RnDAO proposal for an Arbitrum Collab Tech Business Cluster
post updated May 23st 2024 (previous update May 1st 2024)
Table of Contents
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Abstract
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Motivation
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Rationale
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Specifications
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Steps to implement
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Timeline
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Funding needs
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Our team
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Closing Thoughts
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FAQ
Abstract
As the Web3 ecosystem expands with the number of L1 and L2s, the chains with unique differentiators will have key advantages. Because network effects are king in this quest, the strongest differentiator is a vibrant group of builders who can output commercially viable projects, invent new use cases for the infrastructure, and attract others to collaborate and build on each otherâs work, creating network effects. As such, we propose creating and supporting an innovation cluster for the Arbitrum ecosystem.
RnDAO will provide a venture creation pipeline focused on outputting commercially viable projects, addressing the current gap. Weâll achieve this through human-centred design, hands-on support, peer-to-peer collaboration, and a staged pipeline of capital and support builders.
Building on the learnings from our pilot funded by PluralityLabs in 2023 and years of research into venture building, the proposal leverages Swarms (Web3-style Business Clusters). Swarms enable Arbitrum to generate new use cases for its infrastructure (e.g. Orbit Chain), attract and retain projects through partnerships and integrations, and compound value from the long tail of projects (not just power law) through P2P collaboration, thus creating network effects for the Arbitrum ecosystem.
Business clusters and venture builders function best with specialisation, as such weâve selected a vertical (CollabTech - essentially, the next generation of B2B SaaS, which might not be subscriptions based anymore) because itâs both valuable for Arbitrum and serves as an ideal first step to validate the business clusters innovation approach (which can then be copied across verticals). Concretely, weâve selected a vertical that has:
- Relatively low competition so we can test a new approach effectively: no clear market leaders among Web3 ecosystems, and limited funding available for projects.
- New use cases, initial traction, and big potential: the vertical can leverage Arbitrum products and already shows some traction generating sequencer fees, has big market potential also beyond Web3, and can create systemic impact providing additional benefits to other projects and verticals in the Arbitrum ecosystem.
- Is naturally a network thus leveraging some of the best traits of blockchain: composability and trustless collaboration, open innovation, and propagation incentives.
- Affinity to develop new forms of collaboration: given the expertise naturally available in this community.
The bigger project to create this innovation cluster (the Swarm) is divided into 3 cycles:
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a minimum viable pilot of the approach (Cycle 1, already completed)
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rolling out at a functional scale to assess the real impact (Cycle 2, this proposal),
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and finally reaping the benefits for Arbitrum of all the previous work (Cycle 3, subsequent proposal thanks to completion of AVI or related initiatives).
In sum, building this Swarm sets Arbitrum as the preferred ecosystem for a valuable vertical, creates network effects of talent, projects, and tools to fast-track Arbitrumâs community growth and usage of its infrastructure, and develops a replicable methodology across verticals to further grow Arbitrum.
Motivation
The number of L1s and L2s is multiplying, and with it, the relevance of Arbitrum is not guaranteed. A rapidly evolving landscape creates pressing demands. Itâs essential for ArbitrumDAO to both invest in organizational infrastructure and seed an ecosystem of sustainable ventures to transform its massive potential into massive impact. In this quest, network effects are king. But how to do so?
Rationale
Vertical specialization is critical
There was a time when you could know every major project in Ethereum. That time is long gone. The number of projects and innovations is expanding rapidly in verticals like DeFi, Gaming, DeSci, CollabTech, NFTs/creative, etc. Without specialisation, itâs impossible to keep up and this situation will only intensify over the next few years as the number of projects and verticals increases.
Specialization enables the support system for ventures to keep up with new developments and add real value. The same person, no matter how well connected, can hardly help a Gaming project connect with all the key publishers, advise a DeFi project on liquidity, or make introductions to the key connectors in the Carbon Credits markets. Every vertical has a different technical palette, market configuration, and social network; with specialized support, weâre in the best position to select which projects to back and help them navigate challenges.
Collab Tech has especially suffered from neglect in specialisation. Organisation design, leadership, group psychology, behavioural economics, and political science are not new disciplines. Yet the DAO movement has often reinvented the wheel and repeated mistakes while being slow to test ideas coming from self-management, cybernetics, and similar bodies of value-aligned theories and practices.
In Web2, we have seen how, in Collab Tech, older and more experienced entrepreneurs have higher chances of success (in contrast to consumer verticals). This is due in large part to Collab Tech being a B2B market where relationships carry a premium and a deep understanding of the complexities of organisations is key to developing commercially viable solutions. In Collab Tech, the experience and networks that specialisation enables are particularly valuable.
Why Collab Tech in Arbitrum
Full rationale here: https://forum.arbitrum.foundation/t/is-collabtech-valuable-for-arbitrum/24703
How to create network effects in a vertical
RnDAO has investigated and tested approaches to ecosystem development for the past two years, and our research leads us to conclude that Swarms (Web3-style Business Clusters) are an ideal approach to creating network effects around a specific vertical.
Swarms rely on facilitating access to capital, vertical-specific support, and incentive alignment leading to deep collaboration between projects. The swarm dynamic is essential in supporting frontier development in Collab Tech, where knowledge on what works when and how is yet to gel into experience and expertise.
Concerted progress in such fast-changing environments requires knowledge to flow more freely through conduits of people exploring the new space, rather than through first establishing knowledge in siloed disciplines, and have it disseminated centrally later on. Swarms, to the contrary, enable learning to take place almost synchronously with the creation of knowledge and experience between groups of vertically-focused builders.
This programme facilitates swarm dynamics by building relationships between buildes performing research and building at the frontier of the Collabtech space and a community of interest behind them. These relationships will be formed and maintained through regularly recurring interactions between those working at the frontier and the community of interest behind them. We thereby create grounds for both adoption and dissemination of knowledge through community and at the same time supply lines of capabilities and experience back towards the frontier. This way the cluser compounds network value from the get-go.
As a result, enmeshment between projects (modularity and composability leading to integrations, cross-selling, sharing of insights, etc) is increased, generating Arbitrum network effects and making it advantageous to stay in the same ecosystem instead of migrating.
As the number of successful projects increases, the ecosystem further attracts talent, capital, and new projects looking to build on top of existing protocols. A flywheel is created.
Sustainable venture creation
A thriving city is composed of a core set of foundational public goods (parks, libraries, roads) used by most people and an ecosystem of businesses that cover the full range of specific needs of a cityâs inhabitants. Along the same logic, this proposal focuses on developing an ecosystem of ventures for Arbitrum and is ideally complemented by public goods funding programs and some vertical-agnostic services.
We learned from Web1 and Web2âs rich history of experiments in entrepreneurship that deploying capital alone is not the ideal method to facilitate the creation of successful, sustainable ventures.
Accelerators and Incubators evolved precisely because small, early-stage teams have critical gaps that mean they âdonât know what they donât know.â As a result, early-stage ventures can underinvest in critical skills or pursue dead alleys searching for the right methodology or approach. No wonder that 75% of Hackathon winners abandon their projects, and still, 9/10 accelerated startups tend to fail.
Moving further in the support continuum, Venture Builders (a.k.a. Venture Studios), are a rising trend.
Venture Studios obtain superior results thanks to going beyond mentorship and offering hands-on support. Imagine the difference between an expert giving you some feedback on why your pitch deck sucks, you going and trying to fix it on your own, then coming back to get a bit more feedback the week after, vs said expert sitting down with you for 4 hours until you have a great result. Hands-on support offers results faster and compounds expertise more effectively. As a result, the failure rate of ventures is lower than traditional acceleration models, the need for outlier talent is reduced, and ventures progress faster, thus generating better ROI.
Now, arriving at this programmeâs Venture Building approach, we expand on the boost that Venture Studios have brought to startup success. This is done in 2 ways, by:
- Providing foundational research to Collab-tech opportunities as a public resource to commercial ventures.
Instead of letting individual founders/teams absorb the risk of performing research or building without a clear foundation of insight, our Market & Research module as well as Entrepreneur in Residence, provide builders with more evolved, matured opportunities as their starting point as well as methodologies for fast and low cost validation of projects. This pre-venture building phase catches a lot of wheels spinning with founders who generally need to come to grips due to the vagaries of developing in the Web3 space. This way we aim to address âthe commonsâ of venture-building risk in Collab Tech.
- Introducing mechanisms for fractional ownership for contributors to venture.
This form of ownership is minted when founders commit knowledge and capability that is provided by contributors to their venture. This provides an incentive for a broader community to add value to foundersâ ventures. On the other hand, it incentivises stewardship behavior, where advice is not only given, but also supported further throughout its implementation. Thus turning mentors into contributors and leading to faster venture development and facilitating decentralisation.
Transition of swarm dynamics around Collab-Tech opportunity between these 2 phases happens seamlessly. Where the incentives for swarming in the âcommonsâ phase of the opportunity are driven by curiosity and intellectual development, it naturally converts to the similar dynamics around commercial venture opportunity, but now supported by means of intellectual property rights that are attributable to contributors in the form of fractional ownership.
Specifications of proposal Cycle 2
TLDR
Weâre proposing to extend the existing two programs for a further 12 months, with
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up to 25 Entrepreneurs in Residence (previously called fellows): funded for up to 6 months with a $2k/month stipend and dedicaed support program to research and validate a venture opportunity.
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and 10 ventures: funded with 50k ARB and equivalent support to develop and market test an MVP.
Additionally, weâre proposing to include two additional (public good) modules that ensure scalability and further improve venture outcomes and grow the Arbitrum community:
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Market research module: funding a small, specialised team of market researchers and analyst to map opportunities in the Collab Tech space and help orient devs and entrepreneurs to promising and unaddressed areas.
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Community Building module: commmunity attraction and community buildign activities to grow the talent pipeline into the Arbitrum ecosystem and position it as the go-to place for this vertical. Including a hackathon, quarterly unconferences, speed networking, and public events with thought leaders.
Design principles
Customer Centricity and Systematic Validation
The Collab Tech buildersâ pipeline has been designed based on creating opportunity-space insights as a public good upfront. Rather than have each venture go through the burden of finding elementary insights each for themselves, we provide these as their starting point. Allowing them to hit the ground running.
We then follow by guiding builders through lean cycles to quickly and at a low cost validate the viability of a venture. We start working at the very early stages of idea formation to reduce waste and validate or invalidate opportunities at the lowest cost.
Additionally, the approach proposed relies on collaborative processes and cross-ownership to complement the specialized support, thus improving outcomes beyond what a generalist program can provide in whatâs largely a B2B (and B2DAO) market.
Incentive alignment for venture success
Compared to traditional grant programs, the incentives have been redesigned to align both those supporting the ventures (RnDAO team) and the builders toward creating sustainable ventures. This is achieved by rewarding the builders and those supporting the ventures below market rate and instead providing them with participation in the ventures (akin to dynamic equity models). As such, all participants only do well if the ventures thrive.
Collaboration to Generate Network Effects
We also give successful ventures ownership in RnDAO itself (generating cross-ownership between the ventures and further incentive alignment). This enables us to have more narrowly focused cohorts (CollaborationTech only) while ensuring that the overlap between the ventures leads not to competition but to deep collaboration (sharing market insights, cross-selling, talent referrals, integrations, etc). The resulting dynamic facilitates collaboration and generates enmeshment, incentivizing ventures to stay in the Arbitrum ecosystem to continue benefiting from the Business Clusterâs network effects. This is designed as an improvement upon negative incentives like a contractual lock on chain/ecosystem migrations, which would make for a worse deal and hence reduce the quality of builders attracted.
Modularity and Composability
The Swarming approach has been designed specifically to encourage modularity and composability between the products built by the ventures. This aligns with the thesis of a future of work composed of networks of teams that demand autonomy to select tools/modules (Consumerization of B2B software) while also needing to collaborate effectively at scale.
Leveraging the Long Tail and Upcycling
Statistically, with traditional entrepreneurship programs, 1/10th of ventures provide outsized returns, ideally returning the whole fund, but about 40-50% exit and a few more continue as SMEs.
Contrary to traditional VCs (not attached to an ecosystem), in our case, the projects that donât produce outlier returns (9/10) can still generate significant value to Arbitrum by using the chain and adding value to the composable ecosystem. And even projects that completely fail, still add value by bringing talent to Arbitrum (e.g. a designer recruited from Web2 can quickly move to another project in Arbitrum if the venture shuts down).
Our model is designed to maximize value generation from the long tail of projects, rather than only focusing on the outliers, thus offering more resilience, network effects, and compounding value for an ecosystem such as Arbitrum.
Specific activities proposed for Cycle 2
Weâll deliver for 4 streams:
Community Building activities
The pilot (Cycle 1) had a very limited marketing budget and a very aggressive timeline yet the calibre and volume of talent attracted surprised us. Despite this promising start, scaling a CollabTech cluster will require us to also scale talent attraction into Arbitrum. As such, weâre planning a series of cluster-specific community building activities. Notably:
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Semestrely Arbitrum CollabTech Hackathon (including inviting existing players to provide integration bounties with matched capital)
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Quarterly CollabTech Unconference
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Quarterly pitch days
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Curation of a CollabTech Investors Database
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Monthly talks with CollabTech leading researchers and (Web2 and Web3) thought leaders.
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Monthly CollabTech speed networking events together with other communities (discussing with MetaGov, DeveloperDAO, etc.)
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And inviting community members to join trainings that are part of the EiR and Venture programmes.
The Community Building modules works as a âpermeable layerâ facilitating the community to latch on to whatâs happening in the ventures, Market & Research module, EiR programmes, etc. and vice versa for the ventures in the Swarm and other projects in Arbitrum to connect with community knowledge and capability. It thus increases the stickiness of the Arbitrum ecosystem through social ties, as well as growing the support ecosystem with talent and expertise for projects.
Market & Research module
Weâll delay the onset of our other programs to gain a head start here. We made this difficult decision to address the information gap that many early-stage builders have, thus reducing groupthink and ensuring builders focus on meaningful problems.
Weâll start with a 12-week intensive to identify granular market opportunities and turn them into Opportunity Validation RFPs (Requests for Proposals). After the intensive, the volume of activity here will be significantly reduced but continue as an ongoing stream, regularly producing new RFPs.
This activity will be carried out primarily in-house with specialised analysts and researchers. Our core team, external experts, and broader community members will also be included in regular workshops.
The programme will start with Mapping the Collab Tech Space as a whole. A blend of in-house and visiting researchers will craft a broad synthesis of what we know and have learned about the collaboration market. We will include:
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the market - the customers, users, and their contexts
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the existing players and their strategy
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and the key concepts and data involved.
The output will be a prioritized list of problem spaces that have high potential to be solved and solved with Web3 technology.
This mapping will serve two purposes. One is to give our investment team the strategic insight needed to make high-leverage choices. The second is to provide our Entrepreneurs in Residence the market and competitive landscape they need for the next phase - to validate one of the opportunities.
Entrepreneurs in Residence Program (EiR program)
This program will focus on recruiting aspiring entrepreneurs who respond to the Opportunity Validation RFPs (program participants can also propose their own opportunities to validate).
Participants are given a stipend and engaged for a maximum of 6 months during which theyâll carry out a series of validation activities (user research, creating paper prototypes and market testing them, competition benchmarking, etc.). Participants graduate into the next program once theyâre able to provide a compelling pitch deck and enough evidence of validation/derisking to the RnDAO investment committee.
If an opportunity is invalidated, participants can pick another RFP and start working.
After 6 months, if a participant has been unable to graduate, their stipend is terminated but they can re-apply to the program. Participants can also be terminated sooner if thereâs no progress or enough quality in their work.
New participants are onboarded regularly, replacing those who graduated or otherwise exited the program. As such, this program becomes a constant stream (instead of fixed cohorts).
Additionally, EiRs can bring on board a potential co-founder to receive the stipend and complete the work with them, thus allowing them to test the relationship and reducing team risks at later stages. (cost is ultimately neutral as cofounder teams have a higher bar for delivery to recieve payments).
We onboard 5-6 EiRs every 2 months (6 months total program), so after 4 months weâll have about 10 consecutive EiRs validating opportunities and supporting each other.
Venture program
Participants are selected on a rolling basis from graduating EiRs and external ventures that apply.
The program lasts roughly 6 months, during which ventures build an MVP and market test it. Upon completion, ventures are ready to join an accelerator program, raise VC funding, or bootstrap through revenue generation.
Upon acceptance ventures receive
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50k ARB tokens.
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$50k worth of hands-on support from our fractional co-founders team (product strategy, tech research, ops support, legal support, mentorship program, and more). Support is hands-on, vertically specialised, white-glove (responding to each ventureâs unique needs and timeline). As such, our support goes well beyond the generalist mentorship and workshops of accelerator programs.
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Swarm membership (co-marketing, cross-selling, collaborative CRMs, talent referrals, integration subsidies, customer insight sharing, communities of practice, and more).
Ventures that graduate are encouraged to continue participating in the Swarm, support others and benefit from the compounding network effects and capabilities. Over time, the Swarm evolves into a modular and composable portfolio of CollabTech products, enabling the creation of a decentralized supperapp of human collaboration.
Cycle 2 includes funding for ARB injection and support for 10 ventures.
Governance and Oversight
Governancen & Oversight
Rationale
This proposal is sufficiently complex and the funding amount is significant enough to justify careful governance for risk mitigation. The delegates can approve the framework, but all parties will likely benefit from high-context oversight that can provide ongoing recommendations and adjust the payments timeline in the best interest of Arbitrum. As such, an Oversight Committee will be contracted to operate on behalf of the DAO, providing oversight on progress, co-defining milestones, and greenlighting payments.
Responsibilities of Oversight Committee
- Reviewing RnDAO progress reports (2 reports total over 16 months) for delivery of promised work.
- Co-defining milestones together with the RnDAO team
- Releasing milestone payments (initial projection of 3 payments: an initial payment of 45%, 2nd payment after the first report of 45%, and 3rd and final payment after the second and final report of 10%).
- Monthly status report call with the RnDAO team
- Transmit concerns from the delegates to the RnDAO team and provide feedback to the RnDAO team on actions taken to address concerns
- Monitoring as needed to be able to perform the functions listed above.
Payment Schedule
- Initial payment of 40%
- Second payment of 50% (to be adjusted or split at the discretion of the Oversight Committee)
- Final payment of 10%
The second payment is left flexible so that the Oversight Committee can adjust based on mutually agreed needs and successful delivery of programmes. For context, this proposal includes 4 complimentary but distinct programs, each with a different use of capital mechanics, as such, the exact payment schedule is left flexible to optimise for safety and positive impact for Arbitrum without being behold to payment assumptions that might change.
Oversight Committee Members
- StableLabs (Matt Stein) - 0x83D7b93A20cb17579B913898a970F0EeC96b78D7
- BobRossi - 0xd7681c8B32f05922d29D2374D8b768e69b8E2592
- [name] - [wallet]
Committee Members compensation
2,000 ARB per month for the duration of the project.
16 months budgeted as per schedule. Run-overs will be deducted from the 10% allocated to the Final payment to RnDAO.
Payments to committee members to be scheduled and executed monthly by committee members.
Committee Members metagovernance
- The DAO can remove and appoint members with a Snapshot vote.
- Committee members can resign and be replaced with a 1-month notice.
- Committee members may remove another member with a unanimous vote (not counting the to-be-removed member)
- Committee members may appoint new members with a unanimous vote.
Implementation details
- 3 oversight committee members
- Multisig signing service provided by ArbitrumDAO or, if unavailable, then 2 additional signers plus oversight committee members for a 3/5 multisig (final version to be defined before the on-chain vote).
- The Oversight Committee is contracted by RnDAO with the needed autonomy baked into the contract (e.g. termination clause stipulating ArbitrumDAO vote, not via an RnDAO decision), and protecting the committee members from tax liability for the bulk of the funds (committee members are still responsible for any tax liability from the payments received in exchange for the provision of the service, see Committee Members compensation)
Steps to Implement: The RnDAO roadmap for Collab Tech business cluster
The initial pilot enabled funding for 6 seats in the Fellowships program and 1 seat in the Venture Program.
Weâre proposing for ArbitrumDAO to fund the next step on this Business Cluster development initiative, while also aligning on the medium-term roadmap as follows:
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Bootstrapping phase (completed): for the last two years, RnDAO developed the concept and bootstrapped 4 CollabTech Ventures through ad-hoc processes - TogetherCrew (backed by TechStars, serving 50+ communities), MeetWithWallet (early stage but revenue generating), Pattern (recently pivoted), and School DAO (PoC stage).
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Pilot program (December 2023 - April 2024): systematic program with 6 Fellows and 1 Venture, and minimum viable organizational setup.
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Cycle two (this proposal. May/June 2024 - Q2 2025)
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Cycle three and CollabTech Fund (future proposals for 2025-2030):
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Continuation of programs.
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Setting up an investment vehicle to back leading CollabTech projects (sourcing deals from those completing the Venture Program and outsiders), with the legal structures to provide ArbitrumDAO with participation in RnDAO (holding + fund) and deliver sustainable returns for Arbitrum. See work on AVI proposal for the medium-term work weâre contributing to enable this.
Weâve designed this approach with the objective of first building the community and vertical expertise, then validating the structured methodology, followed by a focus on generating network effects for Arbitrum, and finally providing long-term sustainability for Arbitrum.
In so doing, we provide a path for Arbitrum to establish itself as the go-to place for those building the future of Collaboration Tech and lead the way in whatâs soon-to-be $1,000bn+ market.
Timeline
December 2023 - April 2024 (Pilot. Now completed): The Pilot program for the Fellowship was completed in early April, with builders having spent 3 months validating a problem and looking to move to prototype a solution.
May 2024 - Q2 2025 (Cycle 2. Current proposal):
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May - June: Proposal + Prepare Cycle 2
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Mid June September: Launch Market Research module and continuation of Venture Building program (support to ventures from Cycle 1 and before)
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October - April 2025:
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Continuous operation of Market Research module,
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Launch and then continuous operation of Entrepreneurs in Residence program (previously called CoLab Fellowship),
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Continuous operation of Venture Building program.
Q2+ 2025 (Cycle 3 and Fund. Future proposal): weâll continue the programs and add the final step with a fund that can supercharge promising ventures (as they complete the Venture Builder programme or come from outside thanks to the clusterâs growing reputation). The fund will enable ArbitrumDAO to participate as an LP and thus receive ROI from the pipeline thatâs been nourished with the earlier stage programs.
Funding needs
RnDAO funding needs
The cycles are divided in 3 stages of a minimum viable pilot of the approach (Cycle 1, already completed), rolling out at a functional scale to assess real impact (Cycle 2, this proposal), and finally reaping the benefits for Arbitrum of all the previous work (Cycle 3, subsequent proposal thanks to completion of AVI or related initiatives).
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Cycle 1 (Pilot): already funded (156k ARB) and completed, (see results in FAQ section below).
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Cycle Two (this proposal): 3.2mn ARB for program (accounting ARB at 0.85) + Foundationâs grant for legal setup. Importantly, the funding is divided in milestones co-created with the Oversight Committee, so value delivery is reviewed step by step and the program only uses the whole funding if value has been delivered throughout.
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Cycle Three and Fund (future proposal): 8m ARB: 3.5mn ARB for program and 5mn ARB as 25% LP commitment for Fund together with commitments from other LPs ($20mn fund, standard 2% management fee and 20% carry).
Context and Breakdown on the pricing modules
Context
Overview: the proposal consists of a community building module (hackathons, events, etc), a Market and Research module to identify market opportunities, and the EIR and Venture Builder programs where said opportunities are turned into ventures.
Importantly, the thesis is that allocating capital alone to startups that then need to figure out everything inhouse leads to subpar outcomes compared to a venture builder model (where a mix of capital and services are allocated using a âconveryor beltâ approach where the right expertise can be plugged into the ventures at the right time).
As such, the support to projects uses 4 strategies:
- Direct capital (Direct Capital Allocation EiRs and Direct Capital Allocation Ventures)
- Services provided e.g. fractional CTO, marketing, product strategy, outreach and biz dev, etc. (Direct Support - Ventures and Direct Support - EiRs)
- A program of workshops and trainings (EiR and Venture Programes Management and Program Development & Infrastructure)
- P2P collabroation e.g. collaborative CRM, market insights database, developer and designer guilds, etc. (EiR and Venture Programes Management and Program Development & Infrastructure).
Breakdown of the modules:
- Admin & Legal (OpEx): includes accounting and compliance costs, contracting and coordination costs, as well as incorporation and legal fees (might be partially covered by the Foundation legal grant, TBC after a successful Snapshot vote in which case it will be discounted before the Tally vote).
- Community Building module: includes events organising, locations and travel, as well as a community manager.
- Direct Capital Allocation EiRs: payment to EiRs as stipend while in the EiR Program
- Direct Capital Allocation Ventures: token allocation to selected ventures (50k ARB/venture)
- Direct Support - EiRs: staff hired to coach and work alongside the EiRs in developing the concepts. Includes head coach, business coaches (also hands-on), vouchers for mentors, and a freelance designer for EiR pitchdecks.
- Direct Support - Ventures: staff hired to coach and work alongside the Ventures in developing the products. Includes 2 fractional cofounders (business side) and fractional CTO.
- Marketing: promoting the EiRs, Ventures, and programs. Includes marketing lead and two part-time assistants.
- Oversight Committee: tokens allocated to oversight committee members.
- Program Development & CAPEX: one-off costs of designing and launching the program. Includes designing workshops for P2P collaboration format (Swarming), building âSwarm infrastructureâ such as collaborative databases (e.g. cross-selling CRM for ventures and EiRs. market insights database, etc.), and outreach work to attract a broader investor network to Arbitrum for the ventures to pitch to.
- EiR and Venture Programes Management: delivery of workshops and training for the EiRs and Ventures e.g. pitch practice, business modelling, customer development, etc. (some of these workshops/training will also be available for the broader Arbitrum community).
Our Leadership Team
We have decades of experience in CollabTech, ecosystem development and venture building, and have gathered an expert community bridging insights from Web2, academia, and Web3; as well as expertise in both blockchain and AI.
Daniel Ospina - Instigator
10 years in Organisation Design. Ex Supervisory Council SingularityNET, Head of Governance at Aragon, consulted for Google, BCG, Daimler, etc. Visiting Lecturer at Oxford, HBR author, and TEDx speaker.
Andrea Gallagher - Research Lead
20 years in collaboration software & user research. Research lead at Aragon, Google Suite, Asana, and previously innovation catalyst at Intuit.
Yatan Blumenthal Vargas - EiR Program Lead
10 years in venture acceleration. Built and run 20 accelerator cohorts for Fortune 500 companies and coached 200+ startups. Country director for Founder Institute Colombia.
Lino Velev - Venture Program Lead
14 years ecosystem development via VC instruments and community development. ÂŁ25m deployed followed on by ÂŁ100m. 3x venture funded founder. First building on blockchain in 2014 and AI in 2016.
Cori Schlicht - Marketing Lead
Co-Founder and Event Organizer at Regens Unite, ex Head of Comms at Giveth, partnership lead at The DAOist and 9 years in sales and marketing.
Closing Thoughts
This initiative aims primarily to position Arbitrum as the go-to place for CollabTech builders, by nourishing a Collab Tech Business Cluster that can generate network effects and progressively attract more talent, capital, and ventures to the Arbitrum ecosystem, resulting in compounding sequencer fees, and smoother operations and governance for the ArbitrumDAO and Arbitrum-based projects.
Our unique contribution yields a large community building and knowledge generation effort, and an innovation pipeline with sustainable ventures, and after Cohort 2, also compounding ROI.
FAQ
Thanks for all the feedback and questions thus far! We have created an FAQ to answer.
1. Outcomes of Pilot (Cycle 1)
âDo you have more information on the current cohort? How are the teams doing, what have been the takeaways? [âŚ] I would love to understand more of what the week to week looks like for the teams going through the initial research fellowship as well as how they have progressed so far. How does the current program enable successful problem/solution ideation and testing?â
Please see the full impact report here: Plurality Labs: Arbitrum DAO x RnDAO Co.lab - #23 by danielo
2.Learnings from the Co.Lab Cycle 1h
âWhat did you learn about running these programs during the Pilot? What are you changing?â
Through a pilot grant to RnDAO via Plurality Labs (now Thrive Coin), we ran a builders pipeline, consisting of two steps programs:
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Research Fellowship: 3-month paid Fellowship for 6 aspiring builders to dive deep and validate a problem through user research, market research, and engaging with experts.
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Venture Programme: 50k Arb and $100k worth of hands-on support for 1 venture to build a team, develop an MVP, and market-test their solution.
Through this pilot, we were able to validate our ability to
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attract attention: over 100k impressions, with our venture recruitment post getting close to 300 retweets (legit retweets, not paid).
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and talent: 100+ applications for 6 fellowship slots and 70+ applications for 1 venture program slot).
Although it takes many months or even years to assess the success or not of a venture, we have a promising pipeline and also had the opportunity to refine our thesis on the ideal support system and progression for Collab Tech project. A notable insight is that a significant number of applicants were rejected not because of a lack of talent (they boasted great track records) but because certain problems are oversubscribed and they lacked an edge (meanwhile many critical but less popular challenges remain unexplored).
Innovation theory as well as case studies like Entrepreneur First suggest that the development of market insights and IP through fundamental research can generate more targeted and meaningful opportunities for ventures. As such, moving forward weâll expand our programmes with an additional, initial module focused on identifying promising and underserved opportunities and orienting aspiring Collab Tech entrepreneurs to address them.
Moving forward, weâre reworking slightly our Fellowship to accommodate this change, and rebranding it to the Entrepreneurs in Residence program (EiR program).
Additionally, we brainstormed ways to leverage and support the talent attracted that didnât make it into the programmes. Thereâs a significant opportunity to share training materials, build community, and facilitate P2P interactions beyond our programme. We lacked the resources to sufficiently sustain this effort in the first cycle, as such weâre now adding a Community Building module that can support and sustain this broader community.
3. Recruiting
âBeyond the Gitcoin grant rounds, how else will talent be sourced? From our own experience running an accelerator, this likely makes or breaks the program. Attracting and retaining the best talent is crucial.â
Compared to traditional accelerators that need to attract viable projects, we can both work with viable projects and build them from the ground up. Building projects takes time, but the rigorous validation process used and gating between stages reduces risks of capital allocation, thus improving impact for capital used.
RnDAO already runs a rich variety of industry events, develops channels and communities and, most importantly, the P2P learning aspects of the Swarming approach naturally open up the innovation process in a way that both invites the community to contribute and benefit. Thus creating powerful network effects for talent attraction and upskilling.
Despite this advantage, we agree that talent should remain a core concern for us. We saw very significant demand for both our fellowship and venture program, just from our organic reach. To sustain this position moving forward, part of our marketing budget will be used to promote the content (research) by previous cohorts of fellows, attracting those geeky about the topic and creating a community flywheel. Additionally, weâve added a range of community attraction and community building activities to rapidly scale up the Arbitrum CollabTech cluster.
Over time, we rely on the success of the Business Cluster and traction from earlier cohorts to give us sustainable network effects and make Arbitrum and our programs the go-to-place for CollabTech builders (see question 9).
4. Ecosystem Collaboration
âI would love to understand how the program plans to collaborate with current CollabTech players within Arbitrum. These teams and products are likely the most fit for serving as mentors and advising teams on the underserved needs of the ecosystem. How should they be incentivized and how do you balance the competitive/anti-competitive nature of this partnership?â
Established CollabTech players can still benefit from the Swarm. Weâre currently in conversation with two more mature ventures interested in the venture program. They see value in the network effects that collaborating with our business cluster could provide them. This is still a nascent area for us, but we see significant potential in developing partnerships beyond the ventures we incubate (token swaps with established players, co-marketing agreements, etc. have been discussed and we plan to explore them over time).
Additionally, a leading CollabTech project has approached us to deliver training for their team similar to our Fellowship, supporting their user-centricity. Over time, we plan to make more of our methodologies available to others. We made a proposal to the Ethereum Foundation to support this work (no clear answer yet), and weâll continue exploring ways to champion user-centricity in the Arbitrum ecosystem.
A year ago, we also started a mentors and angels program, inviting senior leaders from mature DAOs and CollabTech projects. Our venture volume is still low, but we have already appointed someone (Yatan, whoâs ran over 20 accelerator cohorts for Fortune 500 companies) to grow this program in the upcoming cycles.
Finally, our programs are designed to facilitate modularity and composability, and integrations with existing players are a key part of that (also critical for venture success!). A recent example of this is a partnership between TogetherCrew (our first venture, pre-Arbitrum partnership) and Snapshot, where thanks to a small grant from ArbitrumDAO, weâll mint community engagement scores as Dynamic Reputation NFTs and use them to modulate rewards for participating in governance (related to Snapshotâs new governance rewards protocol - Boost). As our ventures mature, we envision many more such collaborations and will actively leverage our network to facilitate them.
In addition to the outlined above, we are happy to hear any ideas and recommendations for ways to collaborate with existing players.
5. Legal
âIâm not quite sure the feasibility of the VC arm you are suggesting. Maybe the Foundation can shed some light on this. However, if we were able to set up a DAO owned venture arm, I believe the scope should encompass all sectors, not just CollabTech.â
During GovHack, we had 20+ conversations with delegates, contributors (e.g., immutablelawyer), and the foundation about this. Weâre getting positive sentiment about the viability. This is a need for Arbitrum bigger than our project, and so weâve started collaborating with others to figure out the ideal legal and governance structure that could oversee multiple investment allocators (other venture builders, VCs, accelerators, etc. etc.).
If youâd like to follow this discussion or engage, this is a good starting point:: What do we want for Arbitrum Venture Funds? 1 and you can see the proposal being discussed here.
Note that irrespective of the venture fund and AVI, we still see the development of a CollabTech business cluster as a critical opportunity for Arbitrum, and the network effects generated through our early-stage programs provide the foundation for it.
6. Addressable Market
âWhile the growth of the CollabTech industry is evident, understanding a more relevant addressable market as it relates to crypto and web3 would paint a better picture of the opportunity in my opinion.â
The Web3 CollabTech market is currently small and hard to calculate. In part, due to a chicken and egg problem: without better tooling (that also streamlines compliance), DAOs are very hard to operate, dissuading others from adopting them. If the challenge is addressed, the market could grow rapidly.
We aim to advance this goal BUT, importantly, weâre not excluding the Web2 market. We include the âIRL potentialâ among our evaluation criteria for selecting program participants and, in our curriculum, emphasize first-principles thinking over following (web3) trends. Weâre also cultivating relationships with communities beyond Web3, as discovering how Web3 technology and patterns can serve society at large is essential for the success of our mission.
The Web3 market (projects in DeFi, GameFi, etc) serves as the speartip customers in many but not all cases (see e.g. the work of our fellow Humberto whoâs bringing a Web2 company into Web3). As such, and given the above, weâd argue that an accurate sizing of the opportunity should include the Web2 market too.
Note that research calculates $8.8 Trillion lost annually in productivity because of poor organisational practices - about 9% of global GDP! And see question 9 for reference to the $1,000bn+ by 2030 market opportunity that CollabTech represents. So weâre confident thereâs a lot to do here irrespective of the success of other Web3 verticals.
7. Outputs/KPIs
âWhat results do you want to achieve as a result? I mean, what specific parameter values?â
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Develop a new defensible vertical Arbitrum around CollabTech ventures
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Grow Arbitrum brand awareness and improve brand perception (go-to place for Collab Tech and for DAOs and Web3 orgs operators): hard to measure but not less important!
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Metrics include participation in Community Building module events and new talent attraction.
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Grow sequencer fees (lagging indicator)
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Create enablers and defensibility for other verticals by enriching Arbitrumâs infrastructure offering
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After the setup of the fund, also grow Arbitrumâs equities portfolio
8. Size of the grant: could we ask for less?
A previous version of the proposal included 12 EiRs and 4 ventures, and then we received the feedback âAccording to statistics, 1/10 of projects make a profit? Why not more Ventures to increase the odds?â, leading us to unpack this question, resulting in adapting the proposal to 10 ventures.
Rationale: We appreciate the need to mitigate risk and appreciate we are requesting a non-trivial amount of funds. The counterfactual to that is that the budget is for incubating 10+ ventures. At $2.4m USD ($600k out of the total $3mn equivalent are dedicated to public research and community building) this leaves less than $250k per venture from conception to market-tested MVP, which is not a huge amount. Going with a smaller portfolio makes the whole thing more risky and statistically insignificant.
Breaking up the programme into smaller chunks and phases is why weâve included an oversight committee. Requiring multiple DAO votes in the middle of the program introduces for RnDAO and the delegates a lot of overhead, costs, and risks (e.g. reviewing additional impact report and proposals, only short-term contracting reducing talent we can attract, gaps in funding leading to having to discontinue and then rebuild the team also losing ventures, etc.). Weâve explored different solutions to this conundrum and designed an Oversight Committee that can act as a representative of the DAO to approve payments and act with high context and bandwidth to ensure funds are used properly.
Can Arbitrum afford this?
A standard for being financially retired is that one can use 4% of oneâs total net worth every year for living expenses and never run out of money (by e.g. investing your net worth in a total stock market index fund, the 4% per year consumed in living expenses would not use up the principal). 4% of the current treasury at the time of writing is valued at $188 million; thatâs the amount that could be dedicated to âliving expensesâ. So the current ask ($3mn equivalent) is equivalent to only 1.59% of âliving expensesâ that Arbitrum can reasonably afford.
If we draw a parallel between âliving expensesâ and the operational costs of the DAO, the DAO is currently using less than $10mn for operational expenses (multisigs, delegate incentives, workgroups, etc.), so less than 1/20 of the available resources for operational costs. Another potential benchmark would be the 2% management fee often applied to funds, which would place the current level of expenses at less than 1/10 the available resources (thus allowing for a whopping 90% ARB price reduction and still being within limits).
Now, the RnDAO proposal is not for âliving expensesâ but for strategically deploying the funds towards developing commercially viable projects that grow the Arbitrum community (attracting developers, users, investors, etc.), create on-chain transactions generating sequencer fees, and improve the effectiveness of the ArbitrumDAO and Arbitrum based projects. In that sense the available resources should not be calculated from the living expenses but from the capital available for investment; the proposalâs ask represents a three orders of magnitude smaller percentage (only 0.08% of the ArbitrumDAOâs treasury).
In conclusion, even if we apply the unfair classification of a âliving expenseâ, and even if we projected a 90% market crash, the ArbitrumDAO can afford this ask without significant risk nor cost of opportunity.
9. Addressing Concerns of Venture Studios
âSome VCs have concerns with venture studios taking too much equity and the founders of companies not being incentivised enough, so the VCs donât invest. Is this an issue here?â
Venture Studios vary widely. Some take over 50% of equity. Weâre quite different.
First, our model is akin to Entrepreneur First (initial fellowship to form the idea and then capital to prototype), which has allowed EF to generate a $10bn+ portfolio across some 500 companies theyâve supported.
Second, we leverage cross-ownership (so yes, we do take some equity, roughly a 250k SAFE/T but also give the companies that join RnDAO and succeed in governance in RnDAO). Cross ownership allows us to create win-win incentives in the Swarm.
Third, weâre quite focused on commercial viability and generally prefer models that can become sustainable earlier, thus being less dependent on VC capital. This is achieved thanks to our model being able to output outlier companies (Unicorn-types) but thanks to the Swarm, also being capable of compounding value from the long-tail of projects (SME-like).
Note that this long tail of projects often constitutes the bulk of an economy (e.g. accounting worldwide for 90% of businesses and more than 50% of employment. Formal SMEs contribute up to 40% of national income (GDP) in emerging economies, and significantly higher if informal SMEs were considered).
11. Value to Arbitrum
âHow does Arbitrum benefit?â
The L2 market is crowded and getting more so; Arbitrum requires strong Business Clusters to sustain its relevance. With the bull market, ecosystems face an arms race, offering bigger and bigger incentives to mature projects in Gaming & DeFi. Meanwhile, opportunities to incubate original projects and expand other sectors are less competitive (see question 9). We offer a play to leverage these untapped opportunities, while also having multiple additional benefits:
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Adding value to our Gaming and DeFi clusters and the ArbitrumDAO itself by researching and building solutions for solving governance, ops, and growth painpoints.
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Attracting talent (devs, entrepreneurs, etc) to the ecosystem (and making Arbitrum THE PLACE for DAO people e.g. Klaus was referred to Arbitrum by RnDAO, leading to the GovHack).
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Research (uncovering ops and gov best practices) and thesis formation (systematic analysis of market opportunities to derisk capital allocation through the Market Research module and Entrepreneur in Residence outputs).
An important additional benefit lies in expanding the funds deployment methods in Arbitrum, and addressing multiple limitations of Grants programs that manifest as:
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Concerns about retention of grantees in the ecosystem
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Concerns about the ROI of incentive programs
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Concerns with the incentive alignment of service providers
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Challenges with forecasting the sequencer fees that different programs could generate
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Growing reporting structures and additional resources consumed in oversight
The Swarm model could complement grants by addressing these issues, and provide significant network effects and ROI to Arbitrum. We propose a staged roadmap to test and validate this approach and position Arbitrum as a market leader in an untapped key vertical, with spillover benefits to the whole ecosystem.
