After spending the past 3 months exploring an idea that obsessed me, I finally finished writing down my thoughts about it in a document that I just published on github:
I would be extremely interested in getting your early feedbacks.
Here’s the abstract:
The digital economy has radically changed the nature of the relationship between customers and corporations. Today’s individuals have switched from being passive consumers to being an essential force in creating value, either by their actual work (think Airbnb, Uber, Apple’s App Store, Amazon Marketplace…) or through their data (Facebook, Google…). By leveraging their users’ work, organizations in the digital economy have the ability to create products with personalized user experiences that can sustain increasing returns to scale, thus providing investors with large returns on investments.
Unfortunately, today’s organizations have no simple and efficient way to strongly align the interests of their workforce of users with the financial success of their organization. This is mostly due to today’s securities’ laws that impose constraints and frictions when it comes to selling and distributing securities, especially to non-accredited investors.
To solve this issue, we propose a new paradigm: the Continuous Organization (CO), a new type of organization designed to align the stakeholders’ interests significantly better than in traditional organizations. A Continuous Organization is any kind of organization that issues fully digital securities called FAIR Securities ( Frictionless Agreement for Investments and Returns securities) by funneling part or all of its cash-flows to a Decentralized Autonomous Trust ( DAT ). A DAT is a smart-contract that automatically mints, burns and distributes FAIR Securities ( FAIRs ) according to the organization’s cash-flows and predefined rules.
Continuous Organizations present very beneficial properties for all stakeholders:
- Founders get a simple and efficient mechanism to strongly incentivize their community with regards to the financial success of their project, enhancing their capacity to create strong network effects without affecting the organization’s governance.
- Employees advantageously trade alienable illiquid stock options for inalienable liquid FAIR Securities (which can vest), truly aligning their interests with those of the organization.
- Early investors receive their fair share of the upside in the case whereby the organization is successful, without having to fear disproportionate dilution in later, bigger rounds.
- The community of users, customers, suppliers and partners of the organization can be rewarded or simply able to invest in the organization in a friction-less and permission-less manner, thus aligning their interests with those of the organization.
- Regulators can better protect citizens from risky ICOs due to the ‘security’ nature of FAIR Securities while also having the ability to tax revenues generated by Continuous Organizations.
- The environment benefits from the decoupling of governance and financial interests proposed by the Continuous Organization model, allowing founders and their organizations to be more focused on the long term.
Even though the “security” nature of FAIR Securities prevents organizations from creating Decentralized Autonomous Trusts today, we are confident that the Continuous Organization model provides a strong enough value proposition that forward-thinking jurisdictions around the world will be quick to adopt this new model.
The full paper is available here.
To give you some context, this idea started to germ in my mind after deep diving into token curated registries, token bonding curves (thanks to @simondlr for the all your inspiring and thought-provoking articles!) and filtering it through my own experience as an entrepreneur (2 companies, 1 non-profit & 1 political party for which we developed an ethereum-based voting platform implementing the majority judgement). The current legal entities suffer from many problems that force you to make difficult trade-offs (governance vs fundraising, trust building vs profit making etc…). By decoupling governance from financial incentives and proposing a new kind of fully-digital securities that is better than traditional securities, I believe the Continuous Organization model provides many benefits that have the potential to make it the go-to model when starting a new venture in the coming years.
I’d be thrilled to have your feedbacks on this!
Also, I am flying to SF this afternoon to attend ETHSanFrancisco this weekend (with the objective to implement/hack a 1st Decentralized Autonomous Trust). I’d be very happy to meet and discuss with anyone interested in the concept.
Thanks a lot for your interest… and for creating Ethereum of course