GIP-102: Should GnosisDAO provide financing for the new GnosisVC ecosystem venture fund?

Governance GIPs
1

GIP-102: Should GnosisDAO provide financing for the new GnosisVC ecosystem venture fund?

  • In Favour
  • Against
0 voters 
GIP: 102
title: Should GnosisDAO provide financing for the new GnosisVC ecosystem venture fund?
author: Ben, GnosisVC
type: Funding
created: 2024-06-10
duration:7y
funding: $20 million

Summary

GnosisDAO should finance the new GnosisVC fund to promote further ecosystem growth and product lines in the selected target verticals.

Abstract

GnosisVC fund will raise a total of $40m, wherein GnosisDAO will invest $20m and the remaining $20m will be raised from external LPs.
GnosisVC will invest in early-stage projects to accelerate the development, adoption, and growth of DApps and fintech integrations strengthening the broader Gnosis Ecosystem.

GnosisVC fund will deploy into early-stage projects in line with the existing Gnosis 3.0 thesis with a focus on RWAs, Decentralized Infrastructure, and Financial Payment Rails as target verticals.

Fund Structure & Terms

The fund will be set up as a Cayman-exempt limited partnership with a term of 7 years (+ up to 2 years extension) and a 2/20 fee structure (2% management fees and 20% carry per industry standards).

The investment period will last for 3 years, with the expected schedule of the capital calls being ca. one-third of the total commitment to be paid in per year.

Deliverables to LPs will include:
Quarterly reports on the investment portfolio posted on DAO forum.
Investment summaries are shared with LPs via a dedicated data room.

Implementation Initiatives

Venture Fund:
Support and incubate projects through funding, governance participation, and advisory.

Gnosis Ecosystem Integration:
Onboarding and integrating portfolio companies into the larger Gnosis ecosystem through an introduction to existing Gnosis projects and by facilitating a collaborative environment.

Maintenance:
Continued review and collaboration with existing partners and ongoing assistance for portfolio companies from GIP 38.

Reporting:
Quarterly reports and updates on investments and portfolio companies will be shared with the DAO, as well as their contribution to the evolution of the Gnosis 3.0 thesis.

Investment Thesis

GnosisVC will be deploying capital into projects that will strengthen the existing Gnosis ecosystem through but not limited to the following three investment verticals:

Financial Payments

Incremental margins are the core of the payment stack. The vertical is very crowded with a deeply intermediated stack and heavy cross selling. Focussing on payments middleware around Gnosis Pay, the fund should have considerable experience and informational advantages to be able to build out an integrated stack from the point of sale onwards.

Decentralized Infrastructure

The future of computing and data availability is open source. In the absence of a fully mature Zero-Knowledge cryptography stack, the decentralization of services and applications at scale must proceed hand-in-hand with an equivalent decentralization of the underlying component infrastructure. The development of such an internet-native substrate must be tackled from multiple avenues: data availability, composable compute environments, orchestration and coordination of tasks, tooling, and real-time analytics to name a few. As a case study, LLMs have captured the public imagination on a circa 6-year-old technology. While there has been a lot of focus on model quality, model tooling, hosting, and standalone end-user deployments are an equally important but frequently underestimated part of the vertical. Historically, some of the most impressive investments by Gnosis have been infrastructure-related (MatterLabs, Gelato, TheGraph). As such, we believe that this vertical stays true to the Gnosis DNA.

RWA

The Defi crypto markets are saturated with liquidity and narrative-driven demand without sufficient credit products to deploy into. This is due to the current need for full collateralization, so capital is abundant while investment opportunities are still scarce, there is also huge latent demand for institutional adoption through stablecoins, yield-bearing instruments, and new liquid RWAs. The continued growth of self-custodial alternatives to existing CeFi interfaces presents the opportunity to funnel conventional financial players into the already existing Defi stack.

Team

Investment Committee

Benjamin Senn,

DAO Legal Consultant

Daniele Pinna,

Quantitative DeFi Researcher 0xSideQuest

Colin Rix,

Multi-Strategy Fund Portfolio Manager

Ariunaa Batzorig,

DAO treasury & Portfolio/Asset Manager

Stefan George,

CTO Gnosis (excluded from management fees and carry)

Advisors

Sebastian BĂźrgel,

VP Technology Gnosis & Founder HOPR

Arthur Gervais,

Assoc. Prof UCL & Founder D23E

For further information please contact info@gnosisvc.io
Or enquire at https://forms.gle/CFHk6s84LA5kBs2F7

7 Likes
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For sure I am in favor of giving the Gnosis DAO the opportunity to invest in valuable projects. Regarding GnosisVC I like to have some explanation what GnosisVC really is: any links to Factor VC (e.g. does any person that is or was in charge for Factor VC works for Gnosis VC?)? Will additional liquidity to the investments possibly be provided by Gnosis ltd? And if so, will this be announced? Any personal overlap to Karpatkey? Will GnosisVC eventually be one of the next spin offs from Gnosis DAO or is it a totally separate entity? Depending on the answer to these questions it might be worthwhile to discuss the option to take the whole investment of 40m by the DAO instead of having other entities being involved.
Also imo the DAO has to decide beforehand who should be allowed to visist the

on behalf of it, at least if this isn’t available to all DAO members. And maybe it should be defined which kind of information from this ‘data room’ is allowed to be shared to the other DAO members if it is restricted.

4 Likes
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Will GnosisVC eventually be one of the next spin offs from Gnosis DAO or is it a totally separate entity? Depending on the answer to these questions it might be worthwhile to discuss the option to take the whole investment of 40m by the DAO instead of having other entities being involved.

I always thought that this is one of the possibilities to create additional value, you could spin out the VC department with a token, GNO pay, GNO AI etc. etc.

Each of these entities could be worth 1-2 billion alone (or more)

On the topic:

I am in favor of the proposal. One of the big learnings for me in this cycle is that you can’t expect other protocols to build things in your ecosystem, you have to develop/finance them yourself. If you look at the L2 ecosystem, you can see many protocols just farm the grants for each L2 network (they get the tokens and move to your competitor, this doesn’t help the network at all)

You either need some exclusive protocols, some timed exclusivity or at least some guarantees that they will develop the protocol on your chain.

3 Likes
4

agree on this, although we finally got some blue-chips like aave and balancer (and have to say good by to agave and symmetrics), but it remains obscure to me how all this is managed, and imo it needs to be more clear to the average Joe how these decisions are made to attract more ppl to join.

4 Likes
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yes, but the problem with multi chain projects is:

  1. they have to focus/build on multiple chains → changes are slow/take a long time to pass
  2. conflict of interest (token allocations, governance ->people prioritize something like ARB if they have a large ARB allocation)
  3. protocols are not fully optimized for the capabilities of the chain → they still need to run on mainnet in many cases

Ofc the pros are:

  1. You have much lower costs
  2. You have actual competition

Multi chain projects increase the utility of the chain, but they don’t give you competitive advantages. There is almost no difference if you use AAVE on ARB or Gnosis chain. The difference is the yield or the token incentives, which means:

  1. You either have to incentivize liquidity, which is not sustainable in the long term
  2. You invest in/build the proper protocols yourself ->the sustainable path
1 Like
6

Gnosis is uniquely positioned to benefit financially from the VC activity and leverage these investments to forge strategic partnerships with portcos and expand the ecosystem. Previous VC initiatives have proved both points, and this activity certainly should continue. Very much in favor!

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Thanks for your detailed thoughts; regarding the 3 main points.

  1. GnosisVC is a separate entity

  2. The fund will also take external capital to help expand ecosystem participation

  3. A public data room is intended to give more transparency over the ongoing investment strategy and thesis development, there is no intention to limit or tier access to it

1 Like
8

There is a clearly defined focus within the fund on application development. You have pretty accurately identified the problems with crosschain switching costs, our intention is to help integrate portcos more closely to give the entire ecosystem a greater degree of stickiness.

4 Likes
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Hi, I’m Yudai. I’m co-founder of Fracton Ventures, a crypto incubator in Japan. My team members have venture capitalist backgrounds and my team is a big fan of Gnosis ecosystem. Also I have an incubator background and knowledge of VC legal structure. So, we’re interested in the VC model for long-term ecosystem empowerment.

The proposal is a one of unique proposals that I have seen before.
So I have a few questions for you.

  1. Are there any new challenges as a VC structure? To be specific, do you plan to convert LP-share to tokenized LP-share? It may potentially you can take a position in DeFI.
  2. Do you have a strategy for deploying money in geographically based areas? Our team is based in Japan, and we’d like to support the fund’s success in the Asian market if you feel it makes sense.
  3. Do you plan to deploy money from the management fee to provide a customized acceleration program by you? We can provide full customized program to Japan or Asian market.
3 Likes
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Hi! I’m looking to try and find out more information about the team and background for this proposal before finalising my vote, but have found very little publicly-available information.

With respect, without more information, it’s quite hard to discern what separates this proposal from an anonymous group raiding the treasury for $20m to fund their new venture.

I am quite reluctant to commit to paying $400k in 2% management fees per year for 7 years to 4 members of an investment committee without any information on their investing credentials or role in the DAO/ecosystem. There’s been no historic engagement from the poster, who joined the date of this post. I’m also struggling to find information about the other 3 fee recipient members of the committee, let alone any historic engagement. It may just be my own ignorance, but more information is definitely needed to make this a strong standalone proposal.

Can I suggest the team provide answers to the following additional questions:

  1. Provide a brief description of each member of the team behind this proposal and/or the investment committee, including their previous involvement with the Gnosis ecosystem, their previous experience in venture capital and links to public profiles/publications for further reading.

  2. Please describe the process by which the team members, investment committee and advisors were selected. Please clearly indicate which elements are public and private, and which involve some oversight by Gnosis (and by which individuals/functions).

  3. Please explain how the proposers arrived at a $40m total for the fund, and a $20m contribution from Gnosis and external LPs respectively. Do the proposers have other external LPs lined up or in the works? And if not, how confident are the proposers in their ability to line up external LPs, and what happens if they fail?

I would also expect to see a more detailed term sheet published in due course, as the details in the post are really very minimal. In particular, it will be vital for Gnosis DAO to understand what recourse it has in the event that its investment is mismanaged or otherwise at risk.

Until more information is provided, I’m provisionally voting “Against” GIP-102. Though I think venture investments for the Gnosis ecosystem is potentially an excellent idea, the execution of this proposal so far concerns me. I hope to be promptly proven wrong!

Edit: following comments from Stefan explaining the involvement and support of Gnosis LTD, I’m content to support this proposal in its current form. I look forward to the community call to hear more.

9 Likes
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I am a web3 believer, did try for 7 years to get into some web3 project to do something meaningful.
All I found was corporate mentality, people judging you by if you worked for some corporation (of course I didn’t I am an anarchist, or why would I be in the web3 lol).

This VC funds made by a DAO is the most retarded thing.

I make a living trading memecoins and when I see that not just doge, or WIF, but even popcat flipped GNO, I understand that this is the right direction.

You wanna get into popcat ? You buy a bag and work for your bag. You wanna get into GNO ? You have to put your job request into some corporate stuff, Linkedin, Resume.

Wouldn’t have sense to start experimenting some real decentralization ?

1 Like
12

Thank you for your feedback. I want to share my perspective as I have been part of forming the team behind the GnosisVC proposal. We have put a lot of thought into composing a team that combines expertise in investments, legal structuring, fund management, quantitative modeling at hedge funds as well as DeFi from both a technical and financial perspective.

The team has been working on this proposal for a long time (over 6 months), which is also due to the requirements set by Gnosis to have voting rights in the final structure. GnosisVC would be the first Ecosystem Fund, where a DAO/token holders will have control within the fund structure. Meanwhile, the team has been working on investments, which we decided to warehouse in Gnosis LTD. The team could hit the ground running and has proven to be working effectively.

I would personally (pro bono) be part of the investment committee to provide oversight and ensure the holistic view on Gnosis is sufficiently represented. The fund would be an independent entity and team from Gnosis LTD and through the asset holding foundation, GnosisDAO would have voting rights in the final structure.

The team decided to cap the fund size at $40M to ensure that the money could be fully deployed to support early-stage projects and avoid being forced to participate in large rounds at unfavorable valuations. With a fund size much larger than $40M, participating in pre-seed or seed rounds could become challenging, given that the average ticket size would need to be >1.5mio (assuming a target of ca. 30 portfolio companies for the fund). Backing projects early can help to align them better with the Gnosis ecosystem and capture their value-add to advance the Gnosis 3.0 roadmap.

The reason to have 50% coming from external LPs has the following reasons:

  1. We want to get more capital into the ecosystem instead of redistributing it.
  2. We would like to allow others to participate in the success of the ecosystem as a whole and not only in the success of the base layer.
  3. There is general interest at the moment from traditional tech and finance actors to participate in our industry, GnosisVC will be a conduit to do so with sufficient alignment.

The existing deal flow, which Gnosis LTD has previously managed directly, would now have a formally managed fund structure, which can do proper due diligence and build a strategic portfolio to let the DAO participate in a more structured and transparent manner.

IC members themselves will have a stake in the fund and would have a considerable amount of skin in the game.

For everyone, who would like to learn more, please visit this link: https://forms.gle/CFHk6s84LA5kBs2F7

I invite everyone to join the Gnosis community call on Thursday, July 11th at 4PM UTCT, where the team will present GnosisVC.

8 Likes
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Thanks Stefan - that’s all extremely helpful to know. Excited for the community call to hear more.

The existing deal flow, which Gnosis LTD has previously managed directly…

Are you able to elaborate a little more on this? Am I right to interpret that Gnosis LTD has been working on the deal outline and general arrangements for GnosisVC, but this work is now being opened up to the DAO for the various benefits you mention? Can I therefore infer that GnosisVC has the general support of Gnosis LTD?

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Yes, this is correct. Gnosis LTD has ensured that the setup and process is in line with GnosisDAO. It is an important part of Gnosis 3.0.

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I second the sentiments from jackgale.eth: with the information available, it’s extremely difficult to form an opinion on this proposal. I appreciate the update from Stefan, but I find it raises more questions than it answers.

When you say “[t]he team has been working on this proposal for a long time (over 6 months)” I appreciate you don’t mean that literally, but the fact is that the actual proposal the DAO has been presented with after all that work is barely 600 words and contains extremely scant information. That doesn’t engender confidence in this initiative or suggest much respect for the DAO.

I filled in the form to get more information over a week ago, but am yet to receive any.

IC members themselves will have a stake in the fund and would have a considerable amount of skin in the game.

How much? “A considerable amount” isn’t enough information to base a decision on.

the requirements set by GnosisDAO to have voting rights in the final structure

When and how did GnosisDAO set these requirements? What is the specific nature of these voting rights? Why was this very important information not included in the proposal text?

I look forward to joining the community call to find out more.

5 Likes
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I was referring to the organizational model, and to the fact that the funds are distributed with a ventur capital approach.

I am one of those folks that think Venture Capital has been in general pretty toxic for crypto, because

  • the need to generate quick returns is not aligned with the current state of crypto (building infrastructure)
  • corporate model it top down while crypto model shall be peer to peer
  • the assumption that corporate governance is the only way to solve freerider problem and principal agent ptoblem is toxic for the space

Gnosis Chain has let somehow starve community first projects like 1hive and Agave. Those folks (I am not one of them, even if I invested in their tokens in the past) at least TRIED to build a DAO, a project to support decentralized governance (gardens, celeste) etc.

Of course those kind of approaches need a lot of experimentation, need to fail several times before finding the right equilibrium. But at least they did try.

Don’t you feel like to be missing something by replicating corporate model ?

Today, with the shittiest market in the last weeks, a Dog Wif an Hat still has more than 2x the valuation of Gnosis.

Memecoins will outperform any other asset (One day also Karpatkey will buy them, and that will be probably top-signal for us folks from the trenches), and the reason is only one.

In memecoins the community matters (just like early in Bitcoin).

Where is Gnosis Community ? Oh you have a forum. I did try to join Gnosis to work for Gnosis, no one even cared of my application (that indeed was with one of those corporate stuff etc).

The reality is that you are playing the “security” game.

I won’t go in the Arbitrum Forum to spend my time. I am here because, Gnosis in theory has a different history. No one forces you to follow A16Z playbook.

Join us in the trenches and wish to A16Z crypto to join SBF in pride and glory.

My call to action is a change of mentality, to have the courage to experiment and to have as a mission going beyond corporate governance and corporate mentality.

Not written with GPT4.

Wizard

3 Likes
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Agree to your sentiment and especially decisions like the closure of Aave should have been discussed here before.

One major problem with this forum is: many decisions regarding the Gnosis ecosystem have been done by insiders and some aligned entities, especially to mention @Karpatkey and the Ltd., elsewhere without going through this forum. While discussing these topics here could have attracted many people to stay here or even join this chance hasn’t been taken.
Now the GIP-101 tries to revive this forum but imho it will only work if the people that have done the relevant decisions before are willing to participate here, that seems much more important to me than to allocate some voting rights to the delegates.

And regarding this proposal: It might worsen this situation if the relevant info don’t reach the people here in time to felt involved and the ‘public data room’ just gives the results afterwards, like the monthly reports of karpatkey. But maybe that’s the main reason to establish GnosisVC: to avoid too much communication about details (which in part can be reasonable and I wouldn’t mind for certain topics if in general the discussion takes place here).

4 Likes
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When you say “[t]he team has been working on this proposal for a long time (over 6 months)” I appreciate you don’t mean that literally, but the fact is that the actual proposal the DAO has been presented with after all that work is barely 600 words and contains extremely scant information. That doesn’t engender confidence in this initiative or suggest much respect for the DAO.

The team has been working on the proposal for a long time. Setting up a legal structure, which satisfies the requirements of having a DAO participating with special voting rights and allowing external LPs to participate is novel and requires significant setup time. The team has invested in this setup without Gnosis LTD’s financial support. A succinct description of the proposal is not disrespectful but consciously chosen.

I filled in the form to get more information over a week ago, but am yet to receive any.

Great, expect us to get back to you in the next couple of weeks. We first want to collect before we make a bigger reach out.

How much? “A considerable amount” isn’t enough information to base a decision on.

The total commitment by the IC members will be above 5% of the total capital. In line with industry standards.

When and how did GnosisDAO set these requirements? What is the specific nature of these voting rights? Why was this very important information not included in the proposal text?

Correction: This requirement was defined by Gnosis LTD. The structure is still a WIP. Once final, more information can be shared.

I look forward to joining the community call to find out more.

Great to have you there. I hope we can answer more of your questions on this call.

2 Likes
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I agree, there is still a lot of work to be done to balance GnosisDAO, Gnosis LTD, and other actors in the Gnosis Ecosystem. GIP-101 is a first, necessary step towards this. I appreciate everyone’s participation here in the forum and I see the need to give important members of the community a stronger voice.

Regarding this proposal: There were some investments done by GnosisDAO directly into projects and also Gnosis LTD has made direct investments into many projects before. The problem is this is not a scalable solution. For proper investments, we need to do due diligence, meet and discuss with founders, and foster synergies between projects. All of this is difficult to scale via a DAO or LTD. This is why GnosisVC should be the vehicle to execute this on the DAO’s behalf. I hope GnosisVC can do this more transparently while also attracting more capital to the ecosystem.

2 Likes
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glad to see you recognize this!

can’t agree too much on this although it might pave the way in the right direction. Imo willingness of the people making decisions for the gnosis ecosystem right now without using this forum before the decissions are already made ís much more important.

I see a bigger need to increase the audience here. The voice of the few ppl posting here is already recognized by the few others :wink:

3 Likes