Directional Temperature Check on Arbitrum Ventures Setup

[ArbitrumVentures]

Context

This snapshot draft is one of the deliverables of the AVI pilot and expands on the concepts introduced in the original AVI Proposal (Apr’24), leading to the Venture Catalyst Investment Vehicle presented at GovHack Brussels and subsequent AVI Pilot https://link.farstar.co/avi-deck. The nature of the DAO and the markets have required consistent iteration since the inception of the working group. This document represents our latest work and includes insights gathered during the pilot phase. We welcome your feedback towards refining it ahead of the anticipated Tally vote.

TL;DR

We are proposing the execution plan for the setup of Arbitrum Ventures, a Multistrategy Evergreen Ecosystem Investment Fund with an operational budget of $1m - $1.5m. This includes the setup costs and management of Arbitrum Ventures during a 1-year period starting on 1st of January 2025. The budget supports full-time working group efforts to conduct the phased rollout of the AVI vehicle, ensuring timely investment execution and a robust foundation for the DAO’s future capital strategies.

This plan is designed to be iterative and collaborative, adapting to the DAO’s needs through active engagement with key stakeholders and workstreams. By utilizing phased development and integrated governance, it aims to produce a scalable foundation for future investment strategies while maintaining alignment with DAO priorities.

The mandates key objectives include:

1. Infrastructure Development:

• Build legal, compliance, reporting, and administrative structures including a Fund-in-a-Box (FiB) solution, streamlining operations for long-term scalability.
• Establish an Interim Expert Council to aid the working group in achieving DAO alignment and transparency.

2. Initial Investments and Deal Warehousing:

• Deploy $5–15M during the interim phase to fund strategic projects, while refining governance processes for long-term capital management.

3. Integration with Existing DAO Operations:

• Anchor frameworks (CapCo/OpCo) for consistency, scalability, and alignment with DAO-wide governance, treasury, and foundation initiatives.
• Collaborate with key stakeholders to ensure seamless integration of structures.

4. Scale up Arbitrum Ventures:

• Establish various investment mandates via DAO votes once sufficient maturity is reached.
• Transition the ongoing team and oversight with all appropriate elections and appointments required.
• Establish Arbitrum Ventures as a preferred investment partner.

Abstract

The goal of this proposal is to secure funding for the set-up and phased roll-out of Arbitrum Ventures - an evergreen ecosystem fund, including all its relevant legal, strategic, governance, and operational structures necessary for large-scale investments throughout a 6-year deployment mandate. Our vision is to foster continuous ecosystem growth and extend Arbitrum’s reach through strategic investments into highly targeted venture initiatives and external venture funds. During the first year Farstar will take care of the fund set-up and will further work on a number of strategic deals and the design of the relevant processes for the selection of management teams alongside an Interim Expert Council.

The full sustainability plan for the Arbitrum Evergreen Ecosystem Fund involves deploying significant investment capital broken down in various mandates over six years. With these funds, we will develop proprietary pipelines, produce investment capital to support projects on Arbitrum, and align 1B+ in available market capital.

Motivation // Why set up an Evergreen Ecosystem Fund?

Venture capital is a driver of innovation and adoption. By creating the capability to invest into the ecosystem, the DAO will unlock value on multiple levels:

1. Ecosystem talent booster: Comprehensive portfolio of investment programs to create and support proprietary pipelines of web2 and web3 talent with deep domain expertise and insights on ‘real world issues’ to build on Arbitrum.
2. Enhance Network Effects and Revenue Growth: Enhancing DAO revenues by empowering an active ecosystem of builders through investment programs tailored for removing the blockers, enabling them to focus on bringing in new users, more capital and real assets, and capturing real world data.
3. Strategic alignment: Investing in protocols that are strategically advantageous for Arbitrum to ensure all interests are aligned and to strengthen the relationships in the long term.
4. Capital boost: Investing as an LP into existing funds to mobilize 2x to 5x the invested capital to deploy into and better support a more mature Arbitrum ecosystem.
5. Self sustainability: Capturing ROI and reinvesting profits to scale successful initiatives and launch new programs, creating a perpetual flywheel without exceeding the initial treasury allocations.
6. Create space for better grants and incentive mechanisms: Creating an investment capability in the Arbitrum ecosystem addresses critical capital needs, which would enable the DAO to focus on designing more targeted grants and effective incentive programs.

Rationale

Despite investing millions in incentive programs, Arbitrum has seen overall low retention rates from these initiatives. Currently, the DAO has paused to re-evaluate our incentive programs, following the recent Short-Term Incentive Program (STIP) which saw a net loss of $60M, with around 35% of all recipients failing to post a final report. As the community discusses ways to improve these programs, we aim to enrich the dialogue by identifying additional investment opportunities that will establish Arbitrum as an innovator in the Ethereum ecosystem. Currently, there is an opportunity gap in capital allocation that Arbitrum can leverage. Concentrating on highly targeted investment programs will create a better environment for Arbitrum-native projects, while still supporting cross-chain products and attracting external capital. This approach positions Arbitrum to lead the multichain future.

We propose an evergreen investment vehicle with a multifaceted strategy featuring a portfolio of captive and non-captive investment programs. The captive side entails a more direct approach to driving strategic benefits, akin economic development programs, sovereign wealth, or Corporate VC. This includes programs designed to boost founder engagement with Arbitrum, thereby strengthening our position as L2 leader. The non-captive side features a Fund of Funds approach for investing in venture and liquid funds as an LP extending Arbitrum’s reach to new founders, use cases, and markets. The evergreen approach enhances the portfolio by facilitating uninterrupted and long-term execution of investment strategies, while providing the DAO with the flexibility to reinvest profits, or dissolve the fund as deemed necessary.

Examples of key strategic initiatives can be found here (slides 10-20).

Roadmap

Phase 1: Pilot [In final stages of completion]
During Phase 1, we have been exploring how Arbitrum Ventures fits into the broader Web3 ecosystem and how it can best deliver value. We engaged with key ecosystem players, including delegates, members of the foundation, and key stakeholders. We conducted market research with builders and investors, tested market hypotheses, and fine-tuned strategic recommendations for building a solid investment framework.

Phase 2: What’s Next [This proposal]
Now, it’s time to act. With the groundwork laid, the focus shifts to building the essential legal, governance, and operational structures for Arbitrum Ventures. This phase focuses on building Arbitrum Ventures, establishing the legal, governance, and operational frameworks to enable its success.

Supported and overseen by the Interim Expert Council, Farstar will drive efforts to:

• Develop the legal, administrative and operational Infrastructure
• Mature an investment thesis
• Deploy Initial Investments
• Integrate with Existing DAO Operations
• Collaborate with key stakeholders
• Kick off Arbitrum Ventures in scalable manner

Phase 3: Evergreen Fund
This is where the vision really takes off. Over a six year mandate, Arbitrum Ventures will roll out a multifaceted investment strategy, deploying significant capital across targeted projects and programs. By aligning over $1B+ in market capital, we’ll build and co-invest in high-value initiatives, grow our deal pipeline, and support the ecosystem in ways that matter most.

We envision Arbitrum Ventures as a self-sustaining, scalable investment framework and a flywheel propelling the Arbitrum ecosystem to the next stage of maturity.

Considerations

The Arbitrum Ventures Investment Vehicle (AV) should strike a careful balance between its roles as an independent entity with a long-term mandate and its close integration with the DAO.
Externally, it should function and appear as a stable, reliable investment fund and its policies should be designed to make it a nimble, high-agency, performance-driven entity, appealing to top-tier market participants.

From the DAO’s perspective, AV should be easy to understand, aligned with DAO goals, connected to key initiatives, and maintain the integrity of the positive narrative around it by the time it takes for measurable results to be observed. Its initiatives should leverage DAO resources, for example, by using DAO contributors as scouts for investment opportunities. Within the broader crypto market, AV should be seen as a respected, competent entity, adding assets to the DAO’s balance sheet and thus accruing value in the token, rather than diluting it.

Initially, AV should focus on immediate strategic goals, such as building a stronghold around DeFi by aligning with key technology providers. Over time, it should expand to open new markets and Web3 use cases, drawing in users, data, and capital from outside the ecosystem. Some funding should replace or supplement grants with investment programs that may yield a loss but are designed to create higher-impact outcomes or drive pipeline opportunities captured elsewhere.

The AV operational team or management should have long-term appointments under a high-commitment expert oversight structure, subject to DAO elections. This structure should be established with a series of DAO votes, mandating funds sufficient for 5-6 years, aiming to make AV an evergreen vehicle. Further governance involvement by the DAO should happen through the elected oversight roles. The mandate should be structured to discourage deviations, ensuring that any change aligns with industry standards and commitments to investees or managers. This ensures orderly decision-making that avoids unexpected actions and limits uncertainty, while retaining meaningful DAO oversight. Otherwise, the DAO should have limited day to day influence on AV operations.

Specifications

Exclusivity: Farstar agrees to 1-year exclusivity with Arbitrum upon passing this proposal. During this time Farstar will not work with other clients in the Web3 space. The partnership will begin on the first working day of the month after the proposal passes.

Interim Expert Council: 3 to 5 member council including investors in Arbitrum, key delegates with venture experience, stakeholders with experience of the oversight of GCP to advise and assist in the set-up of the fund and further development of the thesis.

Outcomes

1. Strategic Capital Utilization: Enable the Arbitrum DAO to leverage the full power of its treasury into targeted, high-impact investment deals, fostering sustainable growth and delivering measurable returns over time.
2. Professionalized Fund Operations: Establish a professional and predictable counterparty to engage, evaluate and enter into agreements with fund managers and external LPs in a sophisticated manner ensuring appropriate negotiations and accountability.
3. Sustainable Investment Flywheel: Establish a self-sustaining financial model where returns are reinvested to expand programs, ensuring ongoing innovation and long-term ecosystem scalability.
4. Defined Strategic Ecosystem Objectives: Establish what success looks like for the ecosystem and how they can be impacted via investment ensuring alignment of incentives between ecosystem participants.
5. Operational Readiness: Complete the setup of the legal, governance, and operational structures required for Arbitrum Ventures, ensuring the foundation is in place for scalable and compliant operations.
6. Talent Mobilization and Ecosystem Integration: Harness DAO and community talent for investment scouting and ecosystem support, creating pathways for meaningful participation while ensuring alignment with Arbitrum’s strategic priorities.
7. Operational Transparency and Reporting: Implement robust reporting mechanisms to provide transparency on spending, progress, and impact, building trust and confidence among DAO members.
8. Defined Metrics for Ecosystem Success: Develop clear criteria for evaluating the success of strategic ecosystem investments, linking them directly to Arbitrum’s long-term goals, including network adoption, ecosystem maturity, and value accrual.

Steps to Implement

The proposed roadmap to allocate, staff and deploy Arbitrum Ventures Ecosystem Fund:

1. Passing the Snapshot temp check and Tally for the setup of the legal and operational structure, incl. the Interim Expert Council and a budget of $1m-1.5m for 1 year.
2. Tally vote approving the working group + expert committee to make an initial batch of investments in warehoused deals ‘out of model’ during the 1-year setup period.
3. Transition the ongoing team and oversight to permanent configuration with all appropriate elections and appointments required.
4. After sufficient maturity is reached, run Tally votes for the various long term investment mandates.
5. Snapshot vote for assessing the bonus to be awarded to the working group.

Overall Cost

A budget of $1.5M* for the year paid in quarterly installments and stored with the Foundation for DAO-clawback capabilities, along with an optional up to 1 million ARB for performance-based bonuses voted on by the DAO near the end of the term and put in a 3-year vesting contract to ensure long-term alignment.

To get to a final amount by the Tally proposal we are:

• Engaging with the Arbitrum Foundation and GCP teams to get better insights about lessons learned related to costs and efforts from the GCP setup
• Developing the scope of the Expert Council and evaluating appropriate compensation
• Collaborating with stakeholders to refine the team requirements and better plan compensation budget
• Evaluating suggestions by potential Expert Council members for additional DAO stakeholders contributing to research activities and budgeting

Current Estimate:
Up to 750k for working group compensation (incl. oversight)
Up to 750k for direct costs such as legal, incorporations, events, etc

Cost optimisation measures will be practiced and any remaining funds will be returned to the DAO.

Transparency reporting

At the end of each fiscal quarter, we will publish a transparency report that goes over our activities and total spending. Information included will be what we have done, an analysis of impact, and the total cost associated with operating.

Voting Options

1. Fund Farstar to work on the CapCo Development
2. Abstain
3. Do not fund

[Larva]

Thank you for your proposal! This is an excellent idea. It’s essential for Arbitrum DAO to establish a venture. Not only can it support high-quality projects within the ecosystem, but it can also attract outstanding external projects to migrate to Arbitrum.

I have a few questions:

1. Will the projects you invest in be limited to the Arbitrum ecosystem, or will they include the broader Web3 space?
2. Venture capital is different from grants—invested funds require returns, which is a critical point. How will you determine how much to invest in what project? Will it be entirely decided by the council, or will proposals go through voting in the Arbitrum DAO?
3. Lastly, how do you plan to evaluate your KPIs?

[Gabriel]

I like the overall idea, but I would like more information on several points, such as how the team will be formed, who the team members will be, what the investment mandate will be, how this will overlap with the Gaming Program, and what you estimate the yearly operating expenses (opex) to deploy the investments will be.

Thank you for the proposal Temp check

[0xDonPepe]

Hi, thanks for submitting this proposal! To start, could you clarify who Farstar is? I’ve looked for information but haven’t been able to find anything substantial. It’s important to know who’s behind this proposal and if they have relevant experience in this area. Transparency about your background and expertise would help the community understand your qualifications to execute such an ambitious project.

Regarding the proposed one-year exclusivity with Arbitrum, I find this term unreasonable given the scale of the investment you’re requesting. If Arbitrum DAO is committing millions to set up AVI from scratch, I would expect perpetual exclusivity to the Arbitrum ecosystem, not just a single year. One year feels like we’d be funding the foundation for you to potentially take elsewhere after a short period.

Finally, I want to echo Larva’s reply: Venture capital is fundamentally different from grants. The proposal should include clear KPIs to measure success. What is the expected minimum ROI for this initiative? Over what timeframe? And what benchmarks or similar initiatives would you compare your results to? These details are crucial for evaluating the proposal’s feasibility and alignment with Arbitrum DAO’s goals.

Looking forward to your response!

[JoJo]

interesting proposal.

Let’s fly over for now on the mention of the stip results which, to me, seems like not that relevant in here as introduction.

Idea here from what i read is to setup the basis, through a potential 15M initial capital + 1.5M opex + 1M arb in bonus, to create basically create the capco we have been speaking about for the last 6 months here and in other meetings. Executor would be farstar. It would include the legal setup of the entity, the comp of the team including bonuses.
The long term plan is to have this consolidated toward a span of 6 years, with up to 1B in capitalization.
All of this should come under the oversight umbrella of the DAO, through a committee/council/etc.
Posting this to first have a sense check if i got the high level idea.

Assuming I did, few consideration on my side, totally personal.

In this proposal, I think there are several gaps.

1. The main driver/thesis. There is, to me, a big difference between GCP and this. In GCP, the overarching goal is to push games in web3 and specifically in arbitrum, with a detailed thesis hopefully coming in the short period that will dictacte what type of investment will be done. In here, as far as I can tell, the driver is to have the ability in the DAO to invest through several programs such as incubators and others. I don’t think the idea is inheretely wrong, but is not as scoped as the GCP in relation to directo growth of the ecosystem, of Arbitrum. To be more blunt, we are in a moment in which we are literally trying to figure out how to do incentives in a way that makes more sense for us: I have some difficulties in thinking about us doing investments without first crafting a specific rational behind not really the why (is likely a mix of: making money, support growth in arbitrum, expand the reach of arbitrum through weaponization of the dao’s treasury as vehicle that can give back not only, hopefully, more capital than what was in, but also innovative implemented idea, kickass builders etc) but the why we want to do it through ventures and not in other ways
2. The structure. This is the start of capco, which i am not against. I am actually in favor. But is following a different path from the opco. Specifically in here we will have farstar working on setting up the capco and signing a 1y exclusivity deal. I am not sure this is in the best interest of the DAO: is the DAO that would have to come up with the CapCo and potentially hire farstar as service provider. I also understand that this initiative should be spearheaded by someone and makes sense for you to come forward, but, here, you are both setting up the initiative and proposing yourself as service provider. The checks and balances on top should be not only broadly discussed but maybe written down by a more independent party, otherwise the risk is just to tailor too much the initiative itself (which as any initiative should be an expression of a dao need) to the skillset and ability of farstar. Which again, is not necessarily wrong, but is worth exploring in a broader way.
3. The timeline and deal. We have a 6y forecasted plan, but an initial 1y exclusivity clause. Not saying I am against, saying numbers feels wacky in this way, because you are proposing here a 1B+ capital in 6 year, but with a 1y exclusivity with 15M which is 1.5% of the sum planned. Feels like there should be more alignment between the timeline, the exclusivity, and the capital deployed during the exclusivity phase. Exclusivity when we only have this low amount committed doesn’t feel like a robust deal.

To sum up: i am not against the initiative per se. I think it could be better aligned with the direction the DAO is taking (see opco, gcp, in which we basically source ceo/general partners/etc and then plug in people and service providers) and be more robust. In an extreme example, what would it happen for example if farstart, after 1y, decides to not renew the deal because another dao comes and wants to effectively have the exclusivity?
Also, knowing that we are currently figuring out incentives and setting up the opco, is it the exact time to set capco up? Likely is worth starting to talk about this in a broader way. But the way this temp check is posed, it feels like we want to push it right out of the gate, assign a mandate and start scoping the initiative. I am not totally sure this is the exact time to do so, and maybe i am obviously wrong here.

In general I might be just jumping the gun here, not understanding that you indeed want a structure similar to OpCo in which you are service provider. And I might have been jumping the gun on a lot of things, so please let me know if i misinterpreted anything here. Remember as usual, I am just a cow.

[jameskbh]

Hello! Thanks for putting this forward and for all the research being conducted in this topic.

I have one question at this point:

• It seems that the AVI Pilot Phase still has important deliverables to finish, as per your latest post in the Initiative Hub. My understanding is that they are mandatory to evaluate the next steps moving forward. Do you have a timeline for publishing them?

Thanks in advance!

[duokongcrypto]

I personally consider three points: budget allocation, the final outcomes of the proposal, and its risks.

“The proposal mentions an annual budget of $1.5 million, plus up to $1 million in performance-based ARB bonuses. This amount seems quite substantial. Could you provide a more detailed breakdown of how these funds will be allocated? For example, why does the ‘legal, corporate registration, and activity-related direct costs’ category require $750,000? What specific projects or activities are included in this? Additionally, the compensation for the expert committee is mentioned, but how much will it actually cost? Is there a more cost-efficient plan available?”

“You plan to deploy this investment initiative over six years, but could you first clarify the specific milestones or goals for the first year or the initial two years? For instance, how many investments are expected to be completed in the first year? What are the objectives of these investments? Will there be measurable returns? Also, isn’t the $1.5 million budget for the first year overly focused on ‘building the framework’ rather than actual investment execution?”

“The fund aims to become an ‘evergreen’ investment tool, but have you assessed the potential risks of investment failures? For example, if some projects fail, how much impact would this have on the Arbitrum ecosystem? How can we ensure that this fund won’t turn into a ‘high-risk, high-spending, low-return’ experiment?”

[lino]

Thank you all for the questions and engagements!

Starting the responses with the questions from our resident cow @JoJo as they’re quite spot on.

@JoJo

Let’s fly over for now on the mention of the stip results which, to me, seems like not that relevant in here as introduction.

Fair, we could have picked a different way to intro, the core argument is - if you develop a framework, which aims at returns and there are commercially and performance incentivised and accountable managers, it optimises the whole system for better outcomes. Including in some cases grants and incentive programs. This is the direction we want to bring forward, rather than criticise previous work.

@JoJo

Idea here from what i read is to setup the basis, through a potential 15M initial capital + 1.5M opex + 1M arb in bonus, to create basically create the capco we have been speaking about for the last 6 months here and in other meetings. Executor would be farstar. It would include the legal setup of the entity, the comp of the team including bonuses.
The long term plan is to have this consolidated toward a span of 6 years, with up to 1B in capitalization.
All of this should come under the oversight umbrella of the DAO, through a committee/council/etc.
Posting this to first have a sense check if i got the high level idea.

• Role of Farstar: Farstar will serve as the executor and principal facilitator in setting up the CapCo. This means we’ll collaborate with other contributors and groups within the DAO to determine the best structure for the CapCo and develop its investment strategy. The final budget being proposed is to provision for that. All of this will happen under the guidance and oversight of the Interim Expert Council, and we will begin these discussions once this council is established.

• Long-Term Plan and Capitalization: While we have a six-year plan to reach an evergreen state, it doesn’t rely on the DAO investing $1 billion from the treasury. In fact the whole point of the current approach is, so we can be able to start a few very small investment programs, but be able to very rapidly scale them up within a robust framework. That being said we are stressing that we need to consider that the CapCo might end up with over $1B AUM, either because of more investment capital proposals being passed in the future, or because of recycling of returns from earlier ones, so we need to future proof accordingly.

• Initial Capital and Short-Term Needs: The proposed $5-15 million isn’t an immediate commitment to deploy funds as we would with formal investment mandates. Instead, it’s intended to create a facility that addresses short-term needs while the mature CapCo structure is being established. In fact these funds might not be invested at all and we could end up with proper long term mandates directly. Setting up this facility might be part of the same or a separate Tally proposal. Since there are still open questions about how best to handle this, we’ll conduct a separate temperature check after this one covering the CapCo’s operational expenses and approach is solidified. This would make it easier to reason about these initial investments.

@JoJo

1. The main driver/thesis. There is, to me, a big difference between GCP and this. In GCP, the overarching goal is to push games in web3 and specifically in arbitrum, with a detailed thesis hopefully coming in the short period that will dictacte what type of investment will be done. In here, as far as I can tell, the driver is to have the ability in the DAO to invest through several programs such as incubators and others. I don’t think the idea is inheretely wrong, but is not as scoped as the GCP in relation to directo growth of the ecosystem, of Arbitrum. To be more blunt, we are in a moment in which we are literally trying to figure out how to do incentives in a way that makes more sense

This is absolutely right. Stay tuned for an upcoming post on how we should think about investment thesis toward growing the ecosystem. This is part of the deliverables of the AVI Pilot.

@JoJo

2. The structure. This is the start of capco, which i am not against. I am actually in favor. But is following a different path from the opco. Specifically in here we will have farstar working on setting up the capco and signing a 1y exclusivity deal. I am not sure this is in the best interest of the DAO: is the DAO that would have to come up with the CapCo and potentially hire farstar as service provider. I also understand that this initiative should be spearheaded by someone and makes sense for you to come forward,

you’re raising a very valid point here! To be clear what you’re suggesting is very aligned with how we’re thinking about it, but perhaps some of the details need to be coined out. That’s why we’re quite focused on creating the Interim Experts Council from the DAO that would also have to work in managing these checks and balances. We’ll flesh out more details on how we envision the steps towards creating a fund and management structure, which is ultimately fully owned and controlled by the DAO in the Operational Plan and Budget deliverable from the AVI Pilot.

@JoJo

3. The timeline and deal. We have a 6y forecasted plan, but an initial 1y exclusivity clause. Not saying I am against, saying numbers feels wacky in this way, because you are proposing here a 1B+ capital in 6 year, but with a 1y exclusivity with 15M which is 1.5% of the sum planned.

Again, there’s not embedded assumption that this structure would ever be capitalised with 1B. That being said our work from the last several months has been demonstrating that it’s premature to make proposals for large amounts of capital to be invested. However there’s appetite to figure out how investment capabilities will become a part of the tool arsenal of the DAO. There’s a need to approach these problems from multiple points of view to figure them out and do certain activities in parallel. Otherwise we won’t reach optimal solutions and even that will happen too slowly.
To clarify the 1-year of exclusivity, if the mandate for Farstar gets continued the exclusivity can be continued.

@Larva, thank you for the comment and questions!

@Larva

Will the projects you invest in be limited to the Arbitrum ecosystem, or will they include the broader Web3 space?

The primary purpose of this initiative is Arbitrum ecosystem development. That being said we believe that if impose more heavy handed strings attached this will only drive adverse selection. So we envision a mandate that would be fairly liberal in terms of expectations to build only on Arbitrum or to not migrate later. How we achieve the strategic objectives at the same time, we’ll try to elaborate in the other pilot deliverables.

@Larva

• Venture capital is different from grants—invested funds require returns, which is a critical point. How will you determine how much to invest in what project? Will it be entirely decided by the council, or will proposals go through voting in the Arbitrum DAO?
• Lastly, how do you plan to evaluate your KPIs?

We’ll elaborate on that in the full reports as well, as the answers are necessarily too in depth to place here. But generally speaking neither the council nor the DAO are to input in day to day investment decisions. Rather every program will have its own process and Investment Committee. In terms of KPIs they’d be financial and Strategic. The general thinking will be outlined in the Strategic Recommendations deliverable, but the details would be figured out during Phase 2 and the specific investment mandates.

@0xDonPepe

Hi, thanks for submitting this proposal! To start, could you clarify who Farstar is? I’ve looked for information but haven’t been able to find anything substantial.

We dropped our previous website for the current pivot and haven’t published a new one yet. However we’re planning to do forum posts covering the key people and company background. Stay tuned.

@0xDonPepe

Regarding the proposed one-year exclusivity with Arbitrum, I find this term unreasonable given the scale of the investment you’re requesting. If Arbitrum DAO is committing millions to set up AVI from scratch, I would expect perpetual exclusivity to the Arbitrum ecosystem, not just a single year. One year feels like we’d be funding the foundation for you to potentially take elsewhere after a short period.

To clarify if the mandate for Farstar gets continued the exclusivity can be continued. The structures created during the Phase 2 will be the property of the DAO. However if the DAO doesn’t want to continue the mandate it’s not reasonable to expect that Farstar should stop operating.

@jameskbh

It seems that the AVI Pilot Phase still has important deliverables to finish, as per your latest post in the Initiative Hub. My understanding is that they are mandatory to evaluate the next steps moving forward. Do you have a timeline for publishing them?

We’ll update on the Proposals Review and GRC calls today/tomorrow, but in short we made some changes in how we are organising the output. We’ll make series of posts on the forum and there would be such covering every deliverable before the holiday break.
To clarify - we think that these deliverables and research is vital before investment funds are deployed, but this proposal covers the operational setup and this work is not necessarily dependent the full output of these deliverables.

@duokongcrypto

“The proposal mentions an annual budget of $1.5 million, plus up to $1 million in performance-based ARB bonuses. This amount seems quite substantial. Could you provide a more detailed breakdown of how these funds will be allocated?

This will be covered in the Operational Plan and Budget deliverable from the AVI Pilot. This write up is aiming do lead to a directional snapshot and we’ll likely have 2 snapshots before things can go to Tally, by which time we need to have collected more input to specify things a lot more.

@duokongcrypto

For example, why does the ‘legal, corporate registration, and activity-related direct costs’ category require $750,000? What specific projects or activities are included in this?

This is currently just a provision and we are working with Arbitrum Foundation to figure out the lessons learned from the GCP in order to plan more specifically, which will all happen before going to Tally as mentioned.

@duokongcrypto

“You plan to deploy this investment initiative over six years, but could you first clarify the specific milestones or goals for the first year or the initial two years? For instance, how many investments are expected to be completed in the first year?

The ask covered in this directional temp check doesn’t cover any investments. It mentions the intention to have a facility to do such in the interim before there’s a fully fledged mandate, but how would that work would be expanded in a separate tempcheck after we get more convergence around the current one.

@Gabriel we’ll expand on these points as well. As you asked fairly broad questions, some of which have already been discussed quite a bit, are you up for a call to go over and we can then bring back the key points to forum?

[Larva]

Nice! Thanks for the clarification. I’m looking forward to the Phase 2!

[JoJo]

@lino

you’re raising a very valid point here! To be clear what you’re suggesting is very aligned with how we’re thinking about it, but perhaps some of the details need to be coined out. That’s why we’re quite focused on creating the Interim Experts Council from the DAO that would also have to work in managing these checks and balances. We’ll flesh out more details on how we envision the steps towards creating a fund and management structure, which is ultimately fully owned and controlled by the DAO in the Operational Plan and Budget deliverable from the AVI Pilot.

this is likely the whole key point, beside amount of money, deal, exclusivity etc.

I will likely repeat myself here and be petulant.

While I think you can (and up to some degree should) advice on the creation of capco, you also likely should not manage directly this process. This is not due to mistrust on your team’s skills or will; on the contrary, if there is anyone positioned to move forward the venture topic, is likely farstar.
But the risk for the dao to have the company created by the same party that should also be one of the main service provider is just too high. Really, as much as in the opco, we need a ceo with a vision and capable of dripping it top down into the rest of the org, which would likely include both you, maybe other SP, some folks from the dao and some external folks. This is the only way we can build something resilient in time. 6 years is mid horizon in investment, and at the same time is several geological eras in crypto due to the speed of our industry, only way to execute is if we are able to plug in new pieces if old ones fall off over time.

Again, to reiterate and be crystal clear: is not about mistrust in you guys. Is about having something extremely robust.

And again sorry for being petulant. I just want to convey what to me would be the only deal breaker on an idea that, at high level, I support.

Thanks for setting up the discussion.

[kuiclub]

Thank you for the high-quality proposal report. The proposal, through the evergreen fund and multi-strategy approach, provides a stable investment framework for the development of Arbitrum’s ecosystem. This framework is promising for attracting more developers, projects, and capital over the next six years, driving long-term sustainable growth.

However, I think the budget could be optimized. The current proposal’s budget is quite high and somewhat abstract: $1.5 million plus an additional $1 million in ARB bonuses. What are the expected returns for such a large amount? How is the ROI calculated? These details need to be clarified to gain broader support.

The initial investment direction is also unclear: what fields or projects are the $5 million to $15 million in initial investments targeting? Are there clear priorities? I suggest listing a detailed framework or breakdown for better understanding.

Lastly, more detailed planning for execution is crucial. Effective implementation is the most important aspect.

[cp0x]

Hello!
Thank you for the very detailed proposal.

I have many questions:

1. Why does just the creation of the fund and its maintenance cost 1-1.5 million dollars? How many employees are planned and with what tasks, what salaries?
2. It would also be good to have an understanding of what $750,000 will be spent on - why exactly this cost?
3. You are talking about managing capital from the treasury, but we have another initiative for this, which has already been voted for in Snapshot. How will you separate the functions and will you then have funds?
4. If you take funds from the ARB, then it is not specified how you will convert them into dollars without putting pressure on the token price.
5. The issue of transparency. The Foundation often says that it cannot disclose information with whom and on what terms they enter into agreements. Why will everything be open for you - how are you going to ensure this?
6. I do not quite understand why a startup is asking for an exclusive contract in Arbitrum. This project has only recently been created and has not yet proven anything, how it can do anything.
7. The role of the oversight committee is unclear, what exactly will it do? It is also unclear why funding should be provided for 5-6 years?

In general, I have already voiced my opinion on this issue, namely that best practices should be used, and this means using investment funds that already exist and can ensure proper management of funds.
Creating a fund from scratch is a very interesting project, but expensive and without guarantees to even start investing, since only the organization of the structure is planned within a year, with a team that is a startup.
I’m a big skeptic about this.

[Ignas]

I think this is a good proposal to discuss. We all understand how a venture fund can impact the long-term growth and reputation of an organization.

Like other delegates, I’d love to see clear KPIs, both for the selected projects and especially for Farstar’s performance. How will this help grow and generate value for the DAO?

Moreover, if some investments don’t pan out, what’s the plan to protect the DAO’s finances and minimize losses?

It seems like more discussion is needed before making a final decision.

[Euphoria]

The following reflects the views of the Lampros DAO (formerly ‘Lampros Labs DAO’) governance team, composed of Chain_L (@Blueweb), @Euphoria, and Hirangi Pandya (@Nyx), based on our combined research, analysis, and ideation.

Thank you for sharing this detailed proposal. The idea of creating Arbitrum Ventures as a Multistrategy Evergreen Ecosystem Investment Fund is impressive and shows a thoughtful approach to growing the ecosystem.

We do have a few questions about some parts of the proposal:

@ArbitrumVentures

Deploy $5–15M during the interim phase to fund strategic projects, while refining governance processes for long-term capital management.

The $5–$15M range seems quite broad. How will the team decide how much to allocate, and is there a backup plan if some of the investments don’t bring the expected results? Additionally, what process will be used to decide which projects to fund and which ones not to? Will there be clear criteria or community involvement in the decision-making?

@ArbitrumVentures

We propose an evergreen investment vehicle with a multifaceted strategy featuring a portfolio of captive and non-captive investment programs.

Could you explain more about how the captive and non-captive programs will balance short-term needs with long-term goals? Is there a chance that focusing too much on one type could affect the other?

@ArbitrumVentures

Interim Expert Council: 3 to 5 member council including investors in Arbitrum, key delegates with venture experience, stakeholders with experience of the oversight of GCP to advise and assist in the set-up of the fund and further development of the thesis.

What will be the criteria for choosing the members of the Interim Expert Council? How will their experience guide the setup and growth of the fund?

Overall, this proposal shows great potential to help the Arbitrum ecosystem grow sustainably.

[0xTALVO.ETH_MTY]

Regarding structure and governance, I would like to know more about the experienced team that will be managing investments and business development. It is crucial to know the background of these individuals before approving such a significant funding. I understand that you will be rebuilding the Farstar website, but I also believe it is important to see their portfolio of work before making a decision. For now, I will wait to meet the key people and learn about the company’s history. Overall, I think a more transparent structure is needed regarding who will be responsible for activities that have not yet been mentioned. The uncertainty about the return on investment makes me inclined to abstain from voting or lean towards voting against the proposal.