[Withdrawn] Sushi Phantom Troupe - Strategic Raise

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Now that we’ve generally covered the why and who is a good match on qualitative terms ([Withdrawn] Sushi Phantom Troupe - Strategic Raise - #284 by OmakaseBar) - quantitative considerations.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highly dedicated funds, and smaller checks for highly motivated angel investors, @paperhands2 brought up this point ([Withdrawn] Sushi Phantom Troupe - Strategic Raise - #60 by paperhands2)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option has been noted on by @SBF (https://twitter.com/SBF_Alameda/status/1416032494244270084), UMA’s success token ([Withdrawn] Sushi Phantom Troupe - Strategic Raise - #112 by kevin), and many others.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 ([Withdrawn] 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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Just wanted to say thank you to @pegbit for collecting and putting all of these together – very useful given all the conversation.

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Former OTC derivatives structuring guy here, too. Think MGNR raises a good point, but buries the lede.

Here’s what’s really going on:

  • Selling an option creates value out of thin air because the option is valuable to a VC, but worth 0 to the treasury. This makes the current deal structure better for Sushi than selling additional tokens at a discount

  • What’s controversial is how to divide newly created value. Should 90% go to the VCs and 10% to the treasury? 50% to the VCs and 50% to the treasury?

In traditional markets this gets negotiated between banks and corporate issuers. However, one result should always the same: it’s a win-win. The company ends up issuing fewer shares and the bank gets some free money.

What does this mean for us?

Team and VCs probably found a good deal structure. They just need to find terms (strike price, tenor, allocation mechanics) that work well for everyone

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I’d read the proposal in detail once again. Sushi Phantom Troupe - Strategic Raise - #318 by OmakaseBar

While mgnr…io does bring up good points regarding options pricing, the proposal was explicit that:

strike price (subject to revision after further ongoing evaluations)

and

Raise size ( as mentioned equality of access is key, welcome more discussions on securing the mechanism)

The community has equal access to the same terms, if not more advantageous terms

  • Length: 2-yr lock-up / 2-yr vest (subject to revision, no lockup or vesting for community offering)

Additionally these revisions have been discussed significantly in the daily AMA sessions set forth by this schedule, I encourage everyone to participate and engage in this process: Sushi Phantom Troupe - Strategic Raise - #283 by OmakaseBar

They are also recorded and can be found here: Sushi Phantom Troupe Episode 1 - YouTube

As always if you feel this process is not accessible enough for you I’m happy to engage 1:1 at any time Calendly - Omakase

Edit: So I think there’s some misconceptions about these options, or more technically warrants that are floating around. Lots of posts are assuming the option with strike has an implicit price that can be traded on the open market- so an entity can receive an option and immediately sell it at whatever the market determined price for that option for an immediate discount. However there is no liquid market for sushi options specifically, I suppose one could create one by supplying liquidity, but it would be really thin- so this has never come up in discussion. It’s effectively a warrant in this case due to illiquidity - an agreement to be able to buy sushi when it hits a certain price, nothing more - you cannot sell this agreement. The mechanism is the same.

The intention of the revised proposal was to arrive at a mutually beneficial structure - details to be revised in the community sessions planned this week. Alignment on structure is key to establishing a foundation of collaboration between all stakeholders - the revision was made to work towards a simple goal: increase in sushi price. While exogenous effects are present, an increase in Sushi price would be undoubtedly reflective of the growth of the ecosystem, which is what anyone here is interested in. If we do not realize that goal, the warrant expires worthless for everyone - no dilution or discount is realized and price flounders - everyone loses. DeFi is all about incentive mechanism design across different actors.

Now lets consider this term “dilution”, we have to take a step back and realize one of the core mechanisms of Sushi has essentially been giving away rewards to generate outsized value generation. From the perspective of the treasury, if Sushi reaches the strike price - yes, the treasury sells additional sushi and at the current deal size, which has been significantly reduced from the original proposal, this additional amount is not dilutive of the 250,000,000 Sushi that will be in circulation at expiry, nobody is issuing new sushi (only 5% dilutive of treasury, 0.5% transferred to circulation). The net gain for all current holders if Sushi reaches the strike price, which is the incentive, would be magnitude orders larger than any Sushi exercised from the call option.

Recommend tuning into the AMA today 9PM UTC and reviewing the AMA yesterday where we discuss both implementation and details surrounding options: Sushi Phantom Troupe #3 - YouTube

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…because the bigbags can’t just go to aave or any OTC provider and borrow enough sushi to secure the outcome they desire?

Hey Everyone,

I’m a pleb and not a VC, but would like to offer a proposal anyway that is simple, easy to understand, and achieves the 2 stated goals of the raise:

  1. Diversify Treasury
  2. Obtain strategic partners

Let’s call it the “Pleb Capital Proposal”


Pleb Capital Proposal

Screen Shot 2021-07-22 at 8.32.10 AM

  1. Sell $20M worth (about 3M SUSHI at current prices) from the treasury slowly over the course of 3 weeks into the open market. For each chunk of tokens to be sold in this 3 week timeline, we can set limit orders that adjusts to market price of SUSHI to avoid putting too much sell pressure on the market.

  2. VCs who want to participate in strategic partnership MUST buy in the open market a minimum of 1M SUSHI tokens

  3. Community & Sushi team chooses 3 VCs as strategic partner. The chosen partners MUST deposit SUSHI tokens into 3 year vesting, 1 year cliff contract. In return community votes to distribute for FREE 150,000 SUSHI tokens to each sushi strategic partner.


Sushi gets $20M in treasury and long-term aligned partners

VCs get effectively a 15% reward for long-term alignment

The best thing of all, the raise is accessible to everyone, easy to understand , and there are no complicated market-distorting measures of segregating blocks of tokens for sale to private parties with no market competition.

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