AVI Final Report

General
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The Arbitrum Ventures Initiative (AVI) was conceptualized a year ago at ETH Denver in response to a significant challenge: while the Arbitrum DAO was receiving numerous venture proposals, there was no framework or a mature counterparty to assess, negotiate, and execute on them. This lack of infrastructure led to missed investment opportunities and the potential risk of these programs being funded without appropriate prerequisites being met.

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To address this gap, we set up the Arbitrum Ventures working group and later after passing a governance proposal launched the AVI pilot in August 2024 to conceptualize and create a proposal for a functional and adaptable in a multi-strategy investment setup that would enable acting on venture investment proposals or internally conceptualized opportunities for the Arbitrum ecosystem.

This AVI Pilot phase wrap-up document serves as both a record of what has been achieved and an assessment of what remains to be done to fully establish a sustainable venture investment model for Arbitrum.

While the AVI pilot was conceptualised simply as a mechanism to answer how to create a framework around supporting investment programs coming from the DAO, after the launch in August due to delegate demand, the focus has been shifted towards creating a shorter term smaller scale program for direct investment to validate key concepts (culminating in the AVI Phase 2 proposal, as covered in SS1 and Fund Staging and Execution section of the strategic recs, which is part of the feedback cycle for producing SS2).

AVI Pilot: Execution and Outcomes

While the pilot generated several theory-driven deliverables, its primary goal was to “enable Arbitrum to make the next step towards developing a best-in-class approach to a DAO-led Ecosystem Investment Fund in Web3 including a proposal for its further structure and deployment… (or to smaller proposals for allocating capital to specific targets building up to it).” Though a number of reports have come from the pilot, their role was to inform and engage the DAO towards making decisions on the next steps, not as a primary objective. The focus was on execution: developing proposals, assessing potential deals, and establishing the operational framework for venture investment in Arbitrum. The team also worked through governance challenges and coordinated with stakeholders, navigating the complexities of capital deployment within a DAO framework.

Over the course of the pilot, we created:

  1. Investment Strategy & Market Research

  2. Governance & DAO Alignment

  3. Operational & Funding Plan

  4. Community Engagement

  5. Proposed Strategy for Fund Setup

AVI Next Steps

Looking forward: In the process of proposing the next phase of AVI (See Directional Temp Check), it became clear through ongoing developments within the DAO that the most strategic move will be to hold off on executing our recommendations for approximately three months to allow for the integration of all governance processes that could impact the next phase. This is done in the hope of ensuring more alignment on the continuation of the initiative.

Since the start of the pilot, several key developments have taken shape, including:

  • Tandem’s creation
  • Approval of the OpCo proposal
  • Arbitrum Foundation taking a more hands-on role in the DAO
  • Additional capital allocation initiatives, such as incentive programs, and treasury management updates that may ultimately need to align with the CapCo structure
  • Pending considerations around SOSs

The AVI team has already taken steps to align the venture program with these evolving priorities. However, with clearer development timelines now emerging for each, it makes sense to further refine alignment, particularly regarding the scope and plan for CapCo.

Thesis Development and Market Engagement

Among the various thesis development explorations, the “Plaid for Crypto” direction has gained the most traction, particularly in the context of bringing institutional-grade liquidity onchain. This topic was a focal point during the thesis development events on LP mobilization in lending pools, led by Lucas G from Annamite. Additionally, it sparked strong engagement from those working on Agentic AI solutions, who foresee a liquidity crisis intensifying across the industry as AI-driven agents begin managing capital with leverage.

Community Engagement

Maintaining community engagement and momentum from recent market consultations remains a priority. The AVI team is currently exploring ways to sustain low-intensity activities over the next three months to keep this flywheel in motion and further develop the institutional liquidity narrative.

We appreciate the support and engagement from the community throughout this process and look forward to iterating on this foundation for a more robust venture investing model within Arbitrum.

Learn more here.

Summary of Strategic Recommendations for AV

The full write-up of Strategic Recommendations can be found here.

  • Goal: Establish an investment fund that fuels long-term ecosystem growth.

  • Strategy: Stage the execution of an evergreen fund-of-funds in three stages:

    • Pilot (Now): Analyze and Propose
    • Phase 2 (Next): Build
    • Phase 3 (Final): Deploy

  • Key Programs:

    • Strategic Direct Fund: Investing in strategic deals or co-investment in high-performing deals with non-captive partners.
    • Scouts Program: Community-led early-stage investments.
    • Thematic Funds: Vertical-Specific programs for emerging Web3 markets.
    • Captive Liquid Fund: An investment program that’s anchored by AV funds, designed to attract 2–3x in external LP capital once the strategy is validated. It focuses on providing patient, sticky liquidity for the trading of key Arbitrum protocols aligned to our strategy.

  • Governance & Oversight: Managed by an Interim Expert Council (IEC) and Investment Committee for structured decision-making.

  • Community & Talent: Incentivized participation via scout funding, LP investments, and Fund-in-a-Box programs.

  • Why It Matters: Balances short-term returns with long-term ecosystem expansion, ensuring Arbitrum remains a Web3 leader, and expands beyond.

Looking Forward

The AVI pilot was a critical step in addressing the lack of a structured investment framework within the Arbitrum DAO. Over the past several months, the initiative laid the groundwork for a sustainable venture investment model by developing a clear investment thesis, engaging stakeholders, and proposing steps for the setup of the fund and governance structures. While the pilot initially aimed to create a broad framework, it evolved to focus on a more immediate, smaller-scale investment strategy based on delegate feedback.

Looking ahead, the next phase will be proposed after a three-month integration period to ensure alignment with DAO priorities. More information on the proposed phases can be found here.

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