GIP-120: Should GnosisDAO acquire Headquarters (HQ.xyz) to Accelerate Gnosis 3.0

Governance GIPs
14

Thank you for your proposal.

In your extensive proposal, spanning 3000 words, there is a notable absence of any substantial discussion regarding the benefits this acquisition offers to GNO holders. On the contrary, the proposal highlights significant dilution for GNO holders, primarily in favour of yourself and your investors. It is also important to consider the likely scenario where these investors, upon receiving GNO, will opt to liquidate their holdings rather than retain exposure—effectively signalling an exit from their investment.

Additionally, GNO continues to trade below its price (relative to ETH) at the time when “significant buybacks” were announced. This trend reflects a palpable lack of confidence in GNO, and it would be crucial to hear how this acquisition intends to address and reverse this concerning trajectory.

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I am personally unsettled by the fact that you have not been able to secure funding from your existing investors and are instead relying on a DAO acquisition that appears to lack transparency. The absence of publicly shared details, with critical information disclosed only to select “key people at Gnosis,” raises further questions about the governance and fairness of this approach.

5 Likes
15

Although I do think the endorsement from @ernst is a sound signal, I do not think it is a wise idea to downgrade the status of the DAO votes to just a simple ratification of decisions already discussed by the LTD. Instead, if we are serious about the state of Gnosis governance, the discussions here should act as a betterment of accountability among all shareholders. Hence the skeptic attitude I am willing to take.

@armog has already asked for clarification, but as someone who also has had the privilege to provide assistance to Gnosis validators as well as following the developments in the hardware space, the barrier to entry is not limited to having the stake (aka GNO) but in being able to afford and maintain the hardware. Let us know if there has been or any expected technological breakthrough in enabling non-sophisticated devices to run validators with.

Touching but irrelevant anecdote. This merely shows you were not great at assessing risk, but nothing else.

Would you be willing to make it 100% performance based with KPIs specified by the DAO?

Without any injection of capital from Gnosis, how would you define the growth of your company, how long of a runway do you guys have to maintain your workforce?

And one last question. When I check your team on the website, I fail to see any in-house individual specialized in compliance/legal terms. I am curious because in the initial text of this proposal, you have made specific emphasis on compliance within the Asian markets. Have you guys been outsourcing your legal affairs? And are you still planning to outsource these in case the merger takes place?

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16

We fully agree that the status of any DAO vote must be greater than a simple ratification of Gnosis Ltd’s decisions. However, we urge all tokenholders to remain focused on the core objectives of our organisation and resist the temptation to let our interests in governance become the tail which wags the dog. Accountability is important, but there is a danger that it can stifle the organic innovation that we have nurtured in this community, where it is left to run amuck for its own sake.

We want to ensure that this deal is properly handled and kept credibly open to the DAO’s governance. But fundamentally there is a level of trust here in the strategic rationale for the deal. Based on the clear and detailed information already presented, we are leaning into the trust that HQ and Gnosis Ltd are seeking.

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17

I have to say I completely agree with mrtdlgc on this one. I’m against this merge, option, buy, or what ever you are calling it.

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18

I am against this for the simple reason that the proposal does not adequately specify what we’re voting on

What does “Gnosis” mean in this context? Which entity will be doing the acquiring? Presumably Gnosis DAO? Can GnosisDAO complete an acquisition of this kind in Singapore? What will be the ownership structure post-acquisition? Assuming GnosisDAO can complete an acquisition, by what mechanism(s) will GnosisDAO oversee GnosisHQ once the acquisition is complete?

I assume it is intended as an acquisition by GnosisDAO based on the GIP title. However, the proposal text doesn’t specify this, and elsewhere the terms “merger” and “partnership” are used. These aren’t interchangeable concepts. There are also references to a “combined entity”, “new post-acquisition entity”, etc., which further confuses things.

I can believe there are good answers to these questions, but they should be in the proposal. I appreciate that certain information may need to remain private, and it makes sense for Gnosis Ltd to vouch for this – but there’s a difference between information needed to evaluate whether the proposal is good or bad and information necessary to make the proposal coherent.

But let’s assume a revised proposal can provide this clarity. Then to me this is the crux:

I can see that this license to operate is extremely valuable. Conversely, failure to acquire the licence would render the acquisition basically worthless. So: how long does this exemption last? What steps are required to acquire the licence? Has this process already begun? From the quoted passage it seems like it has, but in the roadmap wording it reads like it hasn’t.

Returning to my earlier structural point: if GnosisDAO acquires HQ.xyz, how will that affect the licensing application? What is the Monetary Authority of Singapore’s position on decentralized entities and their ability to own and oversee other entities?

The payout structure and terms are also extremely unclear

Who will determine this?

I don’t understand what the milestones are. I see a roadmap, but it’s vague, and few of the items seem measurable in the usual sense of that word. Those that could be have no targets specified.

Is the deferred payment contingent on completing all of the items listed in the roadmap? What if GnosisDAO, on acquisition of HQ, decides to alter the roadmap somehow?

Again, this is all extremely underspecified.

2 Likes
19

this is why GnosisDAO don’t seems to be a real DAO…too many different entities aligned to Gnosis discussing and planing something. No matter how reasonable and valuable these thoughts are, as long as the DAO is only asked after decisions are made internally and the average DAO member is not able to find a place where to join earlier in the discussion it feels quite worthless to participate. Not totally worthless ofc, but like elections in countries where the most likely outcome is already predictable in advance.

4 Likes
20

I’m going to vote against this.

There are no data points on profitability or growth, and while there are plenty of opportunities in this industry, I don’t think this is a good way to spend our money.

By the way, the section on “Validator-embedded Payment Devices” strikes me as completely impractical. I run many validators across multiple networks and see no reason why this should be the approach—and technically, it’s quite complex. This part alone suggests that the proposal is more of a wishlist than a realistic plan.

7 Likes
21

We are not dropping HQ in favor of Gnosis. The proposal is to discuss whether Gnosis should acquire HQ to and leverage on HQ’s product, clients, licenses, access to key clients in important markets like Asia to accelerate its Gnosis 3.0 vision of becoming the preferred partner for businesses looking for solutions to their Financial Infrastructure needs.

We are proposing the acquisition because then not only would it align both teams towards one key goal, Gnosis would be able to hit the ground running in key markets like Asia and key segments like business banking because we already have these relationships, key clients, the relevant license exemptions and solutions to service these needs. We have been making introductions to key clients in Asia to teams within the Gnosis family and we believe that if both teams are more closely aligned, things can move quickly and we can close these clients much faster.

Going at it alone will force both teams to work inefficiently and potentially pit themselves against one another in client pitches, some of the introductions we’ve made so far have been medium to large enterprises looking to leverage crypto for use cases like cross-border settlement, internal reconciliation, wallet infra etc.

Also, looking at the competition, we see chains like Base / Solana and platforms like Revolut already building their internal teams via acquisitions and key hires to win important markets. They are all trying to buy their way into the market because they understand the compounding impact of being early into the market with a solution. This is largely because customer behaviour when it comes to financial tools is that once they are onboarded & trust a brand, its very unlikely they’ll pick a different vendor/partner regardless of features/prices. So there is a real long term cost of lagging behind in actually going to market with a relevant product.

So I highly recommend that the community also balances its assessment on cost of acquisition vs the cost of losing out in these key markets/clients.

22

I am voting against this proposal, as I fully share the concerns expressed by @gno-investor, @mrtdlgc, and @refri.

The proposal appears to lack adequate communication and transparency in how it was presented to the DAO. GNO holders deserve a clear understanding of the discussions that took place between the LTD and product teams, the criteria and evaluations that led to the merger proposal, as well as details on the product’s technical development and the associated business strategy.

Given its nature, this proposal seems more aligned with an investment opportunity for the LTD or Gnosis VC rather than a matter suitable for a DAO decision.

DAO holders should vote more meaningful if we want to be a real DAO.

3 Likes
23

I’d like highlight that this item is in the roadmap as an item for 2026 and beyond. I’d argue that some of the members are also unfairly hinging on this one item, which has already been highlighted as something for the future, to discredit the entire proposal. Gentle reminder to readers that just like any startup, the further something is on a roadmap the more uncertainty there is around it.

This would create a very unbalanced risk/reward ratio towards HQ, hence our suggestion to use a combination of upfront, time-based and performance based payouts. Open to hearing alternative suggestions that are much more balanced towards both parties.

We’ll go back to the board to explore options like fundraise or a token sale to further fund the business and its goal. Unfortunately, just like revenue, runway information is not something we’d be able to provide publicly as it is highly sensitive.

Yes we work with two key legal offices when it comes to corporate affairs. We are a pre-seed funded start-up, it wouldn’t have been prudent nor cost-effective to hire a legal officer to work full-time in HQ in the early stages.

No, we will have an internal team. The local authorities require licensed operators to establish an in-house compliance function in-order to attain its full license. There is a strict review process around who gets appointed to run the compliance function in these companies.

1 Like
24

I’d say if we look at Gnosis 3.0 from the perspective of payments and surrounding technologies, it’s quite logical as a concept. It will add node diversity to Gnosis Chain and facilitate our geographical expansion. Of course, firstly it would be nice to know the technical details, having businesses that use Gnosis payment technologies also serve as validators aligns with the strategy and helps with the decentralization of Gnosis Chain.

One of the key areas we need to consider is the staking economy. Rather than aggressively increasing validator numbers, our goal this year is to add node operators who will increase on-chain activity and create a validator ecosystem that aligns with Gnosis’s payment-focused technologies (what we might call Gnosis Payment Rails). Happy to develop and advance this proposal regarding the validator aspect further. @Sunny-HQ

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25

So, the Headquarters team raised $5M in a couple of rounds, burned through it in two years with very little to show for it, and now they’re asking this DAO for a bailout—with over $3M reserved for the founders and even more later on?

They’re asking us this with a straight face?

In the real world, if you burn the capital you raised from VCs without so much as a single license to show for it, your equity is worthless. Without the injection from this DAO, HQ probably won’t survive the next bear market, given that they failed to gain traction during this bull run.

Meanwhile, there are plenty of legitimate CASPs in our ecosystem, fully licensed, who would be eager to partner with the Gnosis ecosystem and tap into the rapidly growing gnosisPay userbase.

This DAO can secure far better terms—or look elsewhere. The current proposal shouldn’t even be on the table unless the founders’ compensation is cut by at least 95%.

7 Likes
26

Hello! Thanks for your proposal!

Where can we find those numbers? Can you point out a link to them?

27

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40 paying customers at $2,200/year translates to an ARR of just $88k. Yet the founders are demanding more than a 35× multiple upfront.

As an investor myself, that’s pure science fiction.

If these figures aren’t accurate, they’re free to provide full disclosure, every deal on earth requires due diligence:

  1. HQ’s intrinsic equity is worthless. They have negligible ARR and only 40 paying clients after burning through $5M.

  2. Any early investment should effectively be written off, that’s just part of the game. If HQ is acquired, the cap table should be wiped by at least 95%. No deferred payments to previous external investors; a token repayment in GNO & SAFE of 250k$, along with a polite farewell.

  3. Advisors contributed zero regarding tangible growth or revenue; they merit zero compensation.

  4. Founders shouldn’t fail upwards. They already burned $5M. If this deal is a second chance for HQ, they shouldn’t receive anything more than symbolic amounts upfront—only KPI-based compensation over four years, with clear cliff and vesting schedules.

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28

Hey guys. Thank you for your candid feedback. I do stand by initial assessment that the acquisition is strategically advantageous for Gnosis, but you all have made some good points regarding terms. We will touch base with the HQ team to see how the terms can be amended in favor of the DAO.

@refri, you said that the existence of a Gnosis company/ foundation negates the classification of Gnosis as a DAO. I would try to be much more nuanced here: Gnosis DAO is in charge of allocating funds, but product development cannot happen in a DAO setting. DAOs suck at operational tasks, so having an opinionated entity that leads on product development and product related functions (go to market, legal, compliance) is crucial. Ideally, there would be more Gnosis Ltds, but IMV having this dual-track system is exactly how a DAO can and should work. So having the product team sync with the company that is looking to be acquired ahead of the proposal is what should happen to ensure that the acquisition makes sense and stacks can be aligned & synergy effects reaped. The DAO allocates funds and thereby serves as a corrective. Happy to discuss this in much more detail with anyone who’s up for it – just wanted to make the point that just because not every little decision is made directly by the DAO, it’s not a DAO.

12 Likes
29

Thank you for participating in the discussion. Many important points were raised and must be addressed to achieve a better outcome. We talked to the HQ team and reworked the proposal to address the purchase price and long-term alignment with the founders and their team.

We have been talking to the HQ team for the past 7 months and are convinced that this acquisition makes sense for the Gnosis ecosystem. We want to allow you to join a Q&A session next week to meet the team, discuss the new proposal, and get the relevant answers to any concerns from the team themselves.

Please send me a DM if you want to join and I will share the call information with you.

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30

Agree to the second part of the sentence, but IMO product development could be announced (and discussed) earlier, not at a point where decisions seemed to be made already, especially as (to my guess) voting power is still concentrated in the hands of ppl with close relations to the entities you mentioned.

Also agree on this, not every little decision needs to be made directly by the DAO. But having the opportunity to join a bit earlier in the discussion could attract ppl to become a part of the DAO and thereby helping to grow the Gnosis family.

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31

Following today’s Q&A session, we wanted to restate our support for this proposal, and encourage others to reconsider their opposition to it.

The amended deal (which we assume will be posted shortly for a further temp check) has done a good job of addressing the concerns raised above. We were particularly pleased to see the willingness of HQ’s founders to significantly reduce their own payout and extend the terms of their vesting to ensure alignment over at least the next 4 years.

More broadly, the explanations from both sides of their strategic rationales are worth reflecting on. We recognise the analysis of other delegates who pointed out that the quantitative financial prospects of the deal are not apparent; ultimately, without underlying financial data, we agree it is hard to give this deal much financial weight. But the discussion today weighed heavily on the qualitative prospects of the deal, in extending Gnosis’ stack, geographic reach and regulatory approvals.

For us, it’s easy to see that a business-oriented UI is needed to extend the capabilities of Safe and Gnosis Pay, to meet institutional demand for accounting tools and payment rails… this is a natural extension of the Gnosis stack and a market that would benefit from tighter vertical integration via Gnosis (given the raft of competitors currently vying for market position). Stefan pointed out that it would cost far more than the value of the revised deal to build an equivalent business from the ground up; more importantly, it would take years that we don’t have. We are therefore satisfied that qualitatively it makes sense to acquire and integrate, if Gnosis is to have the foothold in business payments and accounting that we think it should.

Other delegates have referred back to historic Gnosis deals as examples of how paying too much for existing businesses hasn’t created value. With respect, we believe that the success of Gnosis will be measured over decades as we reach mass adoption, and can’t be fully appreciated from a zoomed in view of the last few years. Likewise, deals like this are relatively small in the scheme of the wider DAO treasury; our mental model must be making a number of smaller bets looking for the one or two that will become gamechangers, not insisting on a high bar of each bolt-on pulling its own weight. Ultimately, deals like this which lack immediate financial justification may come to be seen as prophetic as the market evolves… but spotting them ahead of time takes real vision.

We support the vision of Gnosis Ltd. We support the acquisition of HQ.xyz.

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32

Thanks a lot for participating and providing this concise summary, curious to see the amended deal.

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33

A new version of the proposal was posted here: GIP-120 (revised): Should GnosisDAO acquire Headquarters (HQ.xyz) to Accelerate Gnosis 3.0

There were many changes made to the terms, which is why we decided to post it as a new revised proposal instead of an amendment to the existing proposal.

1 Like