[Withdrawn] Sushi Phantom Troupe - Strategic Raise

I think great VCs deliver great value, and if Sushi needed cash it would be a no-brainer.

It doesn’t though, and there are other ways to diversify the treasury too.

In terms of “adding value”… rather than effectively spending millions (and potentially forfeiting the good faith of the community) on a VC discount, I’d prefer to see Sushi spend aggressively on recruiting world-class talent that can commit full-time whether that’s engineering, design, legal, marketing etc. We already have a great team, but I’m sure there are missing pieces and it can improve and grow further.

Even the best VC still has to juggle Sushi with other portfolio companies vs. a team member who is ALL in.

And I think the value-add of a great VC is still less in DeFi than in other domains, since DeFi is so open and connected which facilitates recruiting + business dev.

Future Fund demonstrates how if a fund has truly high conviction in Sushi and the capacity to add value in a meaningful way, it could already be doing so. There are exceptions to this, but I think something like Future Fund is a better match for the ethos of Sushi anyways.

So the traditional playbook would dictate a raise from VCs at a discount. But does Sushi follow the traditional playbook? Does it need to?

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Strategic dumpers known from stuff like solstarter, solana ecosystem or polkamon

Those are the value add VCs that we need at sushi…

Makes sense why they are already dumping on chain and in cex while posting negative tweets on market outlook

To think that we pushed nomi out the door because he was about to steal and dilute the sushi community but now we allow for this phantom troupe to come in and do the same in broad daylight

Btw great choice on the initiative codename, at least it doesn’t hide the true intentions of the group behind this raise

The Phantom Troupe (げんえいりょだん, Gen’ei Ryodan ), sometimes just called the Troupe (りょだん, Ryodan ), is an infamous band of thieves with Class-A bounties. The group is also known as the " Spider " (旅団クモ, Kumo ) and its members the “Spiders”, most of whom hail from Meteor City.

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This is a message from Hart and I on the UMA team:

Today’s community call was insanely exciting. As promised on the call, we want to share a new (but simple) idea that UMA has been working on called “Success Tokens”.

Motivation:

  • The community doesn’t love selling tokens at a discount.
  • VC investors don’t love yield-based products like the Range Token idea that @kevin previously suggested above. VC investors want pure equity upside (not “yield”), as @amywu pointed out on the call.

“Success Tokens” combine a $SUSHI token with a $SUSHI call option. This means that instead of offering the VC investor a discount, we offer the investor a call option alongside their token purchase. They pay the full price of $SUSHI for this package. The option portion is only valuable if the SUSHI price rallies, which better aligns incentives: the VC investor only gets their “bonus” if $SUSHI performs well, which of course benefits the whole community.

@kevin summarized this well on the call: instead of paying the VC investor a bonus upfront (in the form of a discount), the Success Token structure pays the VC investor a bonus only if good things happen for the community (aka the token price goes up).

Example:

  • Create a “Success Token” that combines 1 $SUSHI and 1 $25 strike $SUSHI call option
  • Sell the success token at current $SUSHI price (not at a discount)
  • This Success Token expires in X years (let’s say 2 years)
  • At expiry, the token is redeemable for 1 $SUSHI + the value of the $25 strike call option (paid in $SUSHI)

The parameters that can be tweaked here are (a) the strike of the call option, (b) the expiry date, and (c) the price at which this Success Token is sold. The numbers above were just picked as examples. Picking these parameters would be what the VC investor and the Sushi community should negotiate.

Hart will be writing a blog post going in more detail on this structure shortly. UMA is ready to launch this product for $SUSHI (or $xSUSHI) as soon as today.

Our personal view: Sushi should absolutely pursue a strategic raise from tier 1 venture investors. However we can (and should) design a better incentive structure than simply selling tokens at a discount. We have the tools and financial engineering knowledge to create a structure where everyone (investor, DAO, community) wins. DeFi is about inventing these novel structures—we should do this!

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I’ve actually now wonder if calling this the Phantom Troupe group, which I suppose came from Maki, was a subtle message to the community that he doesn’t really want to do this but a bigger hand is pushing him to comply?

Because otherwise it was just an hilarious poor choice that in the end helped provide a brief overview of what 90% of those folks want to do with this strategic raise. Funny how things are

Guess all we missing now is to find out who is Chrollo in that group

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Using a discount is like saying your bags are trash and you want folks to get them off of your hands, quite the contrary you should use the treasury to incentivize users to remove liquidity from the market (xSushi) so that if VCs attempt to purchase they drive the prices up

Are you personally getting compensated by any of the VCs for proposing this?

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FWIW I think the idea of using call options here isn’t crazy – sushi at market px + 1:1 2x upside strike call options

probably want expiry to be more than 2 years out – maybe 5 years? to incentivize long-term thinking

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@0xMaki please contact me, I’m a portfolio manager at Parataxis Capital and I’m interested in participating here. julian@parataxis.io

Don’t mind a lurker sounding out

Notice the poll earlier heavily skewing towards

  1. the strictest possible vest
  2. the lowest possible upside
  3. the lowest possible allocation and number of partners

The fact that there is no zero partner/zero discount choice is very telling of the choices given to the community, almost as if ‘im going to do this whether or not you agree’

Sushi’s strength was in its community, and this move seems to be punishing the community for the sake of unpromised value by ‘institutionals’. I’m afraid this is the endgame for me

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Future Fund are absolute chads. balls deep in sushi

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@0xMaki Stacker Ventures (stacker.vc) is interested in finding out more - krom@stacker.vc

Just checking in to say selling to VCs at a discount is total bullshit and always will be. The gall of said VCs to turn up and say that they really deserve a 60% discount and that 30% is generous is emblematic of where defi is at this point.

Smooth talking tradfi suits trying to schmooze themselves into buying your bags at a discount only to dump on you in 6 months. Thanks but no thanks.

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i think it can be worthwhile to raise from a select few vc’s with the embedded call option token. this gives sushi liquidity now and that sushi will not be staked for xsushi for x years (3-5). also, why not carve out a portion of the raise for community? launch x% of embedded call token on miso to whitelisted addresses (say sushi or xsushi holders with positions under a certain amount).

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Thank you to everyone who has provided constructive feedback to the original proposal. After observing from the sidelines, DeFiance would like to clarify several assumptions being made and provide further context for this capital raise.

Firstly, we acknowledge that the current capital raise of ~$60m is too large. When initially proposed, we believed that a deal size of $20m would be ideal given Sushi’s Treasury size and Sushi’s financial requirements. However due to overwhelming investor demand, the deal size was enlarged. we do not feel that the number of VCs involved impacts the quality of the round, as long as individual VCs value-add are clearly communicated.

For this capital raise, DeFiance’s involvement was limited to the recommendation of certain VCs and the price discount considerations. DeFiance held no part in the final allocation process. However, to signal support, DeFiance committed a token sum to the capital raise.

In light of the latest conversations with respect to DeFiance’s market activity and the possibility that this is some form of deal arbitrage, I would like to emphasize that the accusations are completely false. DeFiance has been original supporters of Sushi since October 2020 when Sushi was < $1.00 and till today, we remain one of the largest SUSHI holders. We have provided support to the Sushi team throughout this time period and fully intend on doing so for the foreseeable future. As a crypto investment fund that holds liquid positions, our mandate requires us to not only buy tokens but occasionally sell them as well. We do not think that there is a need to explain every action we take to the public.

After reviewing the alternative recommendations to the proposal, we believe that a discount to the 30D TWAP price is necessary in order to offset the illiquidity premium of the purchased SUSHI. Considerations as to how much of a discount or how long the vesting should be for the purchased SUSHI are openly debatable by the community.

Moving forward, DeFiance will not participate in this capital raise in order to remove any concerns of conflict of interest. We hope that the Sushi community focuses on the benefits of a large stablecoin denominated Treasury, which will provide the SushiSwap team with a meaningful war-chest of financial firepower in the years to come.

Best,
Wangarian
DeFiance Capital

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This is an incredibly arrogant response. You do not think there is a need to explain dumping 8 figures of Sushi within days of putting together the proposal? You don’t think you could have chosen a better time, or just refrain from dumping while this is going on?

Your role in selecting which of your buddy VCs gets tokens at a massive discount is deeply unwelcome - we all know how the world of VC back scratching works.

Good riddance “Defiance” Capital

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I barely have a position in SUSHI but this response still rustled my jimmies. Just dismissing your very conveniently timed sells as: “yeah man we also need to eat, you know?” I know I’m being childish with how I’m wording my response, but it doesn’t make it have any less weight.

And to address this:

After reviewing the alternative recommendations to the proposal, we believe that a discount to the 30D TWAP price is necessary in order to offset the illiquidity premium of the purchased SUSHI. Considerations as to how much of a discount or how long the vesting should be for the purchased SUSHI are openly debatable by the community.

Do you just like @Franklin-Pantera think that the only market for SUSHI is the SUSHI/ETH market on SushiSwap? Because that seems to be a big reason for justifying the discount. A very small amount of DD confirms that most of the liquidity for SUSHI is NOT on SushiSwap and in fact does not even account for 10% of the daily traded volume!

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I am extremely disappointed with the team to bring such a proposal forward. There is absolutely no reason why the VCs should get such a huge discount, I would even argue there is no reason why they should get a discount at all. The token already trades at a discount if you look at all the metrics that VCs care about (p/e ratio compared to trading volume etc.). If they believe in the longterm growth of the protocol, they should absolutely love this price right now.

Also it is pretty suspicious that we get this proposal after the UNI education fund in such a short timespan. I would say this is no coincidence and the VC funds realized that they can misuse governance for their own purposes. Just open a governance proposal and make it look legit, while the VCs can switch every vote in their favor with their huge Sushi stack. Just remember the Sushi/Solana proposal and how much influence Sam had over the outcome of the vote.

Additionally there is no mechanism to make sure that the VCs actually fulfill their promises. They get access to Sushi at a discount without actually being forced to do anything. Again this is similar to the DEFI education fund, they get the money and they can do whatever they want (insta dump it). It is absolutely rekkless to not include any meaningful mechanisms (except vesting) that protects Sushi holders.

As a crypto investment fund that holds liquid positions, our mandate requires us to not only buy tokens but occasionally sell them as well. We do not think that there is a need to explain every action we take to the public.

This is nice marketing talk for: “Hey we need to make money and occasionally dump on you guys.”

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First of all, @Wangarian appreciate you guys not participating this round. Personally, this gives me comfort that there’s probably no arb happening.

“As a crypto investment fund that holds liquid positions, our mandate requires us to not only buy tokens but occasionally sell them as well. We do not think that there is a need to explain every action we take to the public.”

However, can’t help but feeling this sounds a little defensive.

IMHO, related parties should also recluse themselves from voting and we should whitelist only funds that have not sold in the past 1 month.

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I like the standard hedge fund talk used in this reply, makes you look serious you know.

Just like Hisoka seemed serious about his Phantom Troupe participation before going against Chrollo.

Also I’m curious since DeFiance is a sub-fund from 3AC, does this mean they are also opting out? Otherwise its all semantics and theatrics to look good because in the end not much changes in effect.

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Do you just like @Franklin-Pantera think that the only market for SUSHI is the SUSHI/ETH market on SushiSwap? Because that seems to be a big reason for justifying the discount. A very small amount of DD confirms that most of the liquidity for SUSHI is NOT on SushiSwap and in fact does not even account for 10% of the daily traded volume!

Nah they leave this part out conveniently, you want to tell me a VC investor doesn´t know this? If this really is the case:

  • You lack all the credibility to be involved in the deal
    If it is not the case:
  • You used a disingenuous argument to push your position, which is an even bigger no-go for an involvement in the deal
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Also I’m curious since DeFiance is a sub-fund from 3AC, does this mean they are also opting out? Otherwise its all semantics and theatrics to look good because in the end not much changes in effect.

Yea bit interesting. As they (3A) were the ones dumping on Binance.
0x085af684acdb1220d111fee971b733c5e5ae6ccd is 3A’s Binance deposit address.

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