It seemed to me that Gnosis didn’t want to do spin-offs anymore?
I agree that circles should aim at developping mesh network communication and resilient graphs to become a currency of conflict zone.
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It’s simple: I open the app and can’t find any onboarding instructions for creating my own Circle. (If it’s there, it’s very well hidden). Do you expect a regular user to go looking for information on how the entire onboarding process works?
Yeah true. But the next blocker will probably be to explain the complex two token model.
Some of the fees you mentioned are highly concerning. Users in high-income economies will accept card ordering fees, withdrawal fees, swap fees, and yield fees through DeFi protocols. Whether they will accept FX fees and app fees depends heavily on the value in return. If cashback is significantly reduced, they won’t accept those two and just leave for the million alternatives out there.
This idea is the most concerning I’ve read in a while. That sounds like an MLM scam that’s being openly admitted. Am I supposed to recruit people like a salesperson and get them to spend as much money as possible with the card? WTF?
1 Like
You are not wrong, it’s just hilarious and amazing to finally read it out loud anywhere in this industry. As much as you are right, we need to have a more nuanced view on MLMs. Tupperware was technically speaking also a MLM, but was for decades a quite successful company. You certainly can do some of these mechanics in order to drive sales. But the fundamental distinction is, which you are probably suggesting here, that you actually need a real product with real demand people actually want to pay money for. But you are 100% right, the red flags are off the charts here, beyond the universe. Tupperware struggled with it too the moment their product became a commodity.
Thanks for the proposal. I appreciate your honesty and candor. There is a lot to like here. Also some major concerns. Let’s break it down.
What is the Gnosis Ltd. Strategy?
I would prefer to see an updated strategy post from Gnosis Ltd instead of this ad hoc proposal without greater context. What is the Gnosis Ltd position on a 3rd party app that does not really fit into their B2B Gnosis Pay strategy? Or does it? 
As I’ve stated before, I believe Gnosis Ltd must downsize the organization, focusing on how it can generate real value to the crypto community in general, and long-term GNO holders specifically.
I believe that happens by spinning off Gnosis Pay and Gnosis App (more on that below), reducing costs significantly, and repositioning Gnosis Chain as the cypherpunk L2. Yes, security on Gnosis Chain can be part of that differentiation, but imo it’s not enough. Gnosis Chain as the home to cypherpunk Ethereum is much more inspiring! And aligned with the values of this community, imo. Let’s reorganize around that! 
Spinning off Gnosis App is a good thing! But what @deep45shah said about Gnosis App surely applies to Gnosis Pay:
“A consumer app hunting for PMF needs one accountable owner instead of multiple stakeholders, a small focused team, quick iterations, and full operational freedom.”
and
“Inside Gnosis, decisions about the app are made - rightly - with the whole of Gnosis & the ecosystem in mind. That can work, but it can also hold a consumer product back from doing what it needs to do right now and with the right speed, regardless of a multi-year Gnosis-wide strategy.”
and
“…getting from linear to exponential takes a speed and focus that’s very hard to sustain inside a larger organization.”
So bravo for GIP-152, but let’s see a GIP for spinning off Gnosis Pay. Let’s have the remaining team focus on new apps and infra to make sure Ethereum wins, and in the right way. And also attracting more cypherpunk builders to Gnosis Chain (with incentives, technical support, liquidity, etc.).
EEZ is the perfect example of this! But this type of strategic restructuring won’t succeed without focus.
Circles: The Emperor Has no Clothes
I always loved the idea of Circles. It was promising in theory. BTC has failed as a transactional currency, ETH is too volatile and more an SoV. We need a native, decentralized cryptocurrency built for spending, not holding. But after 2+ years of trying to make it work, I’m beginning to believe CRC is a dead end.
Why? One primary reason:
Circles is too complex.
Virality and complexity do not mix, it’s like oil and water, pizza and pineapples.
And virality is critical for a successful currency. I don’t think you can achieve virality without being memeable. This Twitter post sums it up perfectly. A snippet:
The world needs its own credibly neutral unit of account that is stable, scalable, immutable, uncensorable, and maybe most importantly memeable.
CRC is not memeable. If the world consisted exclusively of blockchain engineers and Economics PhDs, then maybe CRC could cross the chasm, go viral. But that’s clearly not our world.
Just try to explain CRC to a non-crypto person, it’s hilarious. Try to explain CRC to a crypto native person, and it’s still a very difficult conversation.
Go watch the recent Devcon video WTF is Circles and see if it helps. Nothing against the competent presenter, but it’s almost an impossible task! You may as well try to explain quantum physics.
“So I can mint my own CRC, but my CRC are completely different from your CRC, but kinda related, so I shouldn’t trust the wrong people or then I could lose my CRC, but eventually I can trade my CRC into gCRC and swap them for EUR, or maybe start my own community and swap my CRC into a community CRC that I somehow control, but if I hold CRC I’m subject to demurrage, which is what again?”
You can see the results in the numbers:
- WAU grew to ~4,500 by June then fell to ~4,100.
- WEAU (a better metric) peaked near 1,200 in late May and has declined every week since to 879.
- The economically active share fell from ~28% to ~21%.
Circles is basically giving away free money. Just mint free money! Come and get it! And yet, we have limited PMF. With free money…
I also believe - but cannot prove - that Gnosis Pay is onboarding more people to Circles than Circles is onboarding people to Gnosis Pay! So the exact opposite of what needs to happen.
Is Gnosis App the Solution?
Perhaps the problem is the lack of a mobile app that helps onboard new users (neglecting the fact it already exists)? We abstract away the complexity of Circles, add some gamification, then viola, virality! Maybe. I’m super skeptical, but perhaps.
However, GIP-152 is not just about CRC virality per se, it’s about a business case that justifies a 4M USD investment and a 15M USD valuation. What kind of annual cash flow would justify a 15M USD valuation?
Assuming a cost of capital of 15% (it should be much higher, but whatever), we would need to see over 2M USD per year profit (recurring) from the app to justify the valuation. Profit, not revenue. Every year.
How is Gnosis App going to generate over 2M USD in free cash annually anytime soon? Of course the answer is that it’s not. Which means the 15M USD valuation is massively inflated.
But you don’t have to take my word for it. In her recent post on The Economic Case for Gnosis App, @ernst wrote:
Gnosis App is early and loss-making. In the first week of June, weekly active users with high intent were 1,245, weekly active users opening the app were 4,631, and monthly active users in May were 9,636. Break-even sits at 800,000 to 1 million users.
GIP-152 forecasts 100k weekly active users after 12 months, or just 10% of break even! And those aren’t necessarily economically active users, just people who mint CRC. So again,15M USD is not a realistic valuation for what is being forecasted by the team.
What is to be done?
Well, as previously stated, I do like the idea of spinning off the team as part of a larger restructuring. But I would suggest the following changes:
- Reduce the valuation to 5M USD. A 15M USD valuation is extremely generous. I think 5M USD is also a gift, but ok, at least it’s defensible. There is no way a consumer app using IP from Gnosis, integrating other 3rd party solutions (Circles, Gnosis Pay, CoW etc.), should be worth anywhere close to 15M USD. If you disagree, post the spreadsheet showing your future revenue and NPV calculations! Not MAU, but revenue and NPV. Let’s see how you get to a 15M USD valuation…
- Release the money in tranches. 3M USD can be tentatively committed, but only 1M should be paid up front. We should establish key metrics for 6 months and 12 months. When those numbers are hit, additional funds are released. The key metrics should not include MAU, which is more a vanity metric than a value driver.
Success Metrics
This section warrants more discussion, it’s just my proposal! But the current idea of the DAO paying 3M USD up front for a solution with limited PMF seems unrealistic. Better:
- 1M USD when the updated GIP passes
- 1M USD in six months when success metrics are achieved
- 1M USD in 12 months when success metrics are achieved
Revenue is the primary metric that matters, and because the fee switch is “on from day one,” it’s measurable from day one. I would therefore propose releasing future funds based on the following key success metrics:
Metric 1: Net-new cardholders acquired through the app. Sign ups must happen in the app.
Metric 2: Total revenue generated by the app. This should be net of incentives spent to generate that revenue. This is by far the most important metric imo.
Metric 3: Revenue per economically active user. Might give us hope for the future, even if total revenues are low. 
I would ask the team to come up with numbers for the 3 metrics above they believe they can achieve after 6 months and 12 months. Their numbers should be both realistic and justify the project valuation (currently at 15M USD, but hopefully reduced significantly). Only when the team hits those success metrics are future funds released.
With those changes, I think GIP-152 is a net positive for GNO token holders.
5 Likes
To bring some nuances into this, after hitting hard here too, it might be as simple as: It’s just the wrong team to actually pull it off. The principles are not all stupid per se, but there is a HUGE lack of understanding of Sociology, or god forbid even Quantum Social Physics. As long as you have a team of Ego and Greed driven people in charge, you won’t even get close to it. They will always think about how they can make an extraction or Reputation Game out of it. Speaking of Reputation, that and filtering via AI, aka cutting off the toxic paths, is a requirement to make it even work. But the current team in charge, and I include the founders here, are more concerned about the looks of it than the harsh reality you need to face. It’s fascinating though that you are still willing to give them a single cent, instead of just shutting it down, open source everything and call it a day. At some point you just have to say if we don’t can it, we just run too heavily into Sunk Cost Fallacy.
/e You also have to think about the Opportunity costs here. We are on our way for Ethereum to be used in the mainstream. The Manifolds are starting to mesh. There are so many opportunities right now, you may not want to miss out as DAO. You can still do Circles as experiment on the side, but it’s really questionable, if you need a whole staff of business people and token seller for a technical experiment.
I question CRC as a memeable (and hence viral) currency. I don’t question the intelligence or ability of the team. Most of the people at Gnosis are smart and very capable imo. So giving them some freedom to cook is not necessarily a bad thing. But the money should be capped, the valuation should be reduced in line with reality.
A critical analysis of the current proposal reveals an ambiguous position regarding structural viability. There appears to be an internal contradiction: while the baseline utility of the concept is openly questioned and a $5 million valuation is characterized as a “gift,” there remains a reluctance to completely sever financial ties. Given the lack of demonstrated economic success or substantive market adoption to date, grounding our financial frameworks in current market realities rather than optimistic projections is imperative.
The current operational structure exhibits a disproportionately high ratio of administrative and support overhead relative to core technical delivery. Substantial resources appear to be allocated toward non-engineering headcount and relationship management, capital that would yield far greater ecosystem value if redirected entirely toward verifiable technical experiments and protocol infrastructure.
With a historical capitalization of $30 million, the ecosystem’s tangible milestones remain sparse, raising valid governance concerns regarding capital efficiency and core competency. Delivering objective structural critiques is not personal animus; it is a fiduciary requirement of decentralized governance. Providing further runway without clear accountability merely insulates management from the natural performance metrics necessary to sharpen their operational skills, particularly when the leadership team faces zero personal financial precarity.
Furthermore, the extensive administrative latency required to review, police, and temporarily moderate community feedback highlights an immense, unproductive bureaucratic friction within the DAO’s support entities. In a sector fundamentally optimized for technical agility, we must look closely at the ratio of administrative staff to core protocol engineers.
If the primary objective of these heavily funded support structures were truly to advance open-source, decentralized architecture, priority would have been placed on critical infrastructure—such as deploying a lightweight, stateless execution environment (e.g. Reth customized for Gnosis optimization). The absence of these foundational elements has forced independent community builders to initiate these core developments autonomously.
When individual, independent engineering initiatives can out-pace or match the technical output of an organization capitalized with $30 million, token holders must critically evaluate our current asset allocation strategy. Traditional finance is heavily critiqued for its protective, opaque interest groups that consolidate internal influence at the expense of stakeholders. If decentralized networks replicate those exact defensive, non-transparent corporate dynamics while ignoring baseline capital efficiency, we compromise the core integrity of the ecosystem.
True accountability requires transparent, verifiable metrics. Let us transition this discussion away from administrative moderation and focus strictly on capital efficiency, technical milestones, and the upcoming treasury votes.
Thanks for the constructive questions @waldo.
an active user is anyone who takes at least one of these actions on the app:
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a Circles action - register, personal mint, trust, invite, profile update, or a relayed fee/module event
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a CoW swap tx (signed or filled)
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a marketplace buy
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any card transaction
Fair point that these carry different weight - a mint is a weak signal, a card transaction is not. That’s why the numbers the proposal leads with are the ones you can’t farm: card users, backers committing real capital.
These are 800 users of Gnosis App who actively used the card in the past week - not people who just associated a card with their profile. They’re comprised of users who signed up for the Gnosis Pay card via the app, as well as existing GP (Gnosis Pay) users that signed up elsewhere but have chosen the Gnosis App as their primary app.
All-time card payment volume through the Gnosis App is ~$15.5M, weekly volume end of Q2 was ~$310K.
On quests/streaks/badges: all fair concerns and I understand the parallels, but I’d draw the line differently. The farming problem comes from where the payout sits, not from gamification itself. Streaks and badges are engagement mechanics - they don’t mint any extractable value. What makes a system farmable is paying out for free actions, and that’s exactly what we avoid: CRC spendability is gated by reputation (built through vouching and economic contribution), card rewards require spending real money at merchants and the next iteration of cashback is planned to be funded from the fees we actually earn - so rewards scale with real usage, not treasury subsidy.
Opening the app and minting gets you CRC you can’t yet spend. There’s no $0.10 for showing up. (Also a small factual note: the badge system is live, nothing was quietly deleted.)
And to be direct on the direction: we don’t want to build an airdrop/token farming app. We’re going after the ideologically aligned crowd that wants to support the overall mission, communities and their identity.
Great question, there have been so many. In no particular order:
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Gnosis has historically been an open infrastructure company/ecosystem, not a traditional technology business - that’s its strength and its 10 year track record. Incubating a mainstream consumer app, or any business-driven 0 to 1 startup, requires a very different mentality, culture and set of operating values. I believed I could make the two could coexist under one roof when I took over the business unit last year. Turns out, structure/existing inertia beats intention. It’s telling that Gnosis Pay’s strongest early growth came in the period it operated most independently. This isn’t a criticism of anyone - it’s the case for the model this proposal implements: incubate inside, spin out to grow. Gnosis is great at being technically rigorous, and thus early and contrarian. In my view the way to convert that into value is incubating new ideas, finding capable people willing to make them their own, funding them with the right capital, and letting them run with full freedom.
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Going out to market as a pure-play neobank built on blockchain rails in Europe is a failing strategy in my view. Here are a few reasons why:
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Building a neobank on blockchain rails is technically trivial now, and has been for over a year -distribution is the hard part. Europe is one of the most mature fintech markets in the world, and users in most regions are generally happy with Revolut or similar local neobanks. Blockchain rails when used purely for savings yield & card payments (which is most crypto neobanks today) only give marginal user benefits, and that’s not enough for people to switch to a new neobank. Most crypto neobanks under-estimate how big switching costs are and how long building trust with mainstream users takes. I expect the large majority of them to fail on exactly this.
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Regulation is catching up, but is not there yet. Most mainstream users don’t know or want to take the burden of self-custody. Neobanks abstract it away through Privy or similar wallet infra tools, but ofcourse none of them (neobanks or wallet infra providers) can offer statutory protection (DGS/FSCS-style) in case of loss of funds.
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Similar case with yield/savings products: most neobanks today provide access to defi pools offering maybe a few bps over traditional yields, for an insane amount of extra risk the user takes without knowing, with on-chain insurance that doesn’t cover user mistakes. When you go mainstream, you can expect users to make mistakes. For an app that deals with people’s money, that’s a brand extinction event waiting to happen.
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Privacy is still largely unsolved or not mature enough yet (especially if you wanna build a neobank with cypherpunk values).
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The blockchain-based neobanks that have done well so far did it for mainly 2 reasons, neither of which is our path. Either they provided access to a better currency to an audience with a weak one - think Arq (prev Dolar app) - a regulatory arbitrage that’s closing down, where the time to make the most of it was probably two years back. Or they gamified incentives through tokens for mostly crypto-native audiences who love farming - think Tria or Kast. This is not a dunk on them by any means, they’re doing great - but I care more about building something that solves a real need and brings genuine impact.
These are the reasons we moved away from being a traditional neobank and went Circles-first, with the neobank under the hood (and not marketed like one). It’s important people don’t compare it to a neobank - it’s a completely different app, a new system that allows you to interact with money a different way, and support your favourite communities/causes.
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Where I have the most conviction for the future: communities. Communities can use the app to fundraise from their audience through fees and backing, which gives anyone with an audience a direct incentive to bring them onto the app - distribution the product pays for, not the marketing budget. And it fits our audience: people who don’t want a slightly better bank, but a different system where supporting what they care about is part of the product.
On the gnosis.io distribution advantage: both things are true - it was legitimacy and it was a channel. But honest accounting: that channel reaches crypto-native audiences, and after a year of being front and center it got us to ~800 weekly card users. Gnosis’ brand presence in the mainstream world isn’t very high- don’t get me wrong, a 10 year track record of building world-changing infrastructure is great, but it’s not a consumer growth engine. Having operational freedom outweighs the brand benefit that we’re currently receiving in my view.
Will let @mkoeppelmann or @StefanGeorge answer here 
Just wanted to chime into the discussion. I have nothing to gain or lose in this discussion. Take it as an anecdotal note.
Entirely personal opinion. Deep is absolutely not the person to have the leadership capabilities to run Gnosis App based on my personal experience working with him. With all due respect to what he has achieved so far within Gnosis, he was one of the contributing factors to me leaving Gnosis LTD back when I had to help them out with Gnosis Pay in its earlier days. He was failing to receive feedback despite me constantly sending actionable feedback items from people having trouble both with onboarding and main friction points to Gnosis Pay. What I was getting from him as response was either GPTed responses or a “call” to convince me of going forward with the status quo.
Perhaps it was because he did not have the agency or the power within his own capacity to relay these information. But I do not trust his ability to lead a team to run Gnosis App to make it “go viral”.
4 Likes
The complexity makes this a non-starter, imo.
Let’s do a simple case study of a community that might choose to use CRC. Then let’s compare that with fundraising with USDC, USDT or BOLD (for a more cypherpunk option). Help me understand why CRC is the better option!
For example, in one of your presentations or videos, you gave the example of a community rental collective (in Berlin?) that had been blocked from using banks (can’t recall the exact details, but not important). They would switch to CRC to bypass being debanked. Ok so far.
It just so happens I’m part of a community collective, serving as Secretary on our management committee. If I suggested we move to crypto (not even CRC just “crypto”), I would immediately be removed from my post. Crypto is completely toxic, viewed as a scam. I hope we can change that, but it won’t happen anytime soon, sadly.
Maybe, maybe I would be able to say USDC or USDT, as some have heard of stablecoins. If we were really debanked, this might be an option. But then I would need to educate 31 homeowners on stablecoins. I would need to show them how to onramp. They would need to avoid losing access to their personal bank accounts here because many banks will block you if you are using crypto (even though it’s legal). And forget about BOLD, that would just be too much for them. CRC? How would they even begin to pay their community fees in CRC?
Sure, for a crypto native audience, I suppose CRC can be part of the discussion. But what is the advantage of CRC over BOLD or USDT? I’m not being negative, I’ve actually thought a lot about this for CRC and tried to make it work. I have a small Telegram community of people I help learn about crypto, mainly newbies. But I can’t see how I could monetize that community over just charging fees in USDT.
Let’s assume I have 100 community members and we create our own currency. Call it PrayCRC, or pCRC. Affiliation earns me about 73,000 pCRC a year I believe (assuming all 100 members mint regularly), but pCRC is worthless unless it’s backed, and I can’t just dump it for gCRC and then EUR or USD. The only way it has value is if my members back it with real money, correct?
Say each member puts in 100 USDT. Now there’s a market, but I can only pull those dollars out by draining the pool my own members funded! So why not skip all of it and have them pay me 100 USDT?
Maybe I’m completely missing how CRC now works (again, it’s too complex). Please help me understand why a 100 member community is better served with CRC over a simple stablecoin for fees?
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Hey everyone,
We are at a massive turning point for Deepsha right now. Let’s be real about the stakes: if the “No” wins, we risk losing everything the team has built so far. The project could literally walk away.
Yes, $3 million for 18 months of operations is a serious commitment. But it’s exactly what’s needed to give this vision a real fighting chance.
I strongly believe we need to vote YES.
Voting YES isn’t just about approving a budget. It’s about:
Backing the team: Showing them we trust their talent and dedication.
Buying runway: Giving the project the breathing room it needs to execute and deliver results without constant stress.
Protecting our investment: Making sure all the hard work already put into this doesn’t go to waste right at the finish line.
Saying no right now would completely kill the momentum. Let’s choose ambition over fear, rally behind the team, and give them the tools to make this happen.
Let’s get this done. Vote YES! 
2 Likes
What is this? An “offer you can’t refuse”? If hostage taking is the core argument for a $3M allocation, let’s make this very simple.
@deep45shah If we reject this proposal and instead mandate the open publication of all code, documentation, and internal operational assets, or establish a new leadership, what is your play? Would you actually attempt to fight GnosisDAO in a court of law under the substance over form doctrine and the newly enforced MiCA regulatory framework? Or would you pack your bags, set your ego aside for the vision, and allow new leadership to take over?
I guess that question goes for @StefanGeorge @ernst and @mkoeppelmann as well.
Gnosis Ltd should be putting up their GIP 128 renewal proposal soon which should give you more context. The proposal I have made is ofcourse not out of the blue, it has been discussed with Gnosis Ltd leadership given this proposal has major implications on people/assets/coordination that is currently being done under/via Gnosis Ltd. (Ofcourse DAO is the ultimate owner of all of this and thus the community feedback matters a lot!)
This infact v much fits into the Gnosis Pay B2B strategy This app will simply become a commercial customer of Gnosis Pay. Infact, purely from a Gnosis Pay standpoint – this is a better outcome that what they have today.
You shall hear more about this on the Gnosis Ltd GIP that’s coming soon. This proposal is very much is aligned with your view.
Re: complexity vs virality / ease for consumer apps: 100% agree & that is precisely what the last couple of months of the rebuilt app have focused on – it’s to reduce the complexity without losing the fundamentals of the protocol. We’re already further simplifying it, with the aim to reduce the two tokens to simply one user facing token and further abstract all the complexity underneath it. Users shouldn’t have to care or take the cognitive load of knowing about different tokens.
Right, although context here matters – the GP/Zodiac hack incident is what led to a sudden decline in numbers & trust in June, and shortly after there was a large restructuring within Gnosis. Since then all marketing/growth channels are pretty much paused or in maintenance mode, no longer in growth mode, and thus i wouldn’t expect numbers to grow until after this GIP is complete. (ofc in the favourable outcome)
But the honest headline stands either way: growth is linear, some weeks are flat or down, and that’s why the GIP says no PMF yet rather than dressing these numbers up.
Gnosis Ltd GIP should hopefully help give more context here.
On break-even numbers you took from the Economic Case post from Freiderike : the 800k-1M user figure you’re quoting was computed on the old cost structure - a much larger team inside Gnosis Ltd that was working on the Gnosis App, sharing the Ltd cost base. The spinout runs on a fraction of that cost base, with the fee switch on from day one, economics on incentives fairly different so that breakeven number would be far lower.
Re: your proposal to do the funding in a different way/different valuation: Firstly, appreciate you believing that the spinout is indeed the right way to move forward. Regarding my thoughts on the mechanism, will get back on them in a bit
2 Likes
Thanks for engaging. Looking forward to more info. And to be absolutely clear, while I am skeptical, I do hope this can work. I also accept I may be wrong, and I actually hope I am wrong and this becomes wildly successful… I don’t doubt the ability of the team.
But someone needs to represent the DAO, and $15M seems inflated to me. But again, I’ll reserve final judgement until I see more info. Thanks!
1 Like
Adding a bit more to this: (in terms of learnings over the past year)
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Circles as a protocol/product is quite complex underneath, trying to combine it with a pure-play neobanking strategy simply didn’t work. If Circles is on the product, the product has to be centered around it.
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The team that would build a pure-play on-chain neobank like product and the team that would build a Circles-centred product are two very different looking teams in terms of skillsets, values, and internal motivations. The team at Gnosis App was/is far more Circles-centred than neobanking centred.
1 Like
Moved GIP to Phase 2.
Rewrote a few parts to give more clarity & context + incorporate some community feedback
This is a $3M bailout at an invented valuation
I am strongly against this proposal.
The team has failed to find product-market fit, failed to demonstrate meaningful retention, failed with the original strategy, and is now asking Gnosis for another $3 million while assigning the company a completely unproven $15 million valuation.
There is no external lead investor validating that price.
There is no independent valuation.
There is no meaningful revenue supporting it.
The people receiving most of the equity have simply decided what the company is worth, and Gnosis is expected to accept the number and write the cheque.
What exactly is worth $11 million here?
At a $15 million post-money valuation, the proposal effectively assigns around $11 million of pre-money value to the company before the new Gnosis funding.
What exactly is the team contributing that is worth $11 million?
It cannot be product-market fit, because there is none.
It cannot be revenue, because there is no meaningful revenue.
It cannot be growth, because usage is weak and retention is poor.
It cannot be the product, integrations, brand or existing user base, because Gnosis already paid to build all of that.
Gnosis funded the salaries.
Gnosis funded the product development.
Gnosis funded the user acquisition.
Gnosis funded the failed strategy and the pivots.
Now Gnosis is being asked to transfer those assets into a private company, give the team most of the equity, and add another $3 million in cash.
This is not a spinout.
It is a management buyout funded by the entity being bought out.
Failure is being rewarded
The proposal itself admits that the previous strategy did not work and that the product has not found PMF.
Normally, when a team fails to deliver a viable business after receiving substantial funding, the response is greater scrutiny, reduced budgets and clear accountability.
Here, the proposed response is:
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another $3 million
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majority ownership
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control of the product
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continued salaries
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and most of the future upside
Why?
What has this team achieved that justifies handing them the majority of a $15 million company?
They had funding, distribution, brand recognition, existing infrastructure and privileged access to the Gnosis ecosystem.
They still failed to build a sustainable business.
Calling them talented does not change the results.
Gnosis gets the worst side of the deal
Gnosis contributes:
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the product
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the IP
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the brand
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the integrations
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the existing users
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the historical development costs
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and another $3 million in cash
The team receives:
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control
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majority ownership
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operating capital
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salaries
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and most of the upside
Gnosis receives a minority SAFE with limited control, no guaranteed liquidity and no guarantee that it will ever convert into anything valuable.
The advertised ownership percentage is also not some protected minimum. It will be diluted by future fundraising, option pools and employee grants.
The downside sits with Gnosis.
The upside sits primarily with the team.
That is not alignment.
That is treasury extraction.
We already made this mistake with Gnosis Business/HQ
This is not the first time Gnosis has been sold a questionable business deal using optimistic internal assumptions.
With Gnosis Business/HQ, Gnosis acquired a failing company, took over its payroll and operating costs, and paid a substantial amount to its founders, team and advisers.
The acquisition was justified with the usual language about strategic value, synergies and future growth.
Around a year later, Gnosis realized that the business was not commercially viable and shut it down.
Gnosis absorbed the loss.
The founders had already been paid.
Now we are preparing to repeat the same basic mistake:
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Accept a valuation created by insiders.
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Fund an unproven business thesis.
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Put the downside on Gnosis.
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Give most of the upside to the team.
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Discover later that the assumptions were unrealistic.
The legal structure may be different.
The failure mode is exactly the same.
If $15 million is real, prove it
If the team genuinely believes this is a $15 million company, they should take it to the market.
Publish the full data room.
Show the revenue, retention, cohorts, margins, acquisition costs, liabilities, cap table and complete SAFE terms.
Then raise from independent investors at the same valuation.
Or conduct a public or community round where others can invest on identical terms.
If credible outside investors are willing to invest at $15 million, Gnosis can consider joining the round.
But Gnosis should not be the only price-insensitive buyer funding a valuation invented by the people receiving the money.
If nobody outside Gnosis is willing to invest at $15 million, then the company is not worth $15 million.
It is that simple.
Spin it out without milking Gnosis
There may be a legitimate case for making Gnosis App independent.
There is no legitimate case for gifting the team majority ownership of a Gnosis-funded asset and attaching another $3 million cheque.
Spin it out with limited funding.
Require outside capital.
Tie any Gnosis contribution to measurable milestones.
Give Gnosis proper governance, information and anti-dilution protections.
Or let the team acquire the assets at a valuation established through an independent process.
But stop pretending that handing $3 million to a team with no PMF at a fictional $15 million valuation is an investment.
It is a bailout.
It rewards underperformance.
It repeats the same mistake made with HQ.
And it uses Gnosis as exit liquidity for insiders.
Vote no.
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Hey, thanks for sharing your concerns @cynicalgnostic !
Important context to have here before I respond is that Gnosis Ltd is going to discontinue the app within its own annual budget, and are more open to doing spinouts now so each entity/team can remain more focused. Read this post from @mkoeppelmann here.
So this proposal should be read more as : Do we continue to keep Circles as a project alive in a new structure with a motivated founder as a seed stage bet, or do we shut it down.
Back to some of your Qs/concerns:
Regarding getting external funding to get a market price, I’m not against this at all but going full fundraising mode right now would very likely mean we stop all existing momentum, put product on a standstill and lose most of the team. Important to note here that we have a close to ~1000 backers on the product today (i.e $100,000 committed by users, almost like a non-refundable fee/‘revenue’ for the app). Many of these ~1000 have done this purely to support the product & it’s large vision — this is something quite valuable at this early stage in my opinion, and something to build on top of rather than forego it.
On the HQ comparison: I’d push back on the parallel. From what I understand, there, cash went out to pay external founders for their equity and the DAO took on ongoing payroll.
This is the opposite: no one is bought out or paid to exit, the $3M is akin to a seed stage funding to give the project a chance to succeed. The team’s equity vests over standard 4 year schedule. The incentives are aligned for both parties to bring long-term success. No one is trying to extract the DAO’s treasury.
Hopefully this post from @mkoeppelmann here should already give more context. I expect to see more info/insight in GIP 128’s renewal proposal!
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