Summary

The DAO will fund the startup of the Spellguard product at a $20 million valuation in exchange for 10% equity in the parent company. This proposal will also reallocate the liquidation fund set aside from TIP-51 towards initial opex for the Spellguard entity due to the liquidation fund's decreased relevance in the DAO's improved financial condition.

Rationale

Spellguard is a B2B product that assists enterprises building AI on top of hyperscale compute providers. The Treasure “brand” and community is an inappropriate vessel for this new entity.

After long deliberations, we decided to bring this to the DAO as transparently as we could. We have a multitude of reasons why Spellguard would fail completely if released “by Treasure, the former gaming DAO” but could provide a massive boon to the token holders given that the problem space that Spellguard focuses on is quoted by Gartner and others as a $50-150 billion sector. Multiple companies will be established soon in this space that one day IPO.

Why a Separate Entity is Required

• Enterprises don’t do SLAs with DAOs: Enterprise procurement requires a legal entity with standard corporate governance, not anonymous token holders
• The DAO lacks the structure to fund and incentivize a startup at the level needed for success: The Spellguard product has the potential to rival Datadog or Snowflake in its size. We will lose talent capable of producing an enterprise at this scale without a reorientation. Moreover, even if the team was retainable without proper incentives, neither investors nor enterprises would believe in the safety and longevity of this product without proper equity incentives for the team building it
• Crypto is polarizing: Given the current state of consumer crypto after the memecoin era, Spellguard should not have any public tie-back to crypto. The only connection will be the DAO’s 10% ownership of the company, which will be disclosed to future investors but not featured on company branding or customer-facing materials
• Inclusive of Past Structures: Treasure’s incorporation in 2022, approved by the DAO, kept open the possibility of private entities built on top of it one day. We are actualizing this approach now rather than changing the core structure of the Foundation, Labs, etc.

Why This is Good for Token Holders

It has not been a question since 2025 whether Treasure contributors can build valuable products. Each quarter, we have released products where contributors could conceivably sell the product as a private company at a higher market cap than MAGIC. The community has been rebuilding since our gaming pivot, focusing on bringing attention to our consumer platforms, but has no role to play in this enterprise product. Still, they are well-suited for this approach:

• TIP-61: the community is in a position to help push Treasure’s consumer-focused platforms to fee generation and become profitable enough not just to sustain the DAO but create real deflationary pressure on the token
• TIP-62: the DAO takes a significant minority ownership in an entity that can be separately developed on Treasure’s AI stack

Valuation Rationale

The $20 million valuation for 10% equity would allow the team to build with half its resources for two years. Revenue and additional investor participation in the Spellguard entity will allow the team to scale up the product focus.

Spellguard includes an open source stack, putting forward first-of-their-kind AI primitives on which a large decentralized network can be built on top, as well as an enterprise-focused SaaS product that makes use of this technology. For competitive reasons, we are not able to disclose the full technology involved here, but we feel strongly that $20 million is a highly conservative rate. If pursued outside Treasure, contributors would be aiming for multiples given that the winning product in this vertical will provide a 2000x return on a $20mm seed valuation. Comparable seed raises for companies of this kind have raised $15-40mm in 2024-2025, not including the possible network. However, we are ready to go fast and have major advantages over these incumbents, including a pre-assembled world-class team, clear product direction, market fit, and an established investment community (the DAO).

It should be understood by the community that venture-style equity investment is high-risk and has a meaningful risk of total loss.

Cap Table

The DAO’s shares are 10% of the new entity, non-voting, and subject to dilution like all other members of the cap table. For the benefit of individuals unfamiliar with this style of investing, dilution at a later stage occurs when the project is succeeding. Shareholders see their total share decrease as the total pie grows.

Upon entity formation, the remaining cap table will not be publicly disclosed to the general MAGIC community. We are doing this for safety reasons. For the last five years, contributors have been publicly harassed over their allocations and onchain fund movements. Spellguard’s founder will be John Patten, the founder of MAGIC and still the largest holder of the token. We hope that Patten’s behavior in the last few years to act as a good steward to the community, as well as lessons learned in public about the risks of “dead equity” from useless contributors, signals to the community that the decision-making is being taken with utmost care.

Liquidity Mechanism

The DAO’s return on this investment will come through an acquisition or IPO. There is no planned dividend or revenue share for any shareholder. The DAO is not unique here. The DAO holds equity with the same economic rights as other shareholders. In the event of a company sale, the DAO will receive its pro-rata share of proceeds based on ownership percentage at time of exit.

Milestones

The Spellguard team aims for the following near-term milestones:

• Release of the initial open source primitives
• Release of the SaaS-focused product for potential customers

First enterprise partners secured

By 12-18 months, we are aiming for Series A readiness or the path to profitability. Progress towards this goal will be communicated to the DAO through existing quarterly reports.

Implementation

Upon passage of this proposal:

• The Spellguard parent entity will be formed
• 10% of founding shares will be issued to the Treasure Foundation as the DAO’s representative holder
• A shareholder agreement will formalize information rights, pro-rata rights, and economic terms
• Quarterly reporting to the DAO will commence within 90 days of formation

Risk Disclosure

Token holders should understand the following risks:

• Total loss: Early-stage startups have a high failure rate. The entire investment could be lost.
• Illiquidity: There is no timeline for a liquidity event. Equity cannot be sold or traded.
• Dilution: Future funding rounds will dilute token holders’ ownership percentage.
• Non-voting: The DAO holds non-voting shares and cannot influence company decisions.
• Execution Risk: While the market is very real and growing, success depends entirely on the team’s ability to execute.

This is a venture bet, not a guaranteed return.

Conclusion

This proposal offers the DAO something rare: direct equity exposure to an enterprise software company in a high-growth sector, built by a team with a proven track record of shipping products. The alternative, attempting to build Spellguard inside the DAO structure, would result in certain failure. Enterprises will not buy from a DAO. Investors will not fund a DAO-governed startup. Top talent will not stay or join without proper equity incentives.

By approving this proposal, the DAO gains 10% ownership of an entity positioned to compete in a $50-150B market, led by the same team that has consistently delivered high-quality products in the last year with the addition of new developers.

Note: holding the MAGIC token is not a representation of equity in the Spellguard product or a claim on future dividends. The beneficiary of a liquidation event would be Treasure DAO.

Submitted by: John Patten, Treasure DAO Founder

Amendments from Comment Period

• Some holders expressed concern that the DAO is shutting down: Treasure is not allocating the last remaining funds towards this venture. Quite the opposite, we have high confidence in our current products and believe the challenge to adoption for these products is currently distribution and community growth, not development. We aspire for TIP-61 and TIP-62 to succeed in parallel and result in long-term sustainability for the DAO.
• Equity language: we have amended the wording to describe as clearly as we can that MAGIC does not represent equity in Spellguard, and that the 10% equity belongs to the Treasure DAO, governed by MAGIC holders
• Demo vs Product Release: For near-term milestones, we have amended the milestone from "release of the product" to "releasing demos to interested clientele." Based on early consultations, we decided that Spellguard should follow our competitors by only offering demo access and not full public release for proprietary reasons.
• TIP-61 Reassignment: During our quarterly financial review, we assessed the DAO's current runway (12 months in stables, not including the MAGIC treasury) and concluded that the liquidation fund from TIP-51 would be put to better use for early Spellguard costs given that the fund is sitting idly, the DAO's financial situation has improved significantly, and it was liquidated at a better price than today's bear market.