> For the complete documentation index, see [llms.txt](https://skyren-foundation.gitbook.io/skyren-technical-white-paper/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://skyren-foundation.gitbook.io/skyren-technical-white-paper/skyren-dao/funding-sources/initial-capital-formation.md).

# Initial Capital Formation

<figure><img src="/files/OjStr1UKpV26H1dlOYIw" alt=""><figcaption></figcaption></figure>

## Skyren DAO: Initial Funding Process

The initial funding of the Skyren DAO follows a carefully structured three-step process, designed to ensure transparency, fairness, and long-term sustainability. Let's break down each step of this process:

### Step One: Contributor Investment

The first stage of funding occurs during the SKYRN token presale:

* **Contributor Allocation**: Skyren contributors receive a proportional share of the rights to the 5% contributors reward.
* **Alignment with Whitepaper**: This allocation is in line with the DAO reward distribution outlined earlier in the whitepaper.
* **Incentive Structure**: This step ensures that early contributors are rewarded for their support and have a stake in the project's success.

Key Points:

* Contributors get a share of the 5% reward pool.
* Allocation is proportional to contribution.
* Follows the predetermined tokenomics structure.

### Step Two: DAO Funding from Presale Proceeds

After the presale, a portion of the funds raised will be allocated to the Skyren DAO:

* **Proportional Allocation**: The amount allocated to the DAO will be proportional to the total funds raised.
* **Post-Operational Costs**: This allocation occurs after satisfying necessary operational costs.

Examples of operational costs include but are not limited to:

* Marketing expenses
* Development costs
* Third-party service provider fees
* Legal and compliance fees
* Team salaries and administrative expenses
* Infrastructure and technology costs

Key Points:

* DAO receives a share of presale funds.
* Allocation happens after covering operational expenses.
* Ensures balance between DAO funding and project needs.

### Step Three: Ownership Structure of Contributions

The final step clarifies the ownership and rights associated with the contributions:

* **Initial Contributions**: Funds contributed during the first stage (Step One) remain under the ownership and rights of the Skyren contributors.
  * These funds can be returned to contributors at any time and for any reason.
  * Provides flexibility and security for early supporters.
* **Subsequent DAO Funding**: All funds added to the Skyren DAO after the first stage (Step Two and beyond) fall under the sole ownership of Skyren token holders.
  * These funds are governed by DAO rules and voting mechanisms.
  * Represents the transition to full community ownership and control.

Key Points:

* Initial contributor funds remain returnable.
* Subsequent DAO funds are community-owned.
* Clear distinction between early contributions and ongoing DAO assets.

### Conclusion: A Balanced Approach to DAO Funding

This three-step funding process for the Skyren DAO is designed to:

1. Reward and incentivize early contributors.
2. Ensure adequate funding for both the DAO and operational needs.
3. Provide a clear transition from initial contributor control to community governance.

By following this structured approach, Skyren aims to create a strong foundation for its DAO, balancing the interests of early supporters with the long-term goals of the project and its community. This process not only funds the DAO but also sets the stage for sustainable, community-driven growth and governance.