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

[ben]

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

• In Favour
• Against

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 Bürgel,

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

[refri]

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

@ben

dedicated data room.

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.

[Wunderbernd]

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.

[refri]

@Wunderbernd

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

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.

[Wunderbernd]

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

[Nay]

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!

[ben]

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

[ben]

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.

[reblocketh]

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.

[jackgale.eth]

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!