Operation: Bring Home The Bacon — Bayesian Baller & Uncle Jon Work Stream

Summary

In Spring 2022, Krause House purchased all 25 Fire NFTs representing ownership of the BIG3’s Ball Hogs. As outlined in the Terms of Sale, Section 4: Paragraph 1 states, “Fire Tier Owners will receive 40% of the net sale proceeds generated from future sales of their team.” However, the catch is that this is subject to SEC approval, which to our knowledge the BIG3 has not pursued.

In Summer 2024, the BIG3 announced a shift from its tour-based model to a home city-based model, with plans to expand from 12 to 16 teams starting in the 2025 season. The expansion teams were sold for $10 million each, and it has been reported that the original teams, including the Ball Hogs, may sell for $15 million or more. The valuation of these teams presents an opportunity for Krause House to potentially receive $6 million from a sale — 12x our original investment of $500k.

The financial situation of the BIG3 is a key factor here, as well. The league has faced challenges since the NFT and crypto market crash, and while Krause House has maintained positive relationships with league executives, it is uncertain how long the current team valuations will hold or how long the league itself will last. With talk of transitioning the NFT program into a VIP program, the league may look for ways to renegotiate or reduce the payouts to NFT holders.

On a similar note, Krause House has invested considerable time and resources into the team over the past three summers. Though given the current state of our treasury, the DAO’s ability to provide financial support for the Ball Hogs in 2025 and beyond is uncertain at best.

Taking all of these factors into account — the BIG3’s expansion, rising team valuations, and Krause House’s declining ability to financially support the team — this opportunity could not come at a better time and offers a golden ticket financially for the DAO. It is essential for Krause House to act now while opportunities are available, leveraging our strong relationship with the BIG3 to either secure a sale, a partnership, or continued involvement in the team’s management.

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TL;DR

The BIG3 is expanding and team valuations are booming. There is an enormous opportunity at hand for Krause House. We believe it would be financially irresponsible for us not to explore it.

With the approval of this proposal, we plan to achieve the following:

• Identify a buyer for the Ball Hogs & collaborate with the BIG3 on the terms of sale.
• Officially secure Krause House DAO’s equity stake in a future sale of the Ball Hogs.

When this work is completed, we will bring forth a follow-up proposal for the community to vote on any sale. To be explicitly clear, there will be no sale without official community approval.

Below is a chart diagramming the 3-step approach that we plan on following:

Financial Request

After careful consideration and discussion with key members of the Krause House community during Town Hall on Nov. 14th, we are proposing the following compensation structure.

Contributor Stream

To engage prospective buyers, collaborate with the BIG3 on the terms of sale, and negotiate Krause House’s equity stake in the sale of Ball Hogs. This initial stream is for 2 months with the option for renewal on a month-to-month basis.

Compensation:

• $4,000 USDC/mo apiece
• $4,000 KRAUSE/mo apiece

**Wallet: ** Uncle Jon: 0x2D5803Cb5Cb2Bd90eb242e0162AE5E25B7a31b39 Bayesian Baller: 0xD9b3Ad0eb0d3b9DF83CE919198F9ad0Ff692522F

Duration:

• Minimum 2 months
• After the 2nd month, Bayesian Baller and Uncle Jon will have the option to apply for more funding on a month-to-month basis. In other words, they will put up a new Snapshot with their latest progress reports and will be subject to community approval for stream extension.
• First payout to be December 1st. Second payout to be January 1st. If all goes well, stream extension to be ready for approval January 20th.

Legal Budget:

• Up to $10,000 USDC total
• Stewards to approve transactions

Commission Upon Final Sale

Contingent Upon the Community Approving Final Sale

• After successfully finding a buyer and negotiating Krause House’s equity stake in the sale, there will be a follow-up proposal brought forth to the community to officially vote on approving an actual sale.
• If approved, upon closing the sale and returning significant capital to the community, we are requesting a 15% commission total (maximum cap at $400k) on the final sale proceeds earned by Krause House.
• To reiterate, this commission is only to be paid out upon the community voting to approve the sale of the Ball Hogs. If the deal falls through or the community decides not to sell, then no commission will be paid.

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Scope of Work

The goal of this work stream is to explore and execute the best strategic path forward for Krause House DAO’s equity stake in the BIG3’s Ball Hogs, while positioning Krause House to capitalize on future opportunities. Our focus will include:

1. Engaging with the BIG3 to explore options for the sale or continued management of the Ball Hogs. We will ensure Krause House’s interests are protected in any sale, negotiation, or partnership agreement.
2. Preparing and presenting an investment pitch to external investors interested in acquiring or partnering on the Ball Hogs, including potential buyers who might allow Krause House to retain partial ownership and/or manage the team after a sale.
3. Exploring additional team management opportunities within and beyond the BIG3. Given our proven track record with fan engagement and decentralized team management, this stream will position Krause House as a credible option for other teams seeking similar strategies.
4. Long-term Strategic Planning: As part of the work stream, we will also lay the groundwork for a second proposal after any sale or partnership deal to guide how the capital will be deployed. This ensures transparency and a clear plan for how to reinvest in the community.

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Opportunity

This proposal presents three key opportunities for Krause House:

1. Financial Return via Sale: A sale of the Ball Hogs could generate a potential 12x return on our original investment. If the team is sold for $15 million (which the league is hoping to fetch for the existing twelve teams), our 40% share would be worth $6 million. This financial infusion would significantly extend the DAO’s runway and/or provide an opportunity to repay our original investors.
2. Partnership and Continued Management: If a sale occurs, Krause House could negotiate a continued role in managing the Ball Hogs, leveraging our expertise in fan engagement and decentralized sports management. This could potentially not only secure future revenue but also enhance our credibility in the sports industry.
3. Expansion Beyond the Ball Hogs: By working with the BIG3 and their investor groups, we can explore management opportunities with other teams or leagues. Our track record with the Ball Hogs has positioned us as a credible leader in fan-led sports ownership space, and this work stream will only further substantiate that credibility.

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Why This Stream is Critical

If we do not act now, we risk losing our leverage in discussions with the BIG3. The league could move forward with a sale on their own, leaving us with little to no financial return or potential path to remain involved with the team going forward. By taking a proactive approach, we will be better equipped to protect our investment against the following potential risks:

1. The Uncertain Future of the BIG3: It’s no secret that the BIG3 has struggled financially in the past. During the 2022 season, the league was even on the verge of potentially shutting down.

   Given what we know about how expensive it is to operate the league, it’s reasonable to believe that the BIG3’s future is questionable at best and highly dependent upon new capital coming in from the sales of their teams.

   More importantly, there is no way of knowing how long the current wave of team valuations will last or how long the league will be around altogether. As a result, we need to strike while the iron is hot.

2. The BIG3’s Hesitancy to Honor NFT Contract: While our contract with the league states that we are entitled to 40% of a team sale, we have already been told that the BIG3 is going to try to get out of honoring that agreement.

   Given our strong relationship with the league, however, they have said that they will work with us to facilitate a fair share. As such we believe there will be a strong first-mover advantage, and the longer we wait the more likely it is that the league will find a way out of the contract.

3. The Importance of Us Finding Our Own Buyer: In our conversations with BIG3 executives, it has become increasingly clear that us bringing our own buyer to the league will significantly increase our odds of negotiating a fair share of the final deal price. By finding our own buyer, it also gives us the best opportunity to build a strong relationship with the new ownership and sell them on the value of having Krause House remain involved in the future of the team.

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Conclusion

This work stream is critical for Krause House’s future. Through a sale, partnership, or continued management of the Ball Hogs, we have an opportunity to secure significant financial returns, expand our role in sports ownership, and revitalize our community. The only real risk is inaction.