Author: Edgy Brah

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### ELI5 (Explain it Like I’m 5) Project Value-Add

Collab between EstuDAO x Krause House DAO & pursuing due dilligence with the team.

EstuDAO is aiming at adquiring & operating stakes in Estudiantes, famous basketball club in Spain.

The aim is for Krause House to become the main partner, helping: finance, build legal structure, operate the international community of the DAO, help build the Web3 ecosystem around it.

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### How will funds be used?

Activating the community; developing web3 technology; building contributor stream system; purchasing team stakes.

### Project Details

**Introduction**

The aim of this proposal is for KH & EstuDAO to start working together towards a Due Dilligence process with the club & eventualy purchase & operate it. WAGBAT!

In this document we express the main points about the history of Estudiantes from Madrid, a professional basketball team that currently plays LEB Gold, the second division of the Spanish system behind the ACB League.

Along with this information, reference will be made to **EstuDAO**, an organization aiming to achieve the goal of being able to make the majority purchase of shares that allow us to have a prominent place in the management of the club.

The information contained in this document is of a public nature & most of the figures were obtained from public records, however, there is unofficial information, which may be contrasted prior to the execution of any action through the due diligence process.

**Basketball in Spain**

Spanish basketball just had an extremely successfull Eurobasket with:

- Spain has competed in all 8 finals (men, women, u18, etc.)
- 4 of the men´s team come from Estu

**Legal context of sports institutions in Spain**

In Spanish basketball, there is a league of professional clubs & a Federation that encompasses all the other competitions of less professionalized or totally amateur clubs & also those of training young players.

The [Association of Basketball Clubs](https://es.wikipedia.org/wiki/Asociaci%C3%B3n_de_Clubes_de_Baloncesto) (ACB) organizes the 1st [league](https://es.wikipedia.org/wiki/Liga_ACB), composed of 18 teams at the highest level of competition. Each year the last 2 in the league standings are relegated to the LEB division; the ACB League, which makes winning more meaningful that in the NBA. The LEB is organized by the [Spanish Basketball Federation](https://es.wikipedia.org/wiki/Federaci%C3%B3n_Espa%C3%B1ola_de_Baloncesto).

The Spanish ACB teams compete in [Europe](https://es.wikipedia.org/wiki/Europa) in the championships organized by the [ULEB](https://es.wikipedia.org/wiki/ULEB) & also in the championships organized by [FIBA Europe](https://es.wikipedia.org/wiki/FIBA_Europa).

Madrid is the largest city in Spain & the second largest in the European Union, with a population of more than 3 million inhabitants (more than 6 million in the metropolitan area).

**ECONOMIC REQUIREMENTS TO PLAY THE ACB**

The initial investment is already around €3.5 million between the minimum budget required & the value of participation, which is paid in 4 seasons.

ACB values on the first place, the accounts report that must be presented. This is an external audit that is commissioned for clubs that are promoted to evaluate their economic health.

In this way, the ACB seeks to minimize risks that damage the reputation of the competition & affect the rest of the clubs. On the other hand, the external audit is followed by an examination of budgets. This is a process that all the teams go through.

After passing both financial tests, clubs must meet a number of business & technical requirements. The first is to cover the participation fee, which in the old days could be equated to the canon. This value is a payment that clubs make when competing in a private league. The total amount is 1.9 million euros, although it is split into four different years.

Each club pays about 488,000 euros per year over four years, which is returned at the time of relegation to LEB Gold. In case of achieving permanence, instead of making this full payment, the ACB deducts a proportional part of the audiovisual & sponsorship distribution. It is a complex position for clubs, as it is an important burden when setting budgets.

Once all the steps for registration have been completed & the audits have been passed, the teams must draw up a budget. The minimum is 2.5 million euros, although today almost none of them go below three million. Last year only three clubs started below this amount: Breogán, Manresa & Fuenlabrada.

**EUROLIGA & ACB Budget**




**Profitability of a basketball team in Europe**

European basketball is not very sustainable NOWADAYS, with a model based on the purchase of players because clubs pay more than they are capable of generating. The prospects are not good as long as there are no teams & fans in London & Paris, as the low penetration in the UK, France & Germany is the great drag on the take-off of the business.

**Information about Movistar Estudiantes**

**History**

Estudiantes is a historic basketball team from Madrid, Spain, founded in 1948 which competed  in the ACB league until 2021, the men's team is currently playing in the LEB Gold League.

The Club Estudiantes was founded by a group of students from the Ramiro de Maeztu secondary school, supported by the latin language professor Antonio Magariños. Since they weren't allowed to compete under the name of their school, they decided to do so by describing what they were: students. Those students planted a seed that little by little began to germinate.

They also own a women's team, & are also particularly famous for their renowned youth academy with over 2,000 players (one of the largest in Europe).

Some of his achievements include: winning 3 Spanish Cups & reaching the ACB Finals in 2004.

The youth academy has produced many great Spanish players such as: Juancho Hernangómez, Sergio Rodríguez, Felipe Reyes, Pepu Hernández, Aíto García Reneses or Carlos Jiménez, Fern&o Martín, the first Spaniard to reach the NBA & play for the Portl& TrailBlazers, was also a product of the club.

The 98-99 season was huge: MJ was close to sign for Estudiantes ([Link)](https://www.movistarestudiantes.com/prensa/noticias/cu&o-michael-jordan-pudo-jugar-en-el-estu/)

**Fans**

Estudiantes has historically had some of the most passionate fans in the ACB league, but recent struggles on & off the court have left the fan base upset & disappointed.

They feel that their team has been taken away from them.

There are around 50k Estudiantes fans in Spain, the club is linked to a high school, so it receives around 100-200 new fans every year (former students & parents).

Link: [https://twitter.com/MovistarEstu](https://twitter.com/MovistarEstu)

**Structure**

The club has 3 main structures. The SAD (Sociedad Anónima Deportiva), which represents professional teams, Estudiantes Asociación Civil, which represents the club & youth academy, & Fundación Estudiantes, a non-profit organization that carries out charity actions.

Estudiantes has the 2nd highest paid sponsor in Spanish basketball, [Movistar](https://www.movistar.es/), an important telecommunications company in Spain & Latam that pays 3M€ every year until 2025.

They currently play at the Wizink Center, the same stadium where Real Madrid Basketball plays, the 2nd largest basketball stadium in Spain.

The club has a men's team that plays in the 2nd division, a women's team that plays in the 1st division & the largest basketball quarry in Europe.

The workforce is around 35 people & has a direct & indirect impact on more than 100 families.

**Social impact of the club**

The club has the largest youth academy in Europe. It has been developing social projects for 20 years.

They know that sport is, among other things, a great transmitter of values such as cooperation, autonomy, decision making, equality, respect (learning to win) & tolerance to frustration (learning to lose). That is why they carry out activities & projects that link these & other ethical values with sporting values & bring sport & basketball to people who have fewer opportunities to reach them.

The [adapted schools](http://www.movistarestudiantes.com/fundacion-estudiantes/equipos-y-escuelas/), the [training](http://www.movistarestudiantes.com/educacion/) projects [for employment](http://www.movistarestudiantes.com/educacion/), the solidarity calendar & [awareness actions](http://www.movistarestudiantes.com/acciones-solidarias/) are an example of the line that Fundación Estudiantes follows.

**Club news**

Estudiantes celebrates its 75th anniversary in its biggest sporting, economic & institutional crisis in living memory. The debt is suffocating, the men's, women's & youth sports project is an unknown quantity.

The current president (Fern&o Galindo) stepped aside, & a new one was announced (Ignacio Triana) who expects an ephemeral m&ate while waiting for a new investor.

In order to address the delicate situation that the club is going through, the club closed a financing round amounting to 1.21 million euros, last november, after burning through a capital raise of €5M.

The entity's shareholding consists of five partners with a stake of more than 5% of the capital: Fundación Estudiantes, with 19.52%; Club Estudiantes de Baloncesto, with 6.64%; Fern&o Galindo (former president of the entity), with 11.56%, Vicente Olivenza (president of the Altafit Group) & Ignacio Triana (founder & CEO of Forus), with 12.46%.

After the relegation to LEB Gold in 2020-2021, the organization had a budget of 1.7 million euros & still dragged a debt of four million euros, as reported by the entity.

**EstuDAO**

**Value proposition**

In **Estu.DAO** we have gathered a team of 8 people from different backgrounds who are willing to dedicate countless hours to make this goal a reality. Passion is something inexplicable that brought us together to be part of this crazy group called **Estu.DAO**. - Demencia Mentality.

Our goal is to **build a bridge between traditional Spanish fans & new fans from all over the world**. The team has a deep knowledge of the "Demencia" (name of the Club's fan base) & its ecosystem.

Estu.DAO was born from an idea between a group of basketball & cryptocurrency fans who came up with the crazy idea of buying Estudiantes & giving it back to their fans.

"The dolphins"; a group of collaborators who help us to coordinate & manage the different work teams.

We are currently in the process of building our community by implementing a series of actions to grow the community. There are more than 100 people in our Discord channel + 200 on Twitter without any serious media campaigns yet.

In contact with media personalities + players & explayers who will help us grow in Spain.

Peep our [manifesto](https://twitter.com/Estu_DAO/status/1567600413276250112) made with the community where we express our mission & vision about what we are looking for with the DAO.

**PROPOSAL OF COLLABORATION KRAUSE HOUSE - ESTUDAO**

- Collaboration in the legal aspect for the constitution of EstuDAO with a recognized legal figure that allows it to own physical assets.
- Integration of EstuDAO into the Krause House Accelerator ecosystem, integration of both communities & commercial exploitation of both br&s in Spanish-speaking markets.
- Formation of a joint work team for the management & preparation of the offer for the majority purchase of Estudiantes' shares.
- Fundraising & financing for the confirmation of the investment vehicle for the purchase of a professional basketball club.
- Br& activations.
- New monetization avenues for both organizations.
- KH will be able to test new programs (MyJerry) & have proof that fan ownership model can be successful.

**PROPOSAL FOR MAJORITY PURCHASE OF SHARES IN THE CLUB ESTUDIANTES MOVISTAR**

**STATUS**


*Information updated at the end of 2021. Liabilities correspond to debt restructurings with public bodies & internal loans.


*Annual results

**Proposal for majority purchase of shares of the Estudiantes club.**

From Oct 10, 2022 & for one month, the process by which investors can enter the shareholding of the club will be opened. Currently it was approved to increase the share capital by five million euros through the creation of 833,334 new ordinary shares.

In order to secure the majority share purchase, clean up & pay off the organization's debts, secure the staff's budget for one season & reorganize the structure, a sum of **10 million US dollars**.

Estudiantes has **€4M debt** w/ Spanish government. If the DAO is able to cancel that debt, the **club would be ours**.

**NBA Non-compete clause**
The NBA has a non-compete clause stating:

"The proponents of this proposal recognize that the NBA Constitution and By-Laws (2019) article 3(d) prohibits NBA owner's having interests in teams from other basketball leagues, unless approved by 3/4 of all governors."

Given the mission of Krause House is to buy an NBA team, it is understood that any action or relationship considered under through this proposal or thereafter, will be subject to that restriction.

We are willing to explore any option available to comply with this clause.

**Footnote**
1) For this proposal, votes will be aggregated for the "Decline" options.