We have developed 2/3 key pieces that can inform future proposals:
Fund management process: The funds are transferred from the DAO treasury directly to the AF and the AF is instructed to swap ASAP (they can normally execute within a week). Assuming a 30% volatility buffer, the AF can most likely swap successfully and return the excess to the DAO. After the AF Swaps, stables are transferred to the MSS. After the investees complete KYC and contract signing with the AF, the program manager schedules transactions in the MSS. So it’s the MSS signers who approve but the program manager (e.g. RnDAO) who schedules the transaction. This way the funds remain under the control of the AF (the counterparty for the investment) until transferred to the investee. The program manager serves simply as an advisor/service provider for selecting the projects, suggesting the disbursement(s), and delivering some support services.
Note that one of the strengths of the HCP is having a small amount of funds disbursed each month as opposed to a lump sum upfront, so we can track progress and stop the disbursement if the projects are not executing well. Hence, the program manager serves as a scheduler for the monthly/milestone transactions.
Contract with milestone-based disbursement: we agreed a term sheet and investment contract with the AF. We might suggest some improvements for the next round but we have a template now. (the AF already had their template before, now we have one with the HCP program setup).
The setup sees the service provider negotiate a single term sheet with the projects but then we use two similar contracts: one contract between the project and the AF, another between the project and RnDAO. As RnDAO is investing services, this could cause a tax liability (taxed as income) but given that RnDAO is set up as a non-profit with 0% tax and the incubation services are delivered fully remotely, this tax issue is not problematic for us across most jurisdictions.
Service providers with different legal/tax setups might need to figure out their own approach. This is non-trivial.
We were in favor of both the top-up and sending the extra funds to the TMC.
Sending the leftover funds from the D.A.O Season 1 program as a top-up for the hackathon was the most optimal path forward, and Jojo’s suggestion to send the remainder of the funds to the TMC was great.
After consideration, the @SEEDgov delegation decided to vote “YES TO BOTH” on this proposal at theSnapshot Vote.
Rationale
We view this proposal as a one-time, transitional fix to address the issue stemming from the lack of sufficient funds to fulfill the Hackathon Continuation Program (HCP).
The funding gap was caused by market fluctuations in the ARB price, and the delay in conversion is not attributable to the proposer.
This proposal addresses the issue by reallocating leftover funds from Season 1 of the Questbook program to the HCP, allowing it to proceed as originally approved by the DAO. It accomplishes this without requiring additional funds from the DAO and only needs a Snapshot vote meeting the non-constitutional quorum.
We also supported redirecting the remaining funds from the Season 1 Domain Allocator program to the TMC, rather than returning them to the DAO, to strengthen the TMC’s stablecoin reserve for service provider payments shortfalls.
Additionally, SEEDGov believes a framework should be established to manage surplus funds from multisigs that are not denominated in ARB. We highlight this need because it is likely we will continue to find leftover funds in USDC and other tokens—for instance, in Questbook Season 2—and currently there is no clear procedure outlining how such funds should be handled. @Entropy tagging for visibility on this.