[Withdrawn] Sushi Phantom Troupe - Strategic Raise

100%. You guys have done such a fantastic job, you don’t need VCs, you don’t need their capital. You have done better than you would have with their help from the beginning. Why risk this changing?

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I’m a former founder and current crypto operator. I’ve raised money from some of the funds @0xMaki helpfully brought to the table, invested alongside another few and spent time with at least 3 or 4 the GPs I expect will actually get involved with Sushi after the USDC hits.

Here’s some real talk:

  1. I think this raise is a good idea. The basic reason is that, if you raise from the right VCs, they’ll fucking fight for you, and that’s worth a ton.

  2. If you raise from the wrong VCs, they’ll do fuck-all for you, be a pain in the ass, and then dump ASAP.

^^^ @SBF nailed it here. What you want to do as a project leader is fill your cap table with the collection of VCs who will provide the things you need.

That can be intros to portfolio companies, recruiting support, regulatory guidance or just a shoulder to cry on.

What it is NOT is money.

What it also is NOT is 21 VCs who all do the same thing. And don’t have much skin in the game.

Because, why?

For example, Amy Tong Wu may be an enormous value add. But Lightspeed just raised a $4 billion fund. How much can she actually justify devoting time and resources to Sushi … if her check size is only $3m?

Now imagine having 21 clones of her … all doing almost the exact same thing! :roll_eyes:

(Sorry Amy! I am only singling you out because of you happened to post first! I actually think you are probably lovely!)

A better path forward

Based on this reasoning, I suggest we consider doing the following:

1. Retain a reasonable size treasury sale, but reduce the number of big VCs in the round. This has two key effects: it gives each VC more skin in the game and it makes it easier for each GP involved to justify devoting additional time and resources from her or his fund to the project.

Remember. Each GP supports a portfolio of companies. We will never be the biggest or the hottest - except now!

2. Choose each VC based on a specific contribution that we want. This is like arming yourself for an expedition. What do you really want? 5 crossbows but no boots or food?

Hell no! You want what you need to survive - crossbows, a battle axe, food, water, tents. So we should use this moment to get all the supplies we need!

3. Bring in a bunch of little guys who will have outsized incentives and power to help us…for very small allocations. This is the flip side of the skin in the game problem.

For only $5m, you can bring in 50-100 strategic angels who will do all sorts of high-value-add tasks for you from post great memes to get a dev out of jail. Again, however the challenge is selecting the right ones. You do not want 50 CMS interns! But ROI from getting a healthy collection of angels? Enormous because the incentives are so strong.

In sum:

  1. Keep the fundraise size large
  2. Cut the number of VCs to improve incentives
  3. Optimize our portfolio of VCs - now is the time to arm ourselves to win!
  4. Create an angel tranche to get outsized returns while giving up very few tokens

@0xMaki

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Tokenactivist raises a good point. How does $3M move the needle for a $4B fund? The answer is it doesn’t. I can’t speak for every investor here, but Lightspeed takes a crawl / walk / run approach to building long-term relationships. Our top portfolio positions are $100M+ investments over multiple rounds. Our first investment may be small, but if we invest even $100k in a project (which we have), our reputation is on the line, and the anticipation is to increase position (e.g. via spot) over time. Not every investor takes an active role, not all active roles are good for a company, and not every company wants an active investor. The team/community should decide what kind of value they want, then do references to learn if an investor has a history of providing that.

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This sounds exactly right. Most of the “better” VCs will write small checks early and scale up with the company. It’s why they set up growth funds, keep dry power and jealously guard and use their pro rata rights!

But how would that work here?

What the VC funds are buying now are tokens that already have fixed supply and a market price. Selling the VCs these tokens at a discount to the market price dilutes our treasury (and undercuts existing token holders).

If we scale this up in the future, we will just further dilute the treasury because of the discount.. In fact, each time we offer the VCs a bigger slug, we will be undercutting the existing token holders by more and more money!

Is this really what we want to do?

I’d strongly encourage the team and treasury to just allocate large slugs to the VCs they most want to include - not to gear up for future sales at below market prices.

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Great Points.
The other thing that is yet to be explored but is critical is what “strategic inputs” mean.
In CeFi, of course, it means many things ( talent, merger, intros etc.), but in a community-driven business, these are organic to a successful protocol. Any large protocol like Sushi is naturally attracting these. An argument here is that DeFi can be broad-based, but that I think doesn’t require a Venture Fund’s intros :slight_smile:

I would argue that there has be a roadmap on what Strategic inputs a VC brings to a table that warrants a discount. If they don’t meet the roadmap, then there has to be some repercussion for the same. I do know these are nebulous, but at least a shot has to be given.

In the absence of the above, what Tokenactivist says makes sense. Get someone who has significant Skin in the game OR is commit to a roadmap that is in. I mean, you can’t imagine playing the same game in a new financial ecosystem being built, which in a way is not kind of aligned to large pools of money controlling things

If not, then diversify a lot as the probability of getting a big strategic lever increases.

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Hi everyone, I’m Franklin from Pantera Capital. I love the discussion happening here and wanted to share more detail on the value that Pantera brings as a potential co-lead for Sushi’s strategic raise. We’re also planning to join the Community Call tomorrow and look forward to hearing from others in the Sushi community.

Quick rundown on Pantera Capital:

  • We’ve been investing into the blockchain ecosystem since 2013, with 100+ investments across cryptocurrencies, early-stage tokens, and venture-backed companies. Over that time, we’ve grown our focus and expertise in areas like fiat on-ramps, scaling solutions, developer infrastructure, DeFi and other decentralized applications - with an extensive base of resources, best practices, and team members to support projects and companies building on-chain and off-chain.

  • We invest in teams with a clear vision for advancing the blockchain ecosystem towards greater utility and adoption, with the ability to execute and lead. Our portfolio includes companies and projects like Alchemy, Wyre, Coinbase, Circle, Bitstamp, Bitso, Arbitrum, BitGo, InstaDapp, Terra, Audius (publicly disclosed list here: Portfolio | Pantera).

  • We’re long-term investors and early adopters, who bet with conviction. We’ve been through bull and bear markets with our founders, fighting in the trenches and through the darkest hours to help our teams keep building great tech and products for their users. We’ve been an educational resource and “first stop” for the institutional world and mainstream enthusiasts to learn about crypto - we’ve been able to translate the what / why / how of Bitcoin, Ethereum, DeFi, Web3, etc. for new audiences and we take huge pride in that responsibility & privilege.

About me:

  • As part of the Pantera investment team, my focus is on supporting and accelerating our portfolio teams - building out the tools and resources for hiring / talent, business development & partnerships, marketing / PR, M&A strategy and rolling up my sleeves with founders to break through walls and get shit done.

  • I was the first team member to propose SUSHI as an addition to our portfolio and have actively advocated for SUSHI as one of the most important and exciting projects and communities in DeFi amongst our network, including trading partners, centralized exchanges, and other investors. One of the more visible occasions here, where we shared our support for xSUSHI’s listing on Aave - also the first time we publicly disclosed our SUSHI position: https://twitter.com/FranklinBi/status/1359683748229308417.

  • Prior to Pantera, I was at J.P. Morgan where I helped launch the blockchain team in 2015 and built out the firm’s early strategy / R&D in blockchain and crypto before I left to work directly with early-stage crypto / DeFi companies in 2018.

What value does Pantera bring?

  • Hiring support: Sushi’s team and community are fantastic, but constrained on capacity and will inevitably need to scale. Our jobs board and talent network is a lightning rod for new talent entering the crypto / DeFi industry. We see great candidates leaving Wall Street / Web 2.0 / FANG companies for crypto and our goal is to connect them with the best teams we know. Talent is one of the biggest bottlenecks for the DeFi industry to reach its potential and therefore one of the highest-leverage activities we can help with. We have an in-house recruiter, a deep network of recruiting firms, an active candidate database - all of which has helped our teams get hires (not just candidates) for everything from smart contract engineers and product managers to CFO’s and biz dev leads.

  • Portfolio / Industry connectivity: Sushi’s built out a strong network of partners and relationships, as well as a solid playbook for fostering that within the community. Therefore, our added value for Sushi in connecting with potential partners inside or outside of our portfolio would be less about getting a “foot in the door” and more about accelerating the pipeline - by navigating to the decision makers, uncovering thoughtful ways to partner with mutual benefit, finding the partners who can help crack open new markets or products.

  • Technical / Market research: The sands are constantly shifting in crypto and it’s immensely difficult to track the latest and greatest developments, even for a project like Sushi that’s often been ahead of the curve in testing / experimenting / shipping. Having a partner who’s constantly vetting new tech and solutions can be critical to spotting the next big shift - e.g., which Layer 2’s should we focus our Engineering resources on? where should we prioritize cross-chain bridges & liquidity? what new tools should we be using to ship faster or improve scalability / security / UX? While Sushi hyper-focuses on executing the product roadmap and growing its usage, we’d help constantly scan the horizon for critical opportunities / risks emerging in the crypto ecosystem.

  • Resources / Vendors / Best practices: Over the years, we’ve taken many lessons learned from our portfolio teams on everything from regulatory strategy to recruiting to bootstrapping communities & liquidity. We’re also constantly building out a bench of vetted vendors who uniquely serve crypto companies / projects, e.g., security audit firms, law firms, market makers, insurance providers, etc. It’s funny to call anything a “best practice” in crypto because of how quickly things evolve, but we do our best to collect those lessons learned in real-time and share them. This also helps teams like Sushi save a ton of time and anxiety re: finding and vetting the right vendors.

  • Visibility / Marketing: We’ve built up an incredible audience over time through our monthly Blockchain Letters, conference calls, and annual Summits. Over 100k+ institutional investors, CEO’s, industry leaders - they’ve all looked to us to help them understand the most important topics / trends in the crypto / blockchain industry and the companies / projects working on them. As Sushi’s product set and narrative expands, we’d help carry that message to new audiences to help Sushi uncover new opportunities and gain visibility.

It’s getting late here and I’m winding down a 20+ hour workday, so will add more to this post as needed and also follow up on specific topics. Hugely appreciate the chance to present our perspective and big props to everyone participating actively in this discussion (0xMaki @SBF @paperhands2 amywu OmakaseBar pegbit) - it’s not a decision to be taken lightly and I’m hopeful that we’ll find the best course forward.

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I did want to share some quick thoughts on a question that’s come up a lot and is really important context for everything else: Is a 20-30% discount fair?

A couple ways we think about it:

1 - Based on ONE pricing model that’s often used to price illiquid assets (NOT our full approach to pricing), a “fair” discount JUST based on a narrow view of illiquidity impacting the value of an asset today is ~50-60% for SUSHI with a 6-month lockup followed by 18-month vesting period. This is NOT the discount we’re seeking and NOT a proposal - just context for why there’s often a discount involved in these types of transactions. Not saying 60% is the right discount at the end of the day. [Edits to this statement to clarify]

The model takes into account SUSHI’s historical volatility, crypto market volatility more broadly, and the proposed vesting schedule to back into an adjusted value for SUSHI under those liquidity terms.

Not able to share the exact model, but it’s similar to widely-used pricing models for options. I know that’s annoying / kinda shitty that we’re not sharing the model and less transparent than the community would prefer, but we’re also pretty confident that anyone taking a similar approach would reach a similar calculation and certainly believe no one should take it as pure gospel. At the end of the day, it’s just one tool we use to help us think about the fairness of a discount and if someone else’s model tells them something different, then more power to them. The market will decide which model was better.

So don’t take our word for it that 60% should be the discount - that’s not the point. The point here is this: our process isn’t just waking up one morning and saying “How greedy are we feeling today?” That’s a shitty human thing to do and an even shittier investment process. Our goal is to assess a risk-adjusted price based on math and it’s probably not perfect, but it’s one of the more sensible things we’ve come up with so far. Ultimately, we (and the investors who put their trust in us) own the consequences if we pay too much or too little because of that math. It’s also only one of many inputs. Valuation is an art and science. This is the science-y part.

2 - This raise immediately provides SUSHI’s treasury with up to $60m in proceeds. For now, let’s set aside the topic of whether $60m is the right number (which we should definitely discuss - maybe with more context from the Sushi team). So another way to look at the discount is: What would happen if the Sushiswap Treasury tried doing the same thing via the open market, i.e., market sell $60m in SUSHI?

image

As seen in the Sushiswap transactions above to swap SUSHI directly for ETH, a market sell would incur ~30% of slippage impact to the buyer and the overall market. For USDC, it would be ~43% slippage. The SUSHI in this market sell scenaro would be immediately liquid for the SUSHI buyer vs. the SUSHI sale proposed in this raise would be restricted for 2 years at a 20-30% discount.

3 - Funding rounds are auctions at their core - complex, multi-stage auctions with non-financial, hard-to-quantify assets that all factor into the perceived value of bidders (VC’s / vulture capitalists / face-stabbers / your preferred nomenclature) and their bids. So if this is an auction, then one important question re: whether the price is fair is “Is this a fair auction?”

There’s two reasons why an auction could be deemed unfair (more than 2 exist, but these are the key / most relevant ones):

  1. if bids are artificially suppressed, e.g., blacklisting, exclusivity, holding the auction on a secret island hideout known only to supervillains.

  2. if hidden externalities affect the bidding process, e.g., collusion, kickbacks, fake bids.

On 1), I don’t think there’s any credible signs of bid suppression. It’s fairly easy to tell from the length of the investor list that this raise was presented to a diverse set of funds, with various sizes, focus areas, team types. It’s worthwhile to think about whether it could’ve been more diverse, but clearly the team put in a lot of work and time to test the market rigorously and foster a healthy number of bidders. Eventually there’s a point where spending more of the team’s time and energy on fundraising isn’t worth it / likely doesn’t improve the auction’s efficiency enough to make a difference.

This thread is also a remarkable showing of what makes Sushi and its community unique. Publicizing this process as an open discussion thread is the farthest thing from bid suppression / a secret island hideout. So if there’s a better bid out there for a $60m block of SUSHI with a 2-year lockup + vesting schedule, whether you’re an individual or fund or collective, then this is a great place and time to bring that up for consideration.

On 2), there seems to be a concern that VC’s talk and know each other and therefore must be colluding to keep prices down or some mystery party is getting a finder’s fee for facilitating this raise. We can’t attest on behalf of others, but if there’s a cool kids’ table / cartel out there, we certainly haven’t been invited. The most reliable way to combat this type of hidden negative externality is through transparency and competition.

The transparency point is clear - by publicizing the full investor list, you create an opening for any possible cartel to be divided and captured. Anyone with a better bid inside or outside of the cartel can aim for the bottom of the tribe and put together a better alliance Survivor-style, until an efficient market price is reached.

The competition point is maybe less clear, but pretty easy to state: We compete like hell. For deals, for capital, for reputation - yeah, we definitely compete. Sometimes we find fellow investors that we work well / vibe with, sometimes we find investors who shut the door on our face because they want to eat our lunch. That’s cool and fair and does a great job at preventing collusion.

TL;DR - Based on the above, it seems like a 20-30% discount is a reasonably “fair” or math / market-based price for the liquidity terms of this specific deal, rather than a way to “sweeten the deal” for VC funds. Whether it’s the right deal ultimately is up to the community.

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1 - Based on our pricing model, we believe a fair discount is ~50-60% for SUSHI with a 6-month lockup followed by 18-month vesting period.

the balls it takes to say this is just a slap in the face to defi and the sushi community. If you guys actually cared about growing the protocol you would know this lockup / vesting is an absolute joke.

how about less talk about price and your “fair-value” pricing models and what you guys would actually do for the sushi. everyone has money…but who has the proper tools / ideas / drive to actually make this beneficial for both parties involved.

What would happen if the Sushiswap Treasury tried doing the same thing via the open market, i.e., market sell $60m in SUSHI?

i also like to market sell everything on sushiswap when i want the best price…

less talk about money more talk about what you guys will do to benefit sushi

/stomponcig

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Great Thoughts and love the work you are doing at Pantera.

However, let me try to see if these can be quantifiable milestones. While I know all of them are hard to measure/quantify but then we should not be thinking in Crypto from the traditional lens.

  1. Hiring support- → What does that translate to? Assuming that you agree to Sushi’s hiring process how many people can you help recruit? The sushi team can share a broad roadmap to estimate hiring needs. Let’s put a number to this and smart contract this. If the goal is missed vesting period increases or a fine is put.

  2. Portfolio / Industry connectivity → This is as generic as it gets. What does this mean? If you are investing there has to be a thesis on what partnerships can happen. Let’s put a definite outcome. That hey will get x number of partnerships stitched in Y time. In fact, even before the raise, the Sushi team & community should know what your partnership CRM looks like.

  3. Technical / Market research - Who scans these? Are these tech leads? If not then you can potentially bring the noise to the ecosystem. Also, the community should decide on say which L2 to focus on and not on individual expertise. While I clearly see the merit, to me again this is too generic

  4. Resources / Vendors / Best practices → Definitely a value for the community, but this should dovetail into point 2

  5. Visibility / Marketing - Agree. That is one thing that a lot of Defi projects are missing on how to make them more mainstream.

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Good to see pitch from the two potential investors. Community will also like to hear the answers to the following questions

  1. Do you intend to provide a boost on the liquidity front in an ever growing competitive market?
  2. Majority of the VC’s are invested in many DeFi projects some of which are rivals or potential rivals to Sushi on the Market. What are your thoughts on conflicts of interest and how would you approach it if such a situation arrives in the future?
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1 - Based on our pricing model, we believe a fair discount is ~50-60% for SUSHI with a 6-month lockup followed by 18-month vesting period.

What would happen if the Sushiswap Treasury tried doing the same thing via the open market, i.e., market sell $60m in SUSHI?

I think you are missing the fundamental point of this raise. The sushi team does not need to raise money. Hence trying to compare the market impact of one stop dumping $60M sushi, which is being disingenuous in its own right, is completely useless. The point of the raise as I understand it is to bring together a couple of long term aligned VC’s to support the project and use their connections to expand the general reach of the sushi ecosystem. Diversifying the treasury, while being a nice benefit in of itself, is not the core goal of this raise.
Now I do agree that having a “fair” discount is necessary to attract the right VC’s that will actually be active and beneficial for sushi, however IMO depending on the size of the raise, even a 30% discount should be attached to a significantly longer vesting period. We’re already currently seeing the negative effects of having such a large vesting period hanging over the project from the ongoing sushi rewards vesting, and adding another unlock period right after this current one ends is honestly quite a horrible idea in my opinion.
I also think that having 21 investors is quite ludicrous, as is only dilutes the general allocation each VC gets and like tokenactivist said will result in sushi being just another tiny allocation in their fund. That being said, I would advocate for having at least a one year cliff, followed by a minimum of 24 months linear vesting targeting at a maximum the 10 most aligned and beneficial VC’s. Even if that would require a more significant discount I believe it would be well worth it.

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Hey everyone - I help run a thesis-driven venture fund called Compound focused on both highly technical early-stage companies as well as crypto broadly as a category. As a Sushi holder, I figured I would share my $0.02 (disclosure: Sushi makes up a material portion of my personal crypto portfolio + we are investors in Multicoin).

Round Dynamics

IMO the dominant strategy here would be to anchor the round with 2-3 major investors which equal at least 40% of the capital and then build a collage of smaller firms with a specific value add attached to them. I agree that having them articulate what they want to bring to the table is a fair ask from the community, just as @amywu has so eloquently done.

In terms of structure - if we truly want long-term aligned investors I would stretch out the vesting period or backload it more on vesting, and/or create a cliff that is 12 months (@0xMaki i don’t think increasing discount materially should be pre-requisite and I believe the traction of this proposal will mean Sushi has plenty of demand). As venture investors we raise 10 year funds with the idea that we want to be long-term aligned with our companies that create massive outcomes over a 4-6 year time horizon (perhaps 2-4 years for growth stage). While 6 months in DeFi is like 3 years in normal tech, I do think venture investors should have fairly low pushback against longer time horizons, especially if they are able to sell rewards after a cliff vesting period.

Why Institutional Investors

Advocating for venture investors (I’m obviously biased), at the growth stage, venture investors are often great as sounding boards for their given founders/portcos, as well as unlocking mechanisms surrounding areas of commercialization or scaling. With this in mind, I too believe it’s important to figure out how as a community we want institutional investors involved in governance and/or what their ultimate vision for Sushi is over time (this should be a discussion, not a single pitch from a VC → community).

For me, one of the biggest things that Sushi has going for it is an increasingly horizontal approach to building a suite DeFi products, thus I would prioritize a syndicate that can help think through the constellation of use-cases within DeFi that should be consolidated within Sushi and/or that Sushi should actively partner with to bring onto the core platform. I’ve been impressed by the launch of products like Miso and Kashi Lending and there are likely many other possible expansions that will be enticing over the coming years, but might not be dominant for Sushi to focus on in short-term vs. medium/long-term.

VCs have lots of experience thinking through the long-term sequencing of product roadmaps in order to gain market share, while also having the luxury of being removed from the trenches and seeing innovation at the earliest stages, which will be helpful specifically for a project like Sushi that could be a core leader in the maturation phase of DeFi which again, I believe could be about consolidation of some kind relative to the fragmented/disparate behaviors we see today enabled by composability.

The next order thinking of building a lasting community should be survival in the early days, and aggressive expansion in the later days. What I mean by this is that if/when a true bear market comes, having a group of investors that can participate in the community discussions and governance votes surrounding when to be aggressive while other projects aren’t able to move as quickly in bear markets (due to our large treasury and community relative to others except a few core projects), as well as that can possibly further fund offensive moves during these times is incredibly helpful (to this point of why having more concentrated leads with large funds, is an asset).

Related to this, I would add that similar to the view on product sequencing, the holistic, long-term oriented view of smart VCs within the space also will allow us as a community to perhaps better think through strategic treasury management. (not to pump a post but i’ve written about this here: ).

As a final note, I do think the addition of great firms like many of those listed will help bring some form of brand halo to Sushi that we have been missing. As a community we all have looked at the Sushi token price at one time or another compared to competitors and not fully understood the discount relative to metrics, while in the back of our head wondering if this was a brand perception issue (@0xmaki said as much on a podcast recently). Over time, it’s likely that this halo should deteriorate as capital continues to commoditize, but for now there is some brand signal that comes from large institutions backing you, for better or for worse.

TLDR - I support this at a high level, think we should be intentional but understand how these firms want to engage with Sushi, should have longer vesting, and am excited by many of the partners listed.

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A lot of great ideas and debate happening in this thread! A few thoughts from a relative “shrimp” in all of this.

As far as Defi goes, Sushi is a known quantity “blue chip” with a strong track record of success, implementation, and innovation. That should count for something. Providing a 20-30% discount for such a large amount of the treasury with those vesting terms seems unreasonable.

I think the majority of the community can agree treasury diversification, decentralized supply, and strategic partners are a good idea, but we should explore other alternatives that are more inclusive of all community members that can help achieve the same goals as this proposal.

I think its SUPER important for the funds listed to weigh in here and to give an overview of how they have previously added value to portfolio companies, examples of how they have been active in governance (whether in sushi or other protocols), and how they plan add value to Sushi.

We have seen a ton of misaligned VCs over the past year use “institutional” status as a way to get discounted deals and secure profits by dumping on retail investors. (Note: this is not accusatory towards the funds listed, I actually think many of them are awesome community members and have been a massive value add to many of the communities I personally have seen them active in.) I think more clarity from the funds on how their incentives align long term would help many of us feel more comfortable and build more informed opinions on this.

One of the most inspiring things about DeFi has always been the opportunity it provides for anyone to get involved as a community member/stakeholder at an early stage and to make an impact. I think its important we keep this ethos in mind during discussions.

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I can offer a perspective here to back this proposal. In many ways my comments will echo those of others who’ve recently posted to help present the role they intend to play as participants in this diversification. For context, I lead DeFi and Venture investing at GSR

When you consider the list of those strategic partners proposed for this diversification, they each have a variety of unique value adds that would contribute to the Sushi roadmap and growth and ultimately drive value back to this community.

Some of these qualities include:

  • Liquidity - in the AMM game, the driving factor that will bring more TVL into Sushi is ultimately where can traders find and access the most trading pairs at the lowest slippage. Invested partners in the ecosystem who can bring new liquidity to Sushi through either their own LP activities in pools or through the relationships they have with new token issuers who are looking at IDOs or simply DeFi-first launches will be beneficial to Sushi in building out both deeper liquidity in existing pools and sourcing new liquidity pools to Sushi.
  • New capital - VC’s and trading firms have deep relationships with institutional capital both across the crypto/DeFi world and the broader TradFi world where there are trillions of dollars sitting on the sidelines waiting to enter this marketplace. Partnering with these groups that have access to this institutional capital is ultimately to the benefit of the Sushi ecosystem as it contributed further to the liquidity growth and, ultimately, the revenue growth for Sushi - benefitting both the treasury and community.
  • Product strategy - most, if not all proposed parties here have a depth of experience in working with a number of leading teams in and outside of crypto to help inform and advise upon product strategy and roadmaps based on years of experience in investing in startups or liquid markets. If the expectation is that these partners are being selected/approved by the community based on a stated commitment to building up Sushi long term and ensuring its success in an increasingly competitive DeFi landscape, then one would hope this experience and expertise would be value add to the community as future capabilities and product releases are contemplated and planned.
  • Marketing - Sushi is not an unknown in the space by any stretch. But as evidenced by the Future Fund contribution of Sushi.com to the project, there’s a range of marketing benefits that come from having a set of active, well respected investors across the crypto ecosystem that are helping to drive awareness for Sushi and amplifying the successes and future launches through their various channels of influence.

In terms of our role at GSR, as both a market maker, trader and investor we’ve partnered closely with many of the proposed strategic investors and can say with confidence this is a group that is well-crafted and are all individuals/teams we greatly respect. For those looking for context on us:

  • GSR is one of the oldest crypto-native firms in the industry, founded in 2013 with more than 125 people globally. Our firm’s founding predates the launch of Ethereum. By being exclusively focused on crypto markets throughout our history, we have a depth of trading expertise that comes from years of experience and relationships that go back nearly a decade spanning the global crypto market.
  • We’ve partnered with close to 100 token issuers as a liquidity provider and over time work with them on a number of related needs, including treasury management and OTC trading capabilities, including having one of the largest derivatives portfolios across the alt-coin and crypto landscape. Some names on this list include
  • We work with a growing list of more than 200 institutional clients as a trading partner, including many of the largest institutions in both crypto and traditional finance.
  • We trade billions of dollars a day across 60+ markets globally and increasingly are expanding these efforts with liquidity on decentralized exchanges, including Sushi. This market making function is critical in driving price discovery and ensuring efficient markets across DEXs and CEX trading pairs.
  • We’ve made nearly 50 investments as a strategic investment partner from our own firm capital. We aren’t a traditional VC and we are putting our own money to work in supporting projects we believe in. Some notable venture investments we’ve made include Ethereum, The Graph, Flow, dydx, Coinlist, Secured Finance, Eco, Reserve, Shyft, Tracer and others.

We plan on acting as a strategic partner to Sushi through the expansion of our DeFi trading efforts as both a liquidity provider, partner to new token issuers and a supporter of teams looking to build upon the capabilities of the Sushi ecosystem. It is great to see the level of engagement from the community on this proposal and we would be excited to increase our engagement through participation in this diversification offering.

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Thanks @CryptoPriest and @fozzydiablo for the candid feedback here. To be clear, the extra color around the discount proposed here is meant to be exactly that - just extra color. I felt it’d be helpful to provide extra context on how we (Pantera) look at the impact of illiquidity on deal pricing, since it seemed like that was missing from the conversation around “Why are we giving anybody a discount?! Hell no!” to carry it towards something more nuanced.

Not at all meant to be an argument for why this strategic raise should happen - which I completely agree is the bigger question here, as well as communicating the value that any participating fund would bring to the table (which is much more directly answered through my other post). I’ll try to add this into the original post to clarify that for others too.

Just saw this on twitter

What’s going on?

DeFiance Capital is dumping SUSHI as per user @Luciano_vPEPO on Twitter

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1 - Based on our pricing model, we believe a fair discount is ~50-60% for SUSHI with a 6-month lockup followed by 18-month vesting period.

What would happen if the Sushiswap Treasury tried doing the same thing via the open market, i.e., market sell $60m in SUSHI?

I was actually starting to like you Franklin, and we are grateful for you coming out here to get involved. I understand you guys do a great job in managing portfolio risk management, congrats… Although, spitting on the face of the sushi community is quite disrespectful and goes against what Sushi has built in the first place. Please don’t call a 50% discount and 6-month lockup “fair”, just to make 30% sound reasonable. Then comparing it to us market selling our own treasury like apes.

"wHaT wOuLd HaPpEn If FuNdS mArKeT BoUgHt 60M iN sUsHi???"

…You see what I mean? That was not cool of me to do, so don’t do the same.

I respect your math and your persuasion tactics, but when pitching to DAOs, we would appreciate respect in return.

Sushi would be honored to onboard big-brained people like yourselves. The funds that want to back us seem excited and motivated, as we are- but this is about every VC on the round working as a team alongside Sushi. As the rest of the blue chips begin to see maturity, and as I realize this is more than a “treasury diversification” I now understand the value of having these veterans alongside us.

Therefore I will piggyback and restate some of the points mentioned above

  • Cut the number of VCs to improve incentives, I like the idea of focusing the round on 2-4 major investors, a variety of smaller VCs, and 50-100 angel investors, even a “shrimp” crowd sale would be something new and unique
  • Every investor should be specific and detailed on what they will bring and how, without generalizing a pitch.
  • Make the lockup and vesting way longer. what happened to 10-year time horizons? (Obviously not implying a 10-year vest!) We want people/teams that are in for the long haul, not a short flip.
    -We should use this sale to bring high emergence from all types of investors and builders to expand sushi to the next level.

@zafalijadev brings up a massively underestimated point.
I understand the discount is industry standard, but It’s not hard to imagine how VCs can use this, along with their holdings and trading department, to buy Sushi for dirt cheap. That’s why even 20-30% off a TWAP can be predatory for sushi price.
Options are to limit the VC list to only 2-4 top funds (and hope they play nice)… Or bring in the innovative range tokens to prevent such an attack.

Exciting times ahead,
Thank you everyone and I look forward to the community call!

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@GreenEyes - fwiw, I do see what you mean here and I accept the correction & appreciate the callout. My example wasn’t really relevant / helpful. Just to reiterate from my previous post, sharing our model’s output here wasn’t meant to be a persuasion tactic on any specific terms. I think it mostly accomplished what I was hoping but which you stated much better than I did: it’s industry standard and it’s a part of us managing portfolio risk responsibly.

Where I wholeheartedly disagree is with the characterization that we intended any disrespect to the community by sharing this info. Hope you can come to understand that as this discussion continues.

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Roger @Franklin-Pantera, I accept the apology and completely understand where you are coming from. And once again really grateful to have everyone here for an open discussion :slight_smile:

At the same time, I apologize for that reaction from my end, was just trying to prove a point, while at the same spilled uncalled-for saltiness from having to market buy SUSHI on dips with my humble stack. Way overstated. Sorry.

Onwards!!!

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Hi everybody! Long term lurker looking to give a bit of feedback on this important proposal. Btw, thanks @Franklin-Pantera and @amywu for responding to this proposal.

(1) I think the amount suggested is probably too high, as mentioned by many others, as Sushi will profit much more from the human capital provided by VCs rather than their funds. This is why a crawl-walk-run strategy suggested by @amywu makes a ton of sense for me.

(2) Also as mentioned by others, it is best in my opinion to focus on a few VCs that have these meaningful connections and have a solid track-record. This will avoid the kind of dump that other projects have experienced in the past.

(3) As far as valuation go, I think a discount is fair given the role these VCs will have in the governance and business development. In a certain sense, they are providing not only monetary value, but their expertise and connections and we have to account for that. They are probably also occurring additional costs versus retail investors. However, It feels to me like a fixed 30% discount does not reflect the free market values that should be favored in an open-space like crypto. As mentioned previously, Sushi does not need money, so why not do an auction and get a price that reflects the rationale of the most interested buyer?

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