These benefits often compound and can’t be quantified. You can’t generally buy some of these, for example, perception. While we understand the P/E of Sushi and other such fundamental arguments in favour of Sushi, the ‘boomers’ might not be as knowledgeable. They delegate due diligence to the likes of a16z, USV etc. Whether we like it or not, a good part of the community does care about Sushi’s price as visible on this thread. In such a case, old money can’t be ignored (despite it being possibly contradictory to the ethos of rebuilding the financial system) and thus I’d argue the Lightspeed name itself covers this ‘cost of 6m USD’ (ignoring the benefits of deal flow etc - it’s hard to quantify or foresee a 1000x launch upon onboarding some of these VCs but the likelihood of such an event increasing seems to be very much apparent).
Why pursue a loan that is:
- Over collateralized.
- Can be liquidated.
- Is very short term lock up.
That places undue risk on the issuer, when there are multiple proposal types that are:
- Under collateralized or on par.
- Cannot face liquidation.
- Are locked on a multi-year period.
Your pros section reads a bit generic on the value of taking on a loan, but I am genuinely interested in how you see the Maple offering to be at all competitive in Sushi’s current situation?
But isnt the problem the sushi community has with raising funds from VC’s is that there will be significant dilution? Doesnt this proposal solve that?
More than dilution, the core problem is ensuring that the dilution is worth it. What ensures that these VCs actually add value? We’ve been rekt more times than we can count to risk another one, esp. one where we vote for it.
The crux of the matter is that this isn’t about ‘raising funds from VCs’ but ‘incentivizing the right VCs to contribute’ such that it’s a positive sum game: the protocol and its token grows exponentially with VCs who contribute getting a proportional share of rewards. VCs aren’t here to earn 10% boomer interest rates and the DAO here isn’t trying to raise capital.
So if VC’s aren’t here to earn 10% boomer interest rates and the DAO isn’t here to raise capital, then what’s the solution to getting some USDC into the hands of the treasury?
Are you asking me to summarize the previous 280 posts for you? Moreover, I’m not sure why you would repeat me by stating that ‘the DAO isn’t here to raise capital’ but then ask ‘what’s the solution to getting some USDC into the hands of the treasury’. Don’t you see the contradiction?
There are a number of suggestions above that satisfy what the DAO wants: OTC-ing locked tokens at a discount, UMA range options, OTC + option etc. You can read the same.
Yes it is a lot to read so a summary would be great!
And I meant that if you aren’t wanting to raise capital there needs to be a different solution to getting the USDC. A loan seems like a decent option. An OTC deal + lockup would work but it would just be delaying the dilution wouldn’t it?
Looking at the above discussion, I don’t think the Maple proposal is way off. But I think it can be improved.
Full disclosure - I am the founder of Sublime (sublime.finance), a protocol focused on undercollateralized loans. More broadly, one of our primary focus is enabling DAOs to raise capital. I’m sharing an alternative to what @sid.maple has proposed. [Apologies if the below has been proposed already]
tl;dr: Tweet thread
The main issue seems to be the distrust of the community on funds adding value. Having worked with a couple of great funds over the past few months, I’d argue that the right ones are def a value add. Understandably, this would be much harder for the general community to believe esp. when they’ve been dumped on so many times.
What if the objectives of the raise are encoded and the community decides on the payout? For eg, the objectives could be something like - X hrs of legal assistance to be provided, Y partnerships to be established by Fund Z over the next 4 years. These goals could be further sub-divided over each quarter.
Every quarter, the community votes on the fund’s performance. Payout is a combination of SUSHI tokens + principal + interest. To formalize a bit -
Payout = alpha x (max. SUSHI payout) + (1 - alpha) x [(principal) + (principal x base interest rate per period)]
where alpha → (Objectives completed / Objectives expected)
A very crude example, let’s say Fund Z is putting in $10,000,000 for ~8.5m SUSHI tokens for a 1-year partnership, and the objectives are 100 hrs of legal assistance, 2 partnerships with DeFi/CeFi institutions, 1 detailed article per quarter. Base interest rate is 10% annually. If the fund fulfils 1 partnership and 1 article, their payout for the quarter is going to be 0.5 x (8,500,000/4) SUSHI + $(0.5 x [(10,000,000/4) + ((10,000,000/4) x (0.1/4))]).
All of this can be normalised into a scoring system - 1 point for each hour of legal assistance provided, 50 points for every partnership, 20 for every article, allowing the fund’s performance to be graded and determine the effective payout. The payout conditions can be made as complex as required by manipulating the scoring system.
Initially, the fund performance can be put through community votes on forums. Incentives are aligned - if a fund really wants to support the protocol and envision significant ROIs in the future, they work for it. The community as a whole is incentivised to vote rationally lest their reputation is tarnished. As evident from this thread specifically, imo the community is sufficiently decentralised to act in betterment of the protocol. Over time there could be systems put in place to make this as trustless as possible - for eg, a new partner signs a message / sends a txn confirming that they were integrating because of fund Z.
The central problem is then to define the expectations from funds explicitly. I understand that in some cases a fund’s value add would be hard to codify. imo the path would be to lay out the expectations as clearly as possible, codify the ones which can be codified, and vote on the rest.
The other question to answer would be is if the token holders are in fact sufficiently decentralized or not. Obv. there will be some whales, maybe we require identification (voter links their Twitter profile) beyond a certain threshold of voting power?
The closest I can match the above proposal is to a flipped convertible note - the seller decides on the payout based on whether the fund fulfils their objectives or fails (the default event).
A test run could be made for six months. Also a unique way to expand on Darren’s VC ranking form if protocols start adopting this as a means for capital raise. Like a reputation system but for VCs.
Strategic investors need to be incentivized. They are here for the token appreciation. If the DAO wants to avoid dilution, it can buy call options but there is no suggestion in the thread that the DAO wants to hoard its Sushi forever. Sure, there are suggestions to the tune of delaying the OTC for a better price. The risk of course is that the VCs may go find a competitor by then or competitors will just zoom ahead anyway.
Ah I see you are in favour of the original proposal of onboarding VC’s. This thread is really all over the place, everyone seems to want something different. Hard to see how anything can get done. One of the disadvantages of DAOs I guess.
A quick glance reminds me of the senior note offering from Coinbase in that it offers Coinbase the flexibility to either settle in cash or stock albeit with some differences: Coinbase - Coinbase Announces Pricing of Offering of $1.25 Billion of 0.50% Convertible Senior Notes Due 2026
My read is that the platform (Sublime) is still under development and that it might not be mature enough for this particular Sushi proposal at the moment. I fundamentally like the direction this is taking because:
- Instead of DAOs having to trust the honesty of VCs, the VCs are now required to trust the DAO
- The demand for this offering does suggest that the DAO has an upper hand in negotiations
- Unlike 1:1 options, this route immediately gives the DAO access to capital while also incentivizing VCs to align and work
- While I realize subjectivity can’t be encoded onchain, some KPIs could be (for eg. Risk Harbor or Tidal moving insurance payouts onchain, something considered impossible before)
- This could be a true test for onchain dispute resolution mechanisms like Aragon while also forcing VCs to take their cases to the decentralized courts!
Love the idea in short! Good luck with refining and building it.
PS. You may consider using Markdown/HTML for the equations
Umm that’s what the entire proposal and surrounding debate is about - setting the terms, expectations and size of the VC round. The underlying goal has been to onboard investors for strategic reasons and not just capital.
Oh from reading though it looks like a lot of people are against onboarding VC’s. I think that’s why some of these other proposals like loans are coming up. Best if luck
Thanks for the feedback. Some points you have highlighted do resonate with me.
As for Sublime, we are primarily focussing on problems related to credit scoring and the creation of credit social graphs. Consequently, we do believe DAOs could be important actors in the marketplace in the form of issuers of bonds, secured or unsecured notes. Since there are a wide range of fundraising solutions that already exist or can be created, it’s good to have feedback from the community on what they actually need and would use.
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.
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!
@AdamSCochran you raise good points. To address each.
The needs which the loan is solving for are
- minimizing dilution to raise USDC
- 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?
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