Proposal: [Non-Constitutional] RnDAO proposal for an Arbitrum Collab Tech Business Cluster

Proposals
7

FAQ (deprecated version, please refer to the one updated in the bottom of the top post)

Thanks for all the feedback and questions thus far! We have created an FAQ to answer.

1 Progress thus far: Do you have more information on the current cohort? How are the teams doing, what have been the takeaways? I know the program is unfinished and full analysis is unavailable but 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?

Explanation and then examples:

The Fellowship program is currently in month 2 (out of 3), while the venture program is undergoing recruitment (70 applications registered for 1 spot so far).

The Fellowship has three phases: 1) understanding customers so the fellow can craft a problem statement they trust, 2) mapping the space so they understand who else is involved and some of the root causes of the problem, and 3) defining what success could look like and how the problem can be solved.

Each week consists of

  • one workshop where the fellows learn new concepts and skills and practice them,
  • days of doing the work (interviewing users, experts, analyzing data, mapping and synthesis),
  • and what we call “swarm time” - a less structured workshop where they share recent learnings, pick up on overlapping insights, and applying collective intelligence attack challenges that they are all facing.

The priority is to help them get very solid research on which pre-venture decisions and recommendations can be made. All of the Fellows have talked about how much they have changed their perspective on their topic and that they feel much more grounded already.

Preliminary outputs you can check to understand their experience and see work in progress (final research reports are due in a month):

2. Recruiting: Beyond 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.

Compared to traditional accelerators that need to attract viable projects, we are focusing on interesting problems and solid research as a proxy for pre-venture building foundation. The fellowship program is designed for builders, irrespective of them already having an idea or not. Throughout the fellowship they fall in love with a problem and grow into a viable project (or rule out a specific idea and can apply again to explore the next one). As such, the Fellowship serves as a talent pipeline.

Additionally, 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, ability to research and evaluate ideas and talent gradually, before formal investment decisions are made. A dedicated article on that to follow.

Despite this advantage, we agree that talent should remain a core concern for us. Currently, we’re seeing very significant demand for both our fellowship and venture programs, 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, we’ll be scaling our Speed Networking format with other communities (currently discussing with MetaGov, DeveloperDAO, etc. And exploring the possibility of expanding later to Web2 communities). And the aforementioned Gitcoin rounds (or better alternative to be discovered).

Ultimately, 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).

3. Ecosystem Collaboration: I 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?

Established CollabTech players can still benefit from the Swarm. We’re 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 we’ll 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, who’s 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, we’ll mint community engagement scores as Dynamic Reputation NFTs and use them to modulate rewards for participating in governance (related to Snapshot’s 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.

4. Legal: I’m 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.

During GovHack, we had 20+ conversations with delegates, contributors (e.g., immutablelawyer), and the foundation about this. We’re getting positive sentiment about the viability. This is a need for Arbitrum bigger than our project, and so we’ve 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 you’d like to follow this discussion or engage, this is a good starting point:: What do we want for Arbitrum Venture Funds?

5. Addressable Market: While 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.

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, we’re not excluding the Web2 market. We include the “IRL potential” among our evaluation criteria for selecting program participants and, in our curriculum, emphasize first-principles thinking over following (web3) trends. We’re 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 in many but not all cases (see e.g. the work of our fellow Humberto who’s bringing a Web2 company into Web3). As such, and given the above, we’d 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 $800bn+ by 2030 market opportunity that CollabTech represents. So we’re confident there’s a lot to do here irrespective of the success of other Web3 verticals.

6. Cost breakdown: How much of the total amount do you plan to use for your team’s salaries?

For Cycle two, we have budgeted:

  • 9% is allocated to program management & admin costs
  • 8% to fellowship support (direct work with the fellows)
  • 14% to venture support (direct work with the ventures)
  • 61% to direct capital allocation.

As we scale the program, the % on program management & admin will decrease, and we’ll increase the allocation to venture support.

7. Outputs/KPIs: What results do you want to achieve as a result? I mean, what specific parameter values?

  • Develop a new defensible vertical Arbitrum around CollabTech ventures
  • 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!
  • Grow sequencer fees
  • Create enablers and defensibility for other verticals through enriching Arbitrum’s infrastructure offering
  • After the setup of the fund, also grow Arbitrum’s equities portfolio

8. Why do you propose the 12 + 4 (Ventures) scheme if, according to statistics, 1/10 of projects make a profit? Why not 10 Ventures?

Contrary to accelerators that offer little support to ventures (only a bit of mentoring), we work a lot more with the ventures and fellows (hands-on support). To make sure we get this right we’re proposing gradual scaling. That being said, we’re updating the proposal to include cycles 2 and 3 of the fellowship and venture programs (organized as separate milestones around which we will report and get further funding approvals). Where in cycle 3 we will fund 6 ventures for a total of 10 ventures funded through this proposal (after update).
Ultimately we’re happy to go faster if ArbitrumDAO is keen to deploy more funds faster.

An additional, important consideration for our model is that statistically, 1/10th of projects have outsized returns, ideally returning the whole fund, but about 40-50% exit and a few more continue as SMEs. The projects that don’t produce outlier returns (9/10) can still generate significant value to Arbitrum by using the chain and adding value to the composable ecosystem. And those that completely fail, still add value by bringing and retaining talent in the ecosystem if we execute this correctly. Compared to traditional VC, our model is designed to maximize value generation from the bulk of projects, rather than only focusing on the outliers, thus offering more resilience, network effects, and compounding value for an ecosystem such as Arbitrum.

9. Vertical choice: Why CollabTech?

In a competitive market (i.e. L2s), and all else equal, specialized programs outperform generalist programs thanks to a more targeted value proposition to attract talent and support ventures. Since Arbitrum counts with the resources to fund multiple programs, the question is then which markets to select.

CollabTech is a big and growing market ($800bn+ by 2030), it lacks a market leader amongst L1s/L2s, and it provides a foundational capability for the success of the Arbitrum DAO and ecosystem. Additionally, a CollabTech project (Quest Protocol) is the #1 sequencer fees generator for Arbtirum. As such, we see CollabTech as a valuable “blue ocean strategy” (opportunity with low competition and great ROI medium to long term). For this reason, we believe CollabTach is a great choice together with DeFi (good traction and provides liquidity) and Gaming (also good traction and provides high transaction volume) as key verticals.

CollabTech is also an ideal speartip to test the Swarm model. Swarming could offer superior ROI and network effects, however, it relies on facilitating collaboration between projects and traditional tools and methods are quite limiting. Our focus on CollabTech can thus serve to streamline the operation of Swarms, unlocking adoption of the model for other verticals.

10 Value: How does Arbitrum benefit?

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:

  • Adding value to our Gaming and DeFi clusters and the ArbitrumDAO itself by researching and building solutions for solving governance, ops, and growth painpoints.
  • 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).
  • Research (uncovering ops and gov best practices) and thesis formation (systematic analysis of market opportunities to derisk capital allocation through the fellowship outputs).

An important additional benefit lies in expanding the funds deployment methods in Arbitrum, and addressing multiple limitations of Grants programs that manifest as:

  • Concerns about retention of grantees in the ecosystem
  • Concerns about the ROI of incentive programs
  • Concerns with the incentive alignment of service providers
  • Challenges with forecasting the sequencer fees that different programs could generate
  • Growing reporting structures and additional resources consumed in oversight

The Swarm model could complement grants by addressing these issues, and provides 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.

2 Likes