Why has this evolved from something closer to a fund of funds and now sounds more like a generalist VC with a yearly ops budget of 10-30% AUM (1.5mn for 5-15mn).
I imagine there is a rationale for this so this is not a direct critique, but I’m quite lost as to how this got here. So more of a point of clarification around the design choices
Yes, it’s in the works. An important clarification here is that we’ve referred to this as the Ecosystem Investment Thesis, so we can differentiate from some of the aspects of an investment thesis that’re outside the scope of this work. Namely, deeper analysis of specific spaces and how to be effective and profitable in them lies within the individual investment programs. Not the overall FoF one especially on the pilot phase, which we are focused on here.
Examples of what the output would show are:
Furthermore we’ve communicated constantly that this would be a pilot version of this effort, demonstrating the case for continuing to develop on it, rather than something that by itself would be sufficient for us to potentially deploy 10s or 100s of million $.
We are spending the funds on the basis of the submitted budget and have currently spent about 80% of them.
To that end we’ve discussed the matter with a number of delegates and with R3gen Finance who offered to take a role in analysing our financial activities and including them in the token flow reports. Particularly to cover any “audit like” activities up to the point where licensed auditors would be involved, which is an anticipated part of the setup and operations of the CapCo.
To help us move in that direction could you share what would be important for Gauntlet in terms of transparency and access to information up to now and going forward?
Within the Farstar team we have actually done deep work on this particular topic on a number of occasions in the last decade. Including:
One of the topics we are most excited about is innovating on how such incentives can be created to mobilize and reward the DAO and the whole Arbitrum community. That includes the exploration of creating a token backed by the carry of the fund of funds, which is part of the mechanism design for orchestrating ecosystem benefit optimisation via a portfolio of profit optimised investment programs.
Stay tuned for a separate strategic recommendation post on the topic. Note that this is not planned as a mandatory part of the future development of AVI as we need to manage the complexity of the initiative, however it’s something we are long term committed to explore as a team regardless. If the DAO demonstrates desire for AVI to go in that direction we can certainly prioritise it.
We are all for being lean and doing quick iterations, while learning. However one of the highest drivers of complexity and thus costs and uncertainty is going to the DAO, where you don’t necessarily even have the available capacity to evaluate the results of an experiment in a timely manner.
In your mind what would you hope to learn after 6 months of a pilot investment program that would help drive the next batch of decisions and approvals?
Our key objective here is the design of an interim experts committee that’s representative of the DAO and community and also has the deep expertise, availability and commitment to take care of this need among others. That’s not to say that we won’t do community engagement beyond that. In fact it’s one of our key objectives to figure out the optimal model for doing that. Quarterly transparency reporting, participating in GRC monthly and monthly office hours are a given.
Are there any more specific requirements you’d like to see on the topic of transparency and visibility met?
This is absolutely right! And it’s not just Coinbase, a number of other ecosystems like Solana have been getting ahead on this topic and we believe it is becoming table stakes. Base just happens to be executing well compared to the other players in the Ethereum ecosystem and we need to do better too.
The framing that we’ve seen come from Base is that they’re creating a trifecta of a technology platform, capital ecosystem, and applications marketplace. The second pillar is where their venture investment activities fit.
It is still FoF, which has the capacity to also do strategic direct investments as it was stated in the original proposal. That capacity is particularly important during the setup stage while captive programs are still being set up.
What you are referring to above is not the actual investment mandates, but 2 preceding components, which are the opex for the setup in year 1 and an interim investment facility (which might not even be deployed in full).
The purpose of this facility’s existence is to be able to offer solutions to a situation where for example RnDAO needs more funding and the DAO feels that this should happen sooner than when an appropriate relevant investment mandate might be kicked off. This is one example of such a need, but more often then not they might emerge in different ways and we want to have the executive power to evaluate and act professionally without necessarily going to the DAO. How this should work in practice is the subject of another upcoming Snapshot vote pending the approval of this one.
We have read many comments with which we fully agree, so to avoid being redundant, we would like to focus on the phases mentioned in the proposal and the voting options.
We understand that we are currently in Phase 2, as you mentioned. However, the timelines for this phase are not entirely clear to us. When does Phase 2 end, and when does Phase 3 begin?
If Phase 3 is scheduled to start six years after a mandate, it would be important to clarify how this timeframe was determined.
Regarding the voting options, we notice that the main goal seems to be assessing whether there is sufficient support for the Fund Farstar. However, we find little information about it in the proposal. It would be helpful to elaborate on the key points that could justify the community’s support for this engagement.
I think your direction is excellent. The concept of an evergreen fund can help the Arbitrum ecosystem achieve long-term development. Particularly, this multi-strategy investment approach not only promotes internal ecosystem projects but also attracts external capital through LP investments, which is truly forward-thinking.
The proposal mentions the balance between internal and external investments, and both strategies are great. However, how do you plan to allocate the proportion between the two? For example, at this stage, will you focus more on supporting the internal Arbitrum ecosystem or leverage external LP investments to attract more capital?
Haha, also, I’d like to ask if delegates will have the opportunity to participate in the investments together?
Well overdue. A $10M fund is a great starting place if we have pro fund managers. It should be as utilitarian as possible with a strong DeFi focus since that is what has worked. even small angel checks in the top 10 defi protocols that have been the biggest success in arbitrum would have each returned millions.
