[Withdrawn] Sushi Phantom Troupe - Strategic Raise

Let me give my 2 cents:

A little background - deeply involved with VCs over extended period of time. Had various start ups that both failed and acquired. Now independent trader, retired.

Before I go into this topic, lets back up a little:

In this world, at least in USA there are two money printers: The Fed and The silicon valley elite VCs. Lets not talk about whether Fed is doing the right thing but lets dive into the silicon valley VCs. This is a big money printer that is even more lucrative than Feds. They DO NOT lose. Even when they lose, they win. With that said, this is why you see Lightspeed and Pantera here - they are here to win, not to lose. They are here to make massive amount of money - not to lose money. In crypto, return is measured in multipers vs percentages, and the time horizon is measured in months not years. Make no mistake, they are here to make money and whatever else they bring to the table is secondary.

Strategic VC is just another way to say they will use their connections - whether by playing fair or dirty, to further the business and ultimately making a profit for themselves.

Do you ever wonder why your average joe can never get rich quickly but somehow the VCs are making 10x returns year after year - well that is because they band together to create “weather”. Look at Dfinity - raised at 2 cents and getting dumped on ruthlessly.

VCs are a tool for the elites to transfer wealth from the poor to the rich - and you know what, Crypto is one of the last places that VCs have yet to fully penetrate - and ultimately own. Yes. VCs own everything.

With that said, whatever the community decides - be extremely clear that VCs are here to make money, the balance is whether the value they bring outweigh the inevitable profit taking damage that will be done to the community. When they sell the tokens, they move on, and the partners buy multi million dollar houses and the LPs get their 10x returns, not you.

My personal opinion is that 60M raise is too much.

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The VC printer is ultimately funded by the Fed (indirectly via endowments, pension funds, corporates, UHNIs, basically holders of capital assets).

I doubt anyone here is of the opinion that any VC is entering due to benevolence of their heart or for charitable purposes. Its business, everyone should get it, if not already.

That being said capital providers are incentivized to promote the growth of the system, thanks to their stake. Thus, the emphasis on ensuring their stake is worthwhile. Your point that not all VCs are equally well positioned to provide the help Sushi requires is well taken. If you ignore the noise in this thread, the emphasis has been to:

  • List what kind of support does Sushi require
  • Figure the subset of VCs that can provide such help
  • Determine the terms that would be sufficient to keep them incentivized for the target duration

I agree there’s a cost. The overall system gains need to outweigh the costs.

Here to provide direction towards resolution, this schedule (Sushi Phantom Troupe - Strategic Raise - #283 by OmakaseBar) is tentative - though one can undoubtedly agree the discussion has become disorganized and fragmented across different dimensions. I’m here to make sure we’re focused on the matter at hand. As noted in the schedule a revised preliminary proposal based on feedback of all stakeholders and community comments will be posted here today. Additionally please make sure to make the daily AMAs scheduled for this week.

Any questions concerns, gripes or comments feel free to schedule a 1:1 with me at any time: Calendly - Omakase My time is your time. Accessibility, visibility, communication are key to this process regardless the result!

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@AdamSCochran you raise good points. To address each.

The needs which the loan is solving for are

  1. minimizing dilution to raise USDC
  2. still enabling upside for lending participants.
  • Removing overcollateralization is a positive for the DAO but doesn’t appear necessary here because the opportunity cost of the xSushi is just sitting idle in Treasury. If undercollateralization is a burning need, it could be explored (probably with a tradeoff in APY) but doesn’t appear to be such.

  • Liquidations: On Maple the collateral is only liquidated if you default by not making your repayments. The benefit is that you don’t need to top up margin on a volatile asset to avoid triggering default. An overcollateralized loan elsewhere requires someone to be monitoring margin position like a hawk.

  • Lockups: at a 10-20x smaller level of dilution, with vesting of the xSushi over 12 month loan term, is a longer lockup a problem that still needs to actually be addressed?

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Sushi Phantom Troupe Community Call #2 will be moved to accommodate Asia hours! Wednesday 2AM UTC / 10 AM CST / 11AM JST

N.A. Zones - Tuesday 7PM PST / 10PM EST

Please conduct the replied schedule

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To follow the promised timeline and schedule described in:

Now that we’ve generally covered the why and who is a good match on qualitative terms (Sushi Phantom Troupe - Strategic Raise - #284 by OmakaseBar) - quantitative considerations. For convenience included is a simple table that includes 30d TWAP with various discounts and premiums and how each corresponds to treasury proportion. This should clear up any inconsistencies regarding the proportion of the treasury utilized for each tranche and the existing treasury size in the original proposal. Feel free to copy and adjust the spreadsheet to provide more clarity:

The original proposal gave an outsized funding amount at $60m - this was probably due to any lags between writing and posting, regardless this should be curtailed. In order to satisfy both run rate considerations and diversification necessary to strategically hedge and buyback during periods of undervaluation, a target size of $20m-24m at no discount would be appropriate. This would effectively translate to 13.84% - 16.61% of the entire realized treasury.

Additionally, given concerns of xSUSHI dilution, we assume SUSHI as the asset locked for this raise. Some summarized findings below:

  1. There will be no upfront discount.
  2. There should be no allowance for investors to stake vested SUSHI.
  3. The size of the raise needs to be curtailed - This likely means the composition of the investor group will come down to a focused group of highly dedicated funds, and smaller checks for highly motivated angel investors, @paperhands2 brought up this point (Sushi Phantom Troupe - Strategic Raise - #60 by paperhands2)

The community has also made strong arguments to why discounts are value destroying, by now it’s clear better alignment can exist by purchasing Sushi without discount, which @amywu has taken the first step to readjust, and extending a call option at a higher price point with two year expiry. A call option has been noted on by @SBF (https://twitter.com/SBF_Alameda/status/1416032494244270084), UMA’s success token (Sushi Phantom Troupe - Strategic Raise - #112 by kevin), and many others. This structure is key to aligning all participants to work together towards common growth and development. Additionally this effectively allows the treasury to write and sell Sushi at a higher price point - which @jdorman81 noted should be the goal in “maximizing value while minimizing utilization”

Additionally straightforward terms and products are key to transparency - many protocol level alternatives have been considered, but are not production ready - we will however continue to support discussion and development of such initiatives in the long term. Additionally equality of access to these terms are an important objective - any terms or size proposed will be equally extended to community participants.

To evaluate some previous polling results (Sushi Phantom Troupe - Strategic Raise - #96 by 0xMaki), the community has shown preference for

  1. Raise size: 10m
  2. Discount: 15% (but there was no option for 0%, its clear most support 0%)
  3. Length: 4 years (1-yr lock-up / 3-yr vest)
  4. Number of strategic partners: 5 (21+ potential)

Proposed revision based on community feedback and realignment with all participants:

  • Raise size ( as mentioned equality of access is key, welcome more discussions on securing the mechanism)
    • $20M total
    • $10M strategic firms (target 3-5)
    • $10M for the community (crowdsale auction on MISO, start of auction determines pricing for all parties)
  • Discount: no up front discount
  • Raise in: $SUSHI
  • Length: 2-yr lock-up / 2-yr vest (subject to revision, no lockup or vesting for community offering)
  • Call Option: 2:1, strike price (subject to revision after further ongoing evaluations) at 2x current token price, 2-yr maturity; 2-yr vest (vesting also applied to community offering)

Welcome any additional discussions regarding these revised terms in forum or on the daily AMAs scheduled for this week. As always if you feel the forum, ama, discord, or twitter is not accessible enough schedule a call with me at anytime: Calendly - Omakase

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@OmakaseBar thank you for this summary. I’ve deployed the structure suggested in your post to mainnet (using UMA contracts). The deployed token is called winSUSHI and can be found here. The contract that holds the SUSHI collateral is here.

This token has the following features:

  • 2-yr expiry (expires July 31, 2023)
  • Collateralized in SUSHI
  • An embedded call option with a strike price of $15

I believe these terms match what was suggested in Omakase’s post (I just rounded the call strike up to $15). This “token + call option” idea matches the "Success Token" concept that @Kevin introduced and that both @amywu and SBF have voiced support for.

This structure was deployed using UMA contracts, similar to my deployment of @AdamSCochran’s Smaug design that I posted about here.

UMA’s goal is to help facilitate this trade. We want to showcase how this trade can be done on-chain in a DeFi native way. Sushi and the Sushi community should be the focus of this conversation; we’d just love to help.

Note the parameters I used to deploy this contract need to be triple checked (and I suspect these terms would change in the final trade, so this is more like a real-world prototype).

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Thank you for the leadership over the past few days 0xMaki, @OmakaseBar, 0x_chu in “sitting down” with me/Lightspeed, SBF, @jdorman81/Arca, and the community, bringing us together and finding alignment. I believe the new proposal addresses many of the community’s concerns. Lightspeed would be thrilled to be a strategic co-lead with these terms. Also thank you UMA for offering a potential on-chain solution for the call options.

The Sushi team has kindly invited us to attend this Thursday’s community forum at 2pm PT and I’d be happy to answer further community members questions about Lightspeed.

As a note, two of the things we’ve come to love most about the Sushi team and community are it’s innovations and your pace of innovation. This community vote may have had twists and turns, but they were likely necessary in forging learnings toward the path of decentralized governance. We certainly learned a tremendous amount. But if decentralized governance becomes synonymous with consensus-driven decision-making, there is a danger of losing execution speed. As Jeff Bezos first said, “disagree and commit.” We are in the end all Team Sushi. Regardless of how the final vote turns out for us, we thank you deeply for letting Lightspeed learn alongside you, and respect the decision of this community.

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Hey @OmakaseBar thanks for the great write up.

Could you give more detail on the community block crowdsale and the process with which the pricing will be set. I’ve looked up the process for the crowdsale, but am not sure I fully understand the mechanics for it yet.

Secondly, will the pricing determined through the community crowdsale be the same price applied to the block that the VC strategic partners will be acquiring?

thanks again

Your last paragraph about decentralized governance being slow shows your true colors - you’re very much a generalist VC here to make a quick buck.

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Everyone, PLEASE take a look at this thread before you commit to anything:

SBF, Lightspeed, and others (“VC Sharks”) are taking all of us as total fools. The newly proposed terms are even worse than the original scam proposal. In the real world, these call options should be priced even higher than what the options model suggests as options writers (market makers) would need to attach a huge risk premia.

If this is not a very sneaky way of “dumping on retails” I don’t know what is!

Just lol. ANYONE would be thrilled to be a co-lead with these terms - the call options are literally free money. These predatory VCs and trading funds are knowingly taking advantage of retail ignorance on these exotic instruments. They have proven again and again that this is their basic MO in crypto.

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should probably scrap this idea. sushi really doesn’t need the money right now and can revisit later in a better market. every proposal here keeps getting worse. if a value add partner really wants to come in the best option is just otc from treasury, works out for both parties.

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Definitely read the thread by mgnr_io on Twitter. The Sushi community is being taken for a ride. The terms proposed so far are massively in favor of the VCs and should not be considered at all… the options proposal is actually the worst but the optics make it appear as a good deal. DYOR on options!!

Also…initial list of 21 VCs includes quite a few second rate VCs who cannot add any value whatsoever. This list was put together by a party that was caught selling Sushi just as it was structuring the strategic sale. That tells its own story.

The Sushi community should be looking somewhere in the direction of Arca’s proposal for competitive process / pricing, and for participation there should be a vetted list of strategic partners that fit the criteria of what Sushi wants. This is not so clear yet…Sushi should produce a list of top asks that can be used to determine the participants in the process. As for raise amount we are in a range of zero to 60 million USD. Perhaps Sushi could lay out some more concrete plans in order to size the round.

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As mentioned by @UndercoverVC and @ceteris plz read https://twitter.com/mgnr_io/status/1417742406938628096

need to slow down and think a little harder about this.

great points raised throughout -

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Is it possible to give a benefit that relies on the success on Sushi?

Venture capitalism is the devil’s crossroad. They get a financial win immediately - and the onus is on you to be successful, because they already own your soul.

So instead of an upfront discount, there has to be a way of limiting the potential gains they can realize.

I feel like ‘being first’ in this type of product is already a huge win, especially if Sushi continues at this pace of growth.

Maybe a better deal would be to sell them sushi for 5$ now, but that you’ll BUY their sushi back at 7 dollars in 2 years :wink: Make them take some risk!

(Like doing options strategies - credit/debit spreads. This way the potential risk is calculable, vs being infinate)

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I like this proposal as a starting point for negotiation and want to see the deal get done. The mgnr thread suggests that the option as proposed is underpriced, in which case the community allocation will be oversubscribed (especially if there are no safeguards to prevent funds from eating the entire thing). How does the team plan to ensure that everyone has the ability to invest? Two options I could think of: 1) have decreasing price auction based on strike price, 2) uncap the size of the round. After all, I, too, would like large exposure to a call option with 2 year expiry and 2x strike price on an 150 vol asset that is growing annually by order of magnitude and has potential to do so over next few years as well. I do like the instrument as a way to get buy in and long term alignment. Let’s get pricing and access fair and lfg! Thanks to all for continued good faith discussions and negotiations - really shows the power of open governance.

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If the round gets oversubscribed that means the option was underpriced and the team left money on the table. Also, restricting access to wallet or limiting allocation by wallet also means the team is excluding potential buyers leaving money on the table. My preference would be for an open, descending strike price option.

Remember: not a single institutional investor gets their management fees paid by Sushi holders. In addition to advancing the crypto industry (we have the best VCs), their interest is to get the best deal for their LPs, which pretty much all exclude small time retail (e.g. Sadly, I think even Arca has something like a $500k minimum subscription size for their flagship hedge fund). Any fund will gladly take the maximum discount or lowest strike call option that they can negotiate.

Everyone investing with long term lockups and vesting believes in the project and wants to see it succeed. However, it is incumbent on the Sushi core team to negotiate the best option strike price for the DAO (or implement an auction), such that the round is not oversubscribed and demand is not suppressed.

It would be worthwhile to run the numbers and see the cost to the project under different assumptions 3x, 5x, 10x, 100x and discount that on the likelihood of achieving those returns (could use historical mid-late stage venture data for that).

The whole performance management of VCs thing is tricky in my opinion. Often times it’s hard to predict what kind of support you need. Hence why professionals tend to be “managed by outcome” not task. Usually, the easiest way to do that is to align incentives with a long term investment vehicle, so everyone is incentivized to contribute according to their skills and (hard to predict) needs of the project at the time.

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I think we can all agree that we have a great community that is extremely passionate and Omakase and the Sushi team has been working tirelessly to speak with the community and address their concerns. This has to be commended. I think Sushi’s mindset is exactly where it needs to be and I think we can have a bright future if we do things right and think ahead. I think the general consensus is that lightspeed has done a poor job pitching on how they will add value to Sushi besides network effects. IMO that is too vague and I understand why the community would be deeply concerned giving away sushi for cheap to a VC with no tangible value. But we do need to work to onboard partners that can take Sushi to the next level in terms of the protocol itself and making it mainstream. This should not be rushed. This proposal has the potential to tarnish Sushi’s reputation, and no one here wants that. We have to be diligent. The talk of execution speed is nonsense when a proposal has the potential to break Sushi. Talking like that is exactly why peoples fears have not subsided and are getting worse.

I think we are step 3 in our journey. First step was establishing a vibrant community. We have definitely done that. Second step was becoming mainstream in the Defi community. We have done that as well. Third step is to onboard partners that can take us to the next level. But I think the key here is that the partners have to bring tangible value for the community to see. I think the way to do this is that instead of doing a 50/50 split between partners and the community and trusting the VCs to add value, we scratch the 50/50 split and determine exactly what we want from our partners and set conditions in the smart contract that if our partners meet those conditions they get paid to the agreed OTC price. No options and no community split, just a trustless contract with set conditions.

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Hi Evgeny here from Wintermute!

Just caught up with the recent posts after reading the awesome thread by mgnr. We’ve been active in quite a few deals over last 6 months, so seen quite a few deal structures. We are also one of the teams that are actively getting “free” options as part of our MM activities, so all this stuff is quite familiar, to say the least.

Let me start with some (obvious statements):

What Sushi wants:

· Raise money to be more aggressive at hiring and growth
· Get long term strategic investors for:

  • PR/Brand
  • Value add
  • Synergies

· Have extra capital to be deployed on Kashi
· Not to annoy the current investors/holders who are down quite a bit in the last 1.5 months

What investors want:

· Better terms than buying on the market, e.g. no point of buying at 5% discount with 4 year lockup
· PR from investment, so they can approach other projects later as a strategic/important investor

My views on the subject:

· We have been part of INDEX and LDO deal. They are both awesome and super promising projects, but at a very different stage compared to SUSHI (for example neither are listed anywhere, while SUSHI is on Coinbase), which means that you cannot just ask for a 30% discount with no strings attached, however great VC / Investment firm you are. Add to this the current market conditions and 30-50% discount sounds a bit too good
· A point that mgnr did very well - adding options into the mix overcomplicates things and makes everything much less tarnsparent. I have option trading background from tradfi and pricing exotic stuff outside of BTC/ETH is a challenge even for professionals. Doing a separate yield enhancing “raise” with UMA is a nice experiment (and actually would potentially work well for the “community” part of the sale), but mixing a strategic raise with defi options experimentation is just too much stuff to mix
· There must be a discount to current price, otherwise doesn’t make sense to buy with any kind of lockup. i.e. we can just buy 1 mil USD of sushi and even in current illiquid market it will probably be less than 2.5% slippage and will be immediately liquid without any lockup
· Sushi should be more open to other potential participants to this round. Definitely more MMs wouldn’t hurt, but also including other chains would make a lot of sense (e.g. Solana, Polkadot etc). Some defi projects have sizable treasuries as well and would be worth including for sure with obvious synergies

Some basic disclaimers:
· We own some SUSHI, but nothing remotely significant
· 4 out of 21 investors in the original proposal are on our cap table (hopefully I’m not in trouble with my board now haha)

  • We would have invested in the original 30% discount proposal and the most recent “free option” proposal - they are both quite attractive

What I’m proposing is a basic framework to improve the current proposal. The numbers (in brackets) are purely indicative, but the idea is that the (financial) terms are the same for everyone, while deliverables are not

· [10] investors putting in [1M+] at [25%] discount, [3] year lock-up

· As part of the bid each investor offers how they can be helpful next [3] years. Examples:

  • Hiring – help Sushi with acquiring top level talent (VCs)
  • Deploying capital (for example to above mentioned Kashi pools) (MMs/VCs)
  • Actively introducing Sushi to tradfi institutions (VCs)
  • Tech integrations of any sort (i.e. porting Sushi on Solana for example) (Projects)
  • Follow on investment as protocol grows (Everyone, but especially VCs)

· Every [3] months there is a governance vote to unlock vesting for each strategic investor based on deliverables they promised as part of the round. So effectively every [3] months every investor is pitching the community on the work they did in Sushi interest and the community decides if that was worth it. The vote can effectively be: “how much do we want to unlock now for investor Z”:

  • 0% (they weren’t very useful)
  • [12.5]% (definitely some value add)
  • [25]% (these guys rock)

· So basically there is a possibility to unlock the vested portion (much) faster if there is clear positive output and otherwise they just face a long lockup – for example a star investor would get everything unlocked within a [year]. And given a clear incentive to deliver on value add, the discount is much easier to justify

I strongly feel this is a superior proposal with clear focus on governance and transparency and would welcome everyone to consider it. It would similarly work with the proposed option, but I really think it overcomplicates things too much.

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Hey everyone! There has been a lot of voice surrounding the Phantom Troupe - Strategic Raise proposal but it can be a bit daunting and time-consuming to go through the whole thread at one stretch. If you read @Omakase’s last few post’s you’d see he mentioned about a temperature check platform being build-out. Proposals that seemed to find traction have been curated here: https://sushisimp.com/. It’s live now (still improving few aspects) It acts as a temperature check to upvote your favorite proposals and read them more concisely. If you want to add any new proposal over there, please let me know or anyone from the community members.

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