The best way to understand it is probably by understanding the objective we’ve been trying to accomplish first and then seeing how the current design aims to fulfill that (we’re very open to feedback btw). I don’t know why the forum post is not approved yet but here’s the draft
More details after reading the forum post
A simplified explanation of the incentive aligment model:
RnDAO gets some equity in the ventures and the ventures get some equity in RnDAO. By proxy, the ventures get some equity in each other (so indeed the current cohort could get equity in RnDAO’s previous ventures and vise versa). What this enmeshment does is create alignment between everyone in the cluster, and that encourages collaboration and integrations, which is the goal.
As the number of ventures grows, the cluster attains critical mass and starts to attract others organically (it makes more sense to join Arbitrum and integrate with existing tools than try to build everything from scratch somewhere else. Also, as the number of ventures also attracts a lot of talent interested in this vertical, this leads to more ventures being started already in Arbitrum by said talent. And aligned investors will flock too as it becomes the go-to place).
Additional nouances
Equity is likely to become of little value if the ventures succeed and tokenize as protocols (which is an ideal scenario, albeit with a degree of uncertainty). Also, the agreements do not enforce an equity transfer but just a SAFE type of instrument (both for RnDAO participation in the ventures and vice versa, as that protects from certain attack vectors and optimizes attention).
Currently, the level of funding allocated was for a tiny pilot (about a 1/3 of what we requested for a full pilot); this has led us to focus on validating the ability to attract talent (succeeded with 100+ applications for 6 fellowship slots), and then the design of the fellowship program (which is half the pipeline and is to be followed by the venture building program. Note that the fellowship agreement doesn’t include any equity nor SAFE).
We’re hoping to apply for the next stage of pilot funding to validate the model fully and develop the key systems and operational capabilities (currently, we’re running very very lean).
After completing the second pilot cycle (full pilot), we have indeed considered a scenario where if Arbitrum could provide continuous funding for the program, then we could do some form of allocation for Arbitrum (tokens/shares, the legal/tokenomics side here would need some time and budget to be figured out, hence why we’re first validating the operating model). However, note that the value for the treasury is likely to be negligible in the short term and the medium-to-long-term benefit of Arbitrum succeeding to establish itself as a relevant key player in the L2 wars might well outweigh any benefit of participation in the ventures.
The other thing to consider is that giving Arbitrum a %, this will further divide the pie and might negatively affect the quality of talent we can attract, especially when compared with more generous programs run by other ecosystems (e.g., Optimism).
The ideal scenario, as we see it, is that after some initial period of grant funding, the cluster will be mature enough to become self-sustaining, and then Arbitrum will continue getting the benefits without the need to keep funding it. Right now, we’re in a fledging/embryonic stage, and the grant funding has been key to jump-start the network effects.
A final consideration is that Arbitrum is not funding the total cost but only a fraction. The RnDAO team is working at well below market rate and essentially subsidizing the program in exchange for participation in the ventures. This creates further incentive alignment between all stakeholders as then Arbitrum, the venture founders and teams, and the RnDAO team are all aligned on making sure the ventures succeed (instead of the incentives being to just deploy funding quickly and collect fees).
Happy to discuss this over a call as we have been researching this for about 3 years now, so there’s quite a bit of nuance to unpack that can easily get lost here.