Hackathon Continuation Program

[SEEDGov]

After consideration, the @SEEDgov delegation has decided to “ABSTAIN” on this proposal at the Snapshot Vote.

Rationale

After analyzing the proposal, we believe it is well-articulated and addresses a real issue: winners of hackathons or top projects often lack the resources or time to continue development. We also appreciate that part of the budget will be co-funded with RnDAO.

That said, there are some aspects we disagree with or that require further clarification:

• The on-chain functionality seems unnecessary for tracking a maximum of four grantees. Spending USD 30,000 on something that could be resolved with numerous free tools seems excessive.
• We would like to see a more detailed breakdown of the budget allocated to Program Ops & Comms. Upon reviewing previous versions of this proposal, we noticed that there were more budgetary details in general. The proposer explained to us that this was removed because he received feedback indicating that it generated confusion rather than helped. From our point of view, it should be well-detailed what the money is going to be spent on, especially when there are people involved who will be compensated for their work.
• We agree with other delegates that the administrative and marketing costs seem high relative to the total budget.
• It would make more sense for the capital invested in the projects by both parties to be equitable, potentially adjusting the distribution across other items. This would give both entities shared ownership.

Despite the above points, we want to highlight that SEEDGov has decided to abstain because we were involved in the process of granting the Hackathon in question through the Questbook domain for Education, Community Growth, and Events.

[krst]

The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.

We’re voting FOR the proposal while opting OUT of the on-chain mechanism.

The idea of doubling down on projects that were successful during the hackathon and helping them develop their project further, not just with funding but also with venture support from RnDAO, is intriguing. We believe it can serve as a good experiment of what a follow-up approach could look like for projects created in hackathons or through grants.

Furthermore, the fact that the amount we’ll distribute to those projects won’t be in the form of grants but will instead be in the form of investments is something that we find interesting as it might, in the long run, bring returns back to the DAO and is a good precedent for the future.

The one thing we’re skeptical about and want to raise as a point of discussion and consideration is the operational cost relative to the capital investments we’ll be making in the projects. As things stand, we’ll be allocating $124,000 to projects while spending $87,030 on the operational cost — a 1/0.7 ratio seems pretty high. However, at this point we don’t necessarily request RnDAO to lower it but we plan on discussing it with them before the onchain vote to have a better understanding of what is the cost breakdown and what can expect delivered in it.

For the on-chain component, we’re not sure there’s enough justification to support it, especially since the project has already received a grant from Arbitrum through the DDA programme. If the project and RnDAO are confident of the value it will bring to Arbitrum and the hackathon continuation programme, we would encourage them to find a way to demonstrate that value first (covering the costs internally if needed), and then come back for a follow-up grant.

[danielo]

@krst

As things stand, we’ll be allocating $124,000 to projects while spending $87,030 on the operational cost — a 1/0.7 ratio seems pretty high.

I agree with the sentiment that it’s far from an ideal ratio (as @SEEDGov and others have noted). However, it’s an issue of economices of scale and at this stage we’re unable to lower the operational costs without affecting the viability of the program.
The alternative is to increase the size of the program i.e. fund more temas which would only marginally increase the Operational costs.
We’re thus proposing this as a pilot and hoping we can demonstrate its merit to then be scaled up as a recurring (and more cost effective) program.

Importantly, the ration should also include Venture Support as based on the venture studio model the thesis is that it’s more cost effective to have some experts work with the projects than letting each project try to hire everything in house. The Venture Support costs are thus part of what’s deployed into the projects. Making the ratio 3.5 / 1 Ops

As a nounance (we’ll clarify this before going onchain), the Comms costs are added within Ops but technically we can break these down with more sophisticated accounting into:

• program reporting
• amplifying projects through RnDAO channels and coordinating with Arbitrum Foundaton and others to amplify
• coaching projects on comms/growth

So perhaps anoher 10-15k can be attributed to Venture Support.

[BlockworksResearch]

Blockworks Advisory will be voting FOR this proposal and opting out of the onchain mechanism on Snapshot.

Investing in hackathon finalists and providing aid aligns with the DAO’s needs and responsibilities for its ecosystem. Candidly, Arbitrum DAO should explore more investment opportunities in its ecosystem, and so we are happy to see initiatives like this come about.

We would like to clarify that for this proposal to proceed to an onchain vote, we would like to see the following added:

• While we support the proposal at this very general stage, we do think that this needs significant explanation for its operational costs and venture framing.
• The investment model is overall extremely unclear, and we have yet to see a sufficient background for RnDAO to take on such a project.

[Entropy]

After consideration and internal discussion, Entropy decided to vote AGAINST. Please find our full rationale and the additional details we’d like to see included in this proposal before it moves to Tally on our delegate communication thread: Entropy Advisors Delegate Communication Thread - #10 by Entropy

[danielo]

Thank you for the detailed analysis.

We’ll provide the suggested details when scheduling the Tally proposal on Monday.

Unfortunately, the whole initiative would likely become unviable if we move slower as the end-of-year break would push the start of the support program to mid-February (January for tally vote and then 1-2 weeks to get started), making it 3 months after the end of the Hackathon and thus we wouldn’t be able to offer a pipeline for the Hackathon projects.

[WinVerse]

DAOplomats voted In favor, no onchain mechanism on Snapshot.

Establishing a framework for ongoing hackathons is great as it helps foster long-term support for successful projects. However, we supported no onchain mechanism because implementing one might overcomplicate program execution, introducing inefficiencies and delays in distributing funds or assessing outcomes.

[danielo]

The proposal has been updated with the feedback. Thank you all for the valuable questions and comments

[olimpio]

I voted abstain to this proposal due to a lack of time to properly review it as I needed to vote, as I was OOO.

[danielo]

Thanks for letting us know. If you have any questions or concerns please do share and we’ll do our best to address them

[0xDonPepe]

I’m reaffirming my support for this proposal by voting in favor on Tally, as outlined in my earlier comments:

I support this proposal as it addresses a critical need in the lifecycle of hackathon projects: consistent follow-up to ensure these innovative ideas become tangible, impactful ventures rather than fading out post-hackathon. Hackathons are fantastic for sparking ideas and gathering talent, but without structured support, these projects often struggle to sustain momentum, validate their concepts, and reach market viability.

Additionally, danielo has proven his expertise with RnDAO. His commitment to this space and track record of successful project support are further reasons I believe this program will thrive and help establish a self-sustaining ecosystem within Arbitrum.

[paulofonseca]

voting Against the current onchain proposal because the $60,980 USD cost went up and is not justified in detail, and in general it just feels like this proposal has too much “fat” since only ~65% of the amount Arbitrum would pay would go to the grantees and the remaining ~35% is basically “administrative” costs of this program.

[duokongcrypto]

I voted “FOR” on-chain via Tallyy]

The proposal aims to incubate hackathon projects, attract more developers and innovative initiatives, and inject vitality into the Arbitrum ecosystem, aligning with its long-term development goals. The proposer has explicitly addressed the questions and suggestions raised by various stakeholders. Most concerns are centered around the high costs allocated to projects and administrative expenses. However, maintaining this mechanism does require higher short-term expenditures. That said, creating a sustainable business cluster to attract more projects offers significant network effects, which I believe is worth considering for its long-term value.

At the same time, I suggest adding a mid-term review of the proposal’s implementation to ensure that the plan progresses as expected. Additionally, I recommend establishing an independent risk mitigation mechanism, such as introducing more external evaluations for projects entering the second phase. The proposer has also clarified these aspects in the response.

[0xTALVO.ETH_MTY]

I’d like to reaffirm my vote on Tally in favor because of what I mention before:

@0xTALVO.ETH_MTY

I think it offers a good structure that will help ensure hackathon projects turn into real solutions that benefit Arbitrum ecosystem. Dividing the program into developing and validating, increases the chances of success because you only allocate more resources to the projects that will address the actual needs. This design encourages the use of funds wisely over a lengthy period of time. Also, RnDAO and Arbitrum working together helps to combine efforts and gives everyone guidance, stuff, and connections apart from the money.

[raam]

Hi @danielo, thank you for your detailed proposal.

I have a few questions regarding this proposal that resonate with some of the comments already raised on this thread:

• Would you be able to share a further breakdown of costs across ArbitrumDAO and RNDAO (notably the venture support and program ops)? As roughly 30% of these costs will be provided by the ArbitrumDAO and since RnDAO will be earning ‘sweat equity’, similar to Paolo’s question and Entropy’s comment, can you confirm whether any of ArbitrumDAO’s portion of venture support/program ops will count towards RnDAO’s SWEAT investment? You mentioned here that some more details on this topic would be provided this week, but I haven’t been able to find them (apologies if I have missed them).
• Could you share more light on how the hackathon finalists were selected, if there was any due diligence conducted at this stage, and how the winners of the hackathon were voted on? I noticed in the Jokerace contest, one of the winning projects (Signals) heavily voted for themselves to become a hackathon winner (which could constitute a COI). From reading the comments, as it seems like the hackathon winners will not automatically qualify for Phase 1, would you be able to share more light on the assessment criteria for teams to enter Phase 1?

[danielo]

What you call fat is a misframing of the venture studio model and relate to precisely 1 out of two key changes we’re proposing to make vs traditional grant programs.

Giving cash alone to projects leads to poor outcomes because:

• no economies of scale
• projects don’t know what they don’t know (lack of experience and methodologies i.e. donner kruger effect)
• hiring and contracting risks and cost of opportunity

As a result of this, Web2 evolved accelerators where a large portion of the support deployed is in mentorship (hands-off support aka advisory) and then, over the last 10 years, Venture Studios (that provide hands-on support, so even higher % as services) are growing fast in numbers and showing to provide better ROI.

So, in our proposal, only 15% of the costs are administrative (and we could lower this to below 10% with a larger-scale program, but this is a pilot).

[danielo]

Thanks for the comments

@raam

Would you be able to share a further breakdown of costs across ArbitrumDAO and RNDAO

As mentioned in the proposal and 1-1 conversation, we’re unable to provide such a breakdown publicly without revealing individuals’ salaries and commercially sensitive information. We have already added further information in the proposal including the leadership team involved and their commitment to the program, what the projects can expect in terms of face-time, and a summary of the areas the support will cover. We’re at a loss as to why this constitutes an insufficient level of information.

And as I already mentioned in both the proposal and 1-1 conversation, we can share such details in private. Feel free to book a call with me if you want to proceed.

@raam

any of ArbitrumDAO’s portion of venture support/program ops will count towards RnDAO’s SWEAT investment

As per the budget (see below screenshot from the proposal) the RnDAO and Arbitrum contributions are measured separately. And although RnDAO is investing a larger amount, we’re still offering Arbitrum 50-50 terms.

For clarity, the program is offered to projects only as a whole, not as a menu of components. As such, the investment amounts from a project investment agreement perspective, should not be broken down per components. It would be impossible to deliver the capital investment and venture support without the program ops, and the program ops themselves are not divisible because the program would then become unviable.

So, we’re not accounting Arbitrum funds in favour of RnDAO, but Arbitrum funds are part of enabling the whole program.

@raam

Could you share more light on how the hackathon finalists were selected

Please see here a screenshot from the Hackathon Impact Report

For clarity, the community vote counted for 25% of the voting power as part of an experiment using Jokerace for judging hackathons. No COI policy was determined beforehand and we didn’t apply additional COI terms retroactively. In the future, we will include a COI policy (although enforceability remains a challenge in most settings unless we see progress on CollabTech solutions for Sybil detection).

Each project had to pitch live and present a GitHub repo with the code and submission. Additionally, most projects worked in an open channel in the Hackthon server, so our team had significant contact with all of them.
The assessment was based on the live pitch and GitHub repo content but not on the observations during the month (our community manager is not part of the Judges but was free to raise red flags should there have been any).
In all, we’re confident the projects were selected for their merit despite the lack of a pre-determined COI policy.

@raam

the hackathon winners will not automatically qualify for Phase 1, would you be able to share more light on the assessment criteria for teams to enter Phase 1?

We’ll interview each of the teams (1-3 interviews to our satisfaction) and review their submission which includes the Hackathon submission plus additional information about their motivations, CV/LinkedIn, website and pitch deck.
We’re primarily looking for founder-problem fit, drive, and skills + ability to learn.
We’re roughly following the order of the Hackathon winners for the assessment (some overlap might happen based on delays around call scheduling).

[paulofonseca]

@danielo

only 15% of the costs are administrative

when you say 15%, you mean the $25,980 USD that Arbitrum DAO would pay for Program Ops + the $3,000 USD for user interviews, are the only administrative costs?

then what is the Venture Support amount of $35,000 USD that the Arbitrum DAO would pay for? I believe that since RnDAO will not invest any capital, RnDAO should “pay” for the whole sum of the Venture Support ($200,600). And maybe even for the whole sum of the Program Ops ($60,380), to be honest, because RnDAO will be paid in equity already.

Also, roughly how much equity % will these projects give to Arbitrum Foundation and RnDAO in total (since it’s 50/50 between AF and RnDAO), for this program? I know you’re probably going to say this is secret information… but just roughly, how much?

• between 0% and 1%
• between 1% and 5%
• between 5% and 10%
• between 10 and 25%
• more than 25%

I ask this because it would be much better to see which are the projects that actually agree to give up their equity, and roughly how much, before the DAO votes on this proposal.

It could happen that if this gets approved, and the DAO invests in the worst projects from the hackathon, because those are the only ones desperate enough to give up such amount of their ownership %.

[danielo]

@paulofonseca

when you say 15%, you mean the $25,980 USD that Arbitrum DAO would pay for Program Ops + the $3,000 USD for user interviews, are the only administrative costs?

Program OPs total: $60,380 (15.5%)
Grant total cost: $387,980 (100%)

See screenshot from proposal:

For clarity, The 3k for interviewees is directly cash deployed into the projects’ success (they would have to spend it if we didn’t provide it or would waste a lot of time sourcing people for free), so same as direct capital deployment and services-based Venture Support, we don’t account it as Admin.

@paulofonseca

I believe that since RnDAO will not invest any capital

The RnDAO community does invest in the program. $200k to be exact.
Without Arbitrum putting in capital to cover some costs too, the program is unviable.
And for reference, these are better terms than what is traditionally offered by accelerators. Without experience in the topic it can be hard to assess these things but I invite you to review the Betting on Builders proposal and the terms offered there by Outlier Ventures for reference.

@paulofonseca

Also, roughly how much equity % will these projects give to Arbitrum Foundation and RnDAO

It’s not about privacy but simply that, as already mentioned, the agreement is based on a SAFE format. I’d recommend this entry-level article so you can learn more about how SAFEs work.
As a TLDR: we can’t say the exact amount as that is determined by the next funding round. But we’re targeting about 8-10% (although that’s in part beyond our control because it’s a SAFE).
Importantly, we’re not guaranteeing that the projects will be approved. We have skin in the game here too as RnDAO invests in these projects and only benefits if the projects succeed. As such, if we feel the quality/risk doesn’t make sense, we’ll pass and return unspent funds to the DAO.

@paulofonseca

It could happen that if this gets approved, and the DAO invests in the worst projects from the hackathon

We have already received applications from multiple of the top projects from the Hackathon, including 3/3 winners.

Voting aside, it’s important to understand that this program is part of a cohesive pipeline. The projects have already received support from the RnDAO team during the hackathon (with reviews like “best organised hackathon”) so they already got a taste of the value RnDAO can provide them. It’s a common mistake to assess based on costs, instead of value generation / ROI.
That’s precisely why we’re proposing to move away from programs that deploy capital alone and in favour of more comprehensive support. This approach increases costs vs just giving cash, but that is more than paid for in value creation. I invite you to learn more on the topic by reading HBR’s seminal article The Founder’s Dilemma or more recent research on Venture Studios by Max Pong.

[paulofonseca]

@danielo

we’re targeting about 8-10%

so… the best projects will receive up to $50k in cold hard cash, for giving out 8 to 10% of their ownership?

that’s cold.

Y Combinator does $500k for 7%.