Digital Country Clubs

Power of Niche Internet Communities In the Real World

Disclaimer: Newsletter and the information contained herein is not intended to be a source of advice or credit analysis with respect to the material presented, and the information and/or documents contained in this website do not constitute investment advice. Opinions contained within this letter are my own and not those of my employer.

Have you heard about cryptocurrencies? What about the term Web3? NFT’s? Or how about DAOs? Maybe you heard about the ConstitutionDAO? Before moving any further, I think it’s worth providing some context on Web3 and Constitution DAO. There are folks much more qualified explain ConstitutionDAO, and you can find a good summary here, from Bloomberg. For more robust Web3 explainers, I recommend stuff over at a16z.

I haven’t spent a ton of time in this newsletter talking about Web3 - I have only focused on pointing out that the space is worth studying, even if does all end up being complete hogwash. While I think blockchain technology is very interesting as a concept, most of the projects based on various blockchain architectures (am I saying that right?) have seemed more like fun little side-projects, and less like the world-changing monoliths their creators would have you believe. I didn’t really care about the thriving art-as-investment industry before that art got put online and crypto-fied. NFTs are interesting, to be sure, just not something that has personally resonated with me enough to actually write about. Similarly, I followed the ConstitutionDAO story but didn’t go deep enough to warrant an article on it. Most other Web3 projects seemed interesting, but more like experiments in seeing if the technology had any real product-market fit. And really, when it came down to it, I just haven’t been convinced that the product-market fit for most of crypto/Web3 had really landed, yet.

But, as with most things in life, you never really know what is going to grab your attention until it actually does. Last weekend I scrolled across something that caught my eye: LinksDAO. LinksDAO is a Web3 project, similar to ConstitutionDAO, where a group of people are pooling their resources to buy a golf course and manage it like a digital country club. You can buy into the project by purchasing an NFT with two separate membership classes - Leisure and Global. Leisure membership awards you the right to purchase an actual membership at the first physical club LinksDAO acquires, various governance rights, and access to special LinksDAO related offers. Global membership awards you the right to more enhanced governance privileges and access to real-life golf events hosted by LinksDAO.

LinksDAO minted its NFTs (meaning the NFTs were put up for sale) on New Years Day, 2022, and sold ~9,000 in 26 hours, running out of supply and raising $11 million in the process. According to the LinksDAO marketing materials, this money will go toward operating the affiliated DAO - marketing, legal compliance, community development, course scouting (read: traveling the country and playing dope golf courses), among other things. Notably, it will not go toward the actual purchase of the golf course - the funds of that purchase, from what I can tell are still TBD. It should also be noted that LinksDAO is not yet technically even a DAO yet - the legal construct is still being put into place. But the recent fundraising should help pave the way for both of those things to occur.

[Editors Note: One brief note for my legal heads out there, there is some interesting legal precedence surrounding the sale of unregistered securities to finance a country club - Silver Hills Country Club v. Sobieski. The debate rages on about cryptocurrencies and their classification as securities. This is an interesting wrinkle in that debate. As someone who is definitely not a lawyer, I will leave that discussion for better equipped parties.]

Once legally constructed, the DAO will also hire executives and folks who will help actually execute the plan that the governing body (aka NFT holders) will vote upon. Further timeline can be found below:

Beyond that, there aren’t a ton of details about what is going on with LinksDAO. If you join the Discord channel, you can learn more, but even in there, there are still a lot of question marks. At this point LinksDAO is effectively a seed-stage startup. It’s beyond pre-seed at this point, because raising $11 million from interested individual investors shows that there is certainly some high-level traction occurring. However, there is still a long row to hoe on this one.

If you have ever been a part of a country club or are familiar with them enough in concept, you know that having a golf course is only half the battle in setting up a quality institution. Country clubs today act as an analog version of DAOs, with membership voting on most critical matters, including hiring/firing of managers, managing various committees, and new membership, among other things. And those familiar with the matter, you know that these decisions, no matter how minute, can be extremely painful. Some members think tee times should be 8 minutes apart versus 10 minutes apart. Some members think the club should cut down that tree on hole eleven because it’s killing the grass on number twelve green. Some members think the club needs to hire a new club pro. Some members think the stools in the clubhouse are too tall. And for each opinion that floats around a membership, there is another party who will take the exact opposite position and fight tooth-and-nail on the matter.

What’s more, most country clubs will have somewhere between 250 - 750 members. LinksDAO will purportedly have ~10,000 members, depending on how you define the term. It’s great that they are empowering folks to be involved, but there are natural, physical limits to how involved they can actually be.

Leadership-by-committee, at least for things in the physical world, can be very tricky. There is no reason to believe that it won’t be the same way for something that is managed on the blockchain. Of course, there are well run clubs and there are poorly run clubs and I would generally wager that the former owe their success to strong leadership and effective governance practices as much as anything. The future of LinksDAO and its success will rely heavily upon the folks who are leading the charge, like Mike Dudas, making sure that the digital country club’s governance structure actually makes sense - make it so that people can vote on the right things and not get bogged down in frivolous junk.

What interests me about the LinksDAO project is not that I think it is definitely going to be successful - as I have just laid out, running a country club is hard, let alone one with 10,000 members - but that it’s an experiment that actually makes sense to me. This week, Packy McCormick had an excellent piece in his newsletter about Web3 still being in a laboratory phrase. I encourage you to read that in full if you have the time, but the gist of it is that folks working in Web3 are still trying to figure out how to use this technology and they are doing it by creating whacky projects, like ConstitutionDAO and others. This lab is providing real-world verification for how things in Web3 could potentially work, which will, in theory, provide better avenues for innovation in the future. First Web3 starts out by toying with buying the Constitution, then it figures out how to assist in battling Climate Change. At least, that’s the idea.

That is generally the course of innovation, from toy to tool. And while I think it would be cool to help buy a copy of the Constitution, I am not really sure why we need a DAO to do that? Most projects feel like they are finding a problem for an existing solution. They don’t even feel like toys at this point, but rather, a third-grader inventing a game on the playground, where the rules don’t really make sense and nobody has any fun.

But LinksDAO seems closer than most to actually solving a real-world problem. Country clubs are the best example of grown-up toys I can think of. Country Clubs are basically already DAOs, so using crypto to manage them makes a lot of sense. Not only that, but there are a lot of folks who like golf, but don’t love the traditional golf community (or at least think it needs some improvement). Look no further than what the guys at NoLayingUp are doing to build a community for evidence that golf is currently being disrupted. This is happening because there is a new generation of golfers dying for the industry to change and meet their needs. So if you can use a DAO to design a country club with those new folks in mind, I think you could build something that people would actually want. On the flip side, is anyone clamoring for the ownership structure of the copy of the constitution to change? Sure it was fun to see that community grow, buy why did it need to happen in the first place.

What’s more, this might provide a roadmap for how to use Web3 tools effectively. It can be a resource to start and manage already existing organizations that require membership input. Country Clubs, Fraternities & Sororities, Community Councils, Parent-Teacher Organizations, Book Clubs, etc. Basically anything where there are frequent membership votes, Web3 could be involved. Of course, that’s not a new idea in theory - folks have been talking about using blockchain as a voting mechanism for a while. However, this is one of the first times it is being put to the test in a more conventional, real-world environment. We are no longer talking about theory - the experiment is underway.

Now the question remains - is this experiment going to work? There are a lot of reasons to think it probably will not. Country clubs are hard enough to manage - any additional wrinkle could just make things much worse. Trust me when I say this: golfers are a fickle group. I don’t think I have a golf-oriented group chat on my phone that doesn’t get into an argument over a seemingly minor golf-related opinion thing every couple of weeks.

However, golf is ripe for disruption. There’s a good chance that the headaches caused by existing golf infrastructure are due to outdated governance practices and any change will be a massive improvement. There is potential that this is a total scam and will go down in flames, but there is also potential that this could improve the golf landscape more broadly.

Since it’s inception, golf has largely been a local endeavor. If you joined a country club, it’s typically the one closest to your house. There might be two equidistant from where you live and you pick the one that has a better vibe, but options are typically somewhat slim. As a result, vibes at different country clubs have been somewhat homogenized over time as they try to maximize the experience for the people living in their region.

But what if you didn’t fit with that vibe? You were just totally out of luck? That was true, up until recently, when different social groups for golfers have been sprouting up that were born online in some capacity. There are groups like The Outpost Club, which is a remote-first country club for high-end golfers, or Silver Club Golfing Society, which targets highly competitive golfers who are looking for an enhanced amateur competition experience. There is also NLU’s Nest, which is a paid-subscription organization that has an extremely active message board, puts on several golf outings per year, and finds other ways to get its members involved in the community. They even have their own clubhouse outside the ropes of Sweetens Cove. If you follow NLU at all, you know they have a specific way of talking about golf (I don’t want to say Barstool Sports meets golf, but for an idiot, that’s a good way of describing it). They attract a certain kind of fan and they have developed an awesome community. I say this because I largely agree with everything these guys say - their takes on Jack Nicklaus’ architectural prowess, their feelings towards pushcarts, their aspirations for the game, etc.

While a lot of golfers are still not into the NLU experience, it’s still definitely a community that a certain golfer to cling on to without having to join a club (or in spite of doing so). Of course, there is nothing new or novel about starting a great online community - there are countless examples of that happening over the past two decades at greater and more impressive scale than NLU. The great thing about Web2 (read: the internet) is that you are able to find your own corner of the world, no matter how big or small. But up until now, they haven’t had the resources at their disposal to do something like buy and manage a golf course as a member of that community. The niche appeal of the internet mixed with the local endeavor of playing golf with your buddies in the real world. There is potential that becomes a pretty potent cocktail.

There is still a lot to be learned about the LinksDAO project. As an investor, the question I might be asking myself is “will this scale?” But honestly, who cares? What I really want to know is “will this work?” If so, this could alter online communities in radical ways moving forward.