GIP-92: Should Gnosis DAO spin-off karpatkey DAO and deploy the KPK Token?

We appreciate this update memo and the modifications put forward. karpatkey has had an exceptional year with more and more wins coming each month, and we believe it’s fantastic for GnosisDAO that another incubated project is thriving and delivering value back to this community.

Critical Feedback

Further to @gno-investor 's critical feedback above, our feeling is that the basic 10% allocated to karpatkey is reasonable, in view of (i) the amount invested in karpatkey to date; (ii) the success that karpatkey’s had from its engagements both with Gnosis, Gnosis ecosystem projects and other large DAOs across the industry; and (iii) karpatkey’s rapidly improving financial position.

So we took on all the risk from the beginning and have very little upside

With respect, it’s hard to agree that the karpatkey team didn’t take on any risk here. They threw their entire livelihood at supporting GnosisDAO at a time where it was not clear how that would turn out. Now that they’ve had enormous success, it’s easy to say that the risk profile was obvious in hindsight. In reality, we believe the vast majority of karpatkey’s success comes from the work of its teams.

This critical feedback also seems to ignore a few of the other benefits that can be gleaned from karpatkey’s update here:

  1. The token swap element is good for GNO and increases karpatkey’s “skin in the game” in GnosisDAO, meaning more alignment between the two;
  2. karpatkey have amended the proposal to adjust for GNO price decreases, ensuring that the same USD value is reflected in the investment, avoiding a decrease in the value of their investment that would have occurred otherwise;
  3. karpatkey have committed to devoting 10% of revenue to purchasing GNO tokens, again increasing alignment between the two;
  4. the new $200m valuation announced in this post reflects a significant increase on the original value of Gnosis’ investment in GIP-20 of $50m. That’s a 3x return, or >63% CAGR on the initial investment. Clearly GnosisDAO has done well out of this investment.

For us, the real point of this proposal is that GnosisDAO has an opportunity to expand its share of karpatkey’s success at a decent valuation. If karpatkey’s trajectory continues as it has, the addition $5m investment may prove even more successful than the initial $1m has done to date. We strongly support these plans and look forward to further updates.

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Hi gno-Investor,
I want to provide some critical context around the inception of karpatkey and the timeline of GnosisDAO investments that your response has not considered. Unlike Safe and COW, GNO token-holders took no risk or financial burden to bootstrap karpatkey.

At its beginnings, karpatkey was entirely self-bootstrapped by its members, and I was the largest angel investor. Because we believed in GnosisDAO, we willingly assumed large financial risk by hiring contributors even before we had revenue. During the early stages of GnosisDAO’s creation, karpatkey operated without income for several months. GIP-20 (3% performance fee) didn’t cover costs for many months, and we endured losses during the last 2022 bear market.

GnosisDAO’s investment came only after karpatkey had already become profitable with a team of six. It’s important to note that Gnosis didn’t contribute to our hiring, provide technical resources, or offer financial expertise—our core business. Additionally, karpatkey assumed regulatory risks that Gnosis was not prepared to take.

That said, we remain deeply grateful to Martin, Stefan, and Friederike for their early endorsement and guidance, which were instrumental in helping karpatkey build relationships with other DAOs and grow into the largest treasury manager in the DeFi space. I believe karpatkey owes much to them. However, since they won’t personally receive an airdrop or team KPK tokens, we’ve extended highly favourable conditions to GnosisDAO to honour their contributions.

Lastly, the team will not control the allocations. I assure you that only 25% of the total allocation will go to the team. This is a public commitment we take seriously. If any additional tokens are to be considered for the team, they will be subject to a DAO proposal for approval.

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Gnosis Guild is in full support of this proposal and the recent updates. We look forward to this exciting milestone and the continued growth of karpatkey!

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What Karpatkey has done from the outset, in his individual career but also with his strong links with Gnosis and its ecosysteme, is remarkable and must be underlined.

This proposal update is a strong testimony to this, I support this approach and look forward to hearing more about it.

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Thank you all. This is Majed from Forteus Asset Management, a holder of GNO tokens.

Just so that everyone is on the same page, GnosisDAO owns 10% of Karpatkey at an average valuation of X. This was obtained by :

  1. $1m investment in KPK at 20% discount of $50m FDV, i.e. $40m. This is now worth $5m at latest seed valuation of $200m. = 2.5%
  2. $5m investment at $200m FDV. =2.5%
  3. 5% airdrop to GNO = 5%.

Thus we own 10% of the KPK for $6m implying a cost base of $60m FDV. This seems reasonably generous.

Some questions I have include:

  1. What is the divestment approach for GNO if any? I believe SAFE has set a precedent here ensuring that GNO should only control <7% circulating supply of any incubated project.

  2. It is great to see monthly revenue numbers clearly trending upwards, what does the expense/cost base side of the equation look like? This is important given the 10% commitment will clearly occur after operation expenses (overheads /salaries etc). Or should this actually be thought of as monthly profits?

  3. What does traction look like for the new funding round? And where do you think it’ll price at?

Overall, think this is a very well structured proposal. The DAO receives:

  1. A front-seat in the private rounds for their capital at a $60m FDV
  2. As a token of good faith GNO will also receive 10% of monthly revenues which the team implies at $1.6m / month in the form of buybacks
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