportunity for small markets to merge with a DAO

INVESTOR ALPHA

An NBA team is a value investment with characteristics of an exceptional store of value:

Durability:

Teams have retained value over decades.

Scarcity:

The Association controls supply by preventing issuance of new teams unless it is to the benefit of all incumbents. There’s a zero percent chance that more teams are created to the detriment of league-wide valuations.

Value Retention:

Team prices have appreciated faster than inflation.

Upside Potential:

Over the past 30 years, team valuations have performed better than the Dow and are comparable to high growth tech companies.

Legacy:

As a parent looking to pass on wealth, rather than saving into a 401(k), purchasing gold or an expensive watch, one could purchase shares in a team with the intention of keeping it in the family for future generations.

Community:

Teams are cultural epicenters that you can experience collectively and form lifelong relationships around.

While NBA teams are a strong store of value, they offer an additional benefit to investors. As team prices are not correlated to any traditional investment, they are an ideal hedge against downward market forces. As cryptocurrency investments are exposed to extreme volatility, holding an asset in crypto that is as uncorrelated as possible to the market is a perfect asset to diversify one’s portfolio.

REGULATORY PATH

Krause House intends to offer various products with the ultimate goal of acquiring ownership of an NBA franchise. Some products will pass the Howey Test and others will fail. As a result, Krause House will have numerous regulatory efforts but the net result is what we desire.

Krause House will issue $KRAUSE Tokens and launch projects and/or services like NFTs to support the DAO. All capital assets will be held in treasury and uses of the fund will require a winning vote by the DAO. All financial actions here will pass the Howey test as tokens compel the DAO members into action.

Beyond the DAO, Krause House will create a second holding company where the future NBA minority stake will be housed. This entity will hold a Security Token Offering (STO) which allows for raising funds and blockchain verification of ownership. This funding model requires extensive SEC regulation oversight.

The cleanest option to acquire an NBA team stake with the intention of distributing fractional shares is to start a SPAC. SPACs are Special Purpose Acquisition Companies that are created to raise capital through an IPO to acquire shares of private companies, taking them public through a merger.

SPACs usually raise the initial funds from Sponsors who are institutional investors (SEC Regulation D filing). At this point, the stock value is based on cash-on-hand and belief in the management team. The SPAC then merges with the acquisition target and the stock price adjusts upwards with a real business to value the offering with.

Depending on negotiations with the NBA and team owners, a SPAC sponsor may not be required. A team could approve of the minority sale event and access liquidity directly from individuals. As the funding event doesn’t require institutional capital and sponsors to backstop the deal, we could offer team shares to the public without market makers or costly promoters.

Shares will be listed on over the counter (OTC) exchanges that support blockchain tokens. Team tokens will not be distributed on NYSE or NASDAQ as those platforms do not support tokens with governance rights for on-chain voting and permissions. OTCs are growing in popularity with exchanges such as Coinbase, FTX, Uniswap, Kraken and countless others.

Here’s One Path to Acquire a Minority Team Stake

1. Register a C corp in Delaware and house the Krause House DAO inside

2. Offer NFTs and sell $KRAUSE tokens for the treasury

3. Form a SPAC, file an S-1 with the SEC

4. Find an NBA asset to acquire and present it to the DAO

5. Launch a Security Token Offering

6. De-SPAC and merge with the acquired NBA entity

7. List the minority team stake as it’s own company across OTC exchanges

CONCLUSION

Fan ownership & governance powered by Web 3 is the future. The financial benefits are positive for all parties but more importantly, an NBA team will benefit from the participation of the fan owner to deliver the perfect product desired by the market.

As the NBA has begun allowing traditional investment firms to purchase shares it’s important that the Association isn’t trapped under old structures. To bring the game to the globe and maximize the potential for basketball to bring the world together, there is no better partner than a DAO.

Michael Jordan’s Chicago Bulls just defeated Magic Johnson’s L.A. Lakers to win the NBA championship. The first of six titles for the man better known as “Air Jordan”. Basketball is on the precipice of becoming a global phenomenon, and the NBA is on its way to eventually earning $8.76 billion in annual revenue.

Yet, 100 years earlier, basketball was just an idea.

In 1891, Dr. James Naismith was a P.E. instructor at the local YMCA in Springfield, Massachusetts. One day, he was asked to create an indoor sport to keep athletes in shape during the frigid winter months. With a set of 13 rules, two peach baskets as goals, and a ball with twine lace stretched across the inseams, the game we know today as basketball was born.

I am sure that no man can derive more pleasure from money or power than I do from seeing a pair of basketball goals in some out of the way place.

- Dr. James Naismith

The game of basketball has always been predicated on groups of self-organizing squads coming together to participate. As the years went on, the popularity of the game grew and participation quickly found its lifelong partner, fandom. Now watched by billions of people all over the globe, basketball has quickly become one of the most beloved games in the world.

Fandom, whether manifested from players or teams, gives a sense of belonging that’s seldom seen in day-to-day life. To be a fan is to be part of something larger. To feel belonging to a community that shares a common identity. To ride the rollercoaster of ups and downs, all while staying dedicated to the cause. To be a fan is to love.

Although, there's a part of the game that's been missing amongst fans since it’s inception. A level of integration we could share as fans that even Dr. Naismith couldn't have predicted. Ownership.

Before we dive into who we are and the mission we set to achieve, it's important to define what ownership means. Is ownership merely symbolism for more influence? A state of possession? Means of authority?

As we usher in a new era of new institutions and collective commons, ownership will take on a new meaning. We’ve seen the internet transition over the decades from read, to read-write, and now read-write-execute. This makes the internet a place not only for transactions, but for connection, thought, and programmable democracy. Agreements can now be automated on the application and organizational level, where the players can define business logic and behavioral rulesets for all participants. For all intents and purposes, products and organizations can be owned by the players that built them.

If Web 2.0 was defined as the frontend revolution, Web 3.0 is the execution revolution. Squads, up until now, have been dependent on centralized monoliths for communication, participation, and transactions.  The atomic unit of the internet is the individual, yet corporations hold majority of the power.

Web 3.0 fundamentally changes that…

• What does a group chat bank account or cap table look like?

• What kind of superpowers does a native squad currency unlock?

• How can collectives come together to glean upside, reciprocity, and socialized risk?

• How can online teams band together to do the unimaginable?

* Krause House has entered the chat *

The Krause House is a community of hoop fanatics that are just crazy enough to buy an NBA team. To our members, being a fan isn’t enough. This is a squad made of wet jumpers and saucy crossovers that refuse to sit on the sidelines.

Team ownership shouldn’t be limited to a handful of billionaires, but rather a movement of individuals that want to be a part of the greatest professional league in the world. Fans breed life to the organizations in which they attach, so isn't it reasonable to accept a shared portion of the ownership and upside? We don't think it's merely acceptable, but mandatory.

The Krause House is a Decentralized Autonomous Organization (DAO) governed by the community, the fans, the basketball lovers and purists. Together we will write the consensus rules that will bring the first fan-governed team to the game as first participants, then fans, and now owners. The collective of ambitious contributors whose goal is to own an NBA team describes the underlying mission of DAOs in its purest form: Difficult by one, achievable by many.

We will allow our members to participate in decisions affecting the operating procedures of a National Basketball Association (NBA) team including but not limited to ticketing, merchandising, partnerships, and general management of players and coaches.

As a DAO, we embrace the label of an online cooperative with open arms. We champion evolving organizational mechanics and practices from that of traditional hierarchies.  We prioritize ownership and autonomy. We value culture over structure. As the membership grows, so does the interdependence. Building confidence brought forth by the consistency of socialization and self-actualization. Put simply, we’re a tribe with a vibe.

Who’s got next?

In the weeks to come, Krause House will launch its inaugural Season 1. We’re scouting contributors who want to actively participate in our mission to own and operate an NBA team as a DAO. All skill sets and skill levels are welcome.

We believe championship teams are defined by the role players. The first ones in the gym, but the last to leave. Ones who celebrate making free throws as much as breaking ankles. Ones who think in terms of we, not me.

We’re looking for The Mamba Mentality.

To be the world’s first fan-owned and operated NBA team is no small feat. Do you have the burning desire to own an NBA team? The passion to contribute to a community of fanatics just as die-hard as you? Join us and embrace the movement.

The revolution will not be centralized…

Discord: https://discord.com/invite/3bJwMCUEbe

Twitter: https://twitter.com/KrauseHouseDAO