- Edited
Thank you for your thorough responses. It appears you have only the best of intentions for the DAO, and I greatly appreciate that.
I happen to have experience as an entrepreneur since the mid-90's (i.e., the ".COM" era). I majored in mechatronics engineering but completed a minor program for technological entrepreneurship. I also worked for years as a student for my school's incubator program (at Rensselaer Polytechnic Institute) before my first .COM took off in '97.
Therefore, I have first hand experience with how these things can succeed and fail. I will respond to your points as you did mine.
"…it is the upper bound of where I consider we would fund depending on the negotiated deal. I imagine that the average would be under 100K."
The way in which funds amount is determined must be very clearly specified by your proposal. It should be rules-based, without a chance for deviation.
A program like what you propose can easily be gamed by organized crime organizations. A trustless defi incubator is ripe for exploit. Con artists abound, and any effectively permissionless incubator program that hands out money will simply look like a pay day to fraudsters. (The past 10 years I have served as a cybersecurity engineer and currently manage a threat monitoring, detection and response/automation program at a Fortune 500 financial services company. With trillions of dollars under management, my monitoring intelligence makes me sure we have millions of dollars per day slowly bled out.)
I don't want the DAO to bleed out. Without a rules-based approach for the incubator programs dispersal of money, any OHM holder/staker could infiltrate and sabotage through trustless fraud this kind of program.
"The plan for Olympus is to be a decentralized reserve currency backed by a basket of assets - the updside from a gaining significant share of the governance token of a promising protocol on a risk adjusted return is stratospheric."
You think it's only upside? You don't see how many rug pulls are out there? I lost $1000 just the other day on a rug pull three days after the program was released. Are we going to require KYC verification for all programs we throw money at? Who would prosecute if they take that money? In order to prove fraud, you have to prove intent. Any project we throw money at that fails could easily claim incompetence and walk away with zero recourse to be had.
Do you know that Microsoft paid for Windows to get produced by taking money from IBM to make their "OS/2" operating system? They took all the money and barely did anything with OS/2, instead putting all resources to a project IBM had no real benefit from.
Systems that hand out money are made to be gamed and exploited. Especially in a domain as trustless and private/anonymous as defi.
Not only that, but over 90% of startups outside of the cryptospace fail in the first 3 years. Pretty much everything an Olympus incubator program gives money to will fail, quickly. Almost everything will be a loss. VCs accept that risk with the knowledge that at least one play out of 50 will pay off big time.
The type of investment you propose is what's called seed-round investment. Typically, seed investors have very strong relationships with the startup team long before ever handing over money. The reason is the chance of a seed startup to succeed is even less than a first round startup. In fact, there is almost zero chance that a seed-round startup will succeed.
VC's offset the risk of investing in seed-round startups by having very active roles and participation in the the startup's projects and operations. The DAO certainly can do that, but all of these activities and strategies should be defined and clearly specified in your proposal.
No matter what, even with strong cohesive participation in the startup protocol project, the downside is huge and the payoff unlikely. Most seed investor VCs fail. That's why the most successful like Andreesen Horrowitz, Softbank, and Goldman Sachs prefer Series A - C rounds of investment to put money towards. A startup that has grown beyond incubator is far more likely to succeed than one that is next to failure every day of its existence.
Again, almost every venture in any tech incubator program will fail. Having been in the cryptoasset space since 2013, my experience says this statement is only more true for startup projects in the space - not less. Almost all money that goes to these protocols will be for nothing. Risk is mitigated with effective controls. These controls can be business controls and don't have to be technical controls, but they still need to be clearly defined.
It sounds to me like you are only thinking of the potential upside without acknowledging the risk and the statistical probability that nearly every startup that participates in the incubator program will fail.
"I can’t understand how the activity of incubating projects could be considered high risk."
I can't understand how you can't see that incubating projects is a high risk proposal for any DAO assets - whether time or currency. Let's use the altcoin season of 2017/18 as an example. How many of the thousands of altcoins during that run remain viable any longer? 5%? 2%? Not many at all. Almost all resources the DAO gives to startup projects with an incubator program will be for nothing. The hope is that you get enough reward that somehow the DAO will have tremendous future benefit.
This isn't likely. Especially if the DAO is to hold a protocol's token and not sell at the first chance of pump. A critical step for any VC is the exit. IPOs typically are used in VC exit strategies, but mergers and acquisitions also can be used. No matter what, the intent of every VC is to exit at a huge profit. That is the opposite of acquiring ownership and just sitting on it/holding it.
Exit strategies should also be defined in your proposal, if the DAO is to become a VC firm. Sitting and holding a project's coin indefinitely is not tenable. Do you remember Lycos or Altavista? What ever happened to them? They were HUGE projects in the 90s, only to be eaten and consumed by Google years later. Holding ownership of any tech company that isn't constantly growing and succeeding (e.g., Apple, "Meta", Google, Tesla, etc.) is incredibly high risk because low barriers to entry mean competition is fierce.
This is only more true in defi. First we had Uniswap, then everything got forked and we have X-swap (e.g., sushi swap, pancake swap, even the scammy snow swap). Every fork eats into the originating project's profit and mean it's less likely to succeed. It also means the risk of holding a tech project's token increases over time.
I haven't seen our DAO's balance sheet, but does the treasury hold and stake TIME, Z2O, GRYO, EXODIA, and all other forks that benefit from the DAO? Not likely. You think it's all "we're in this together and the DAO will only benefit"? I find that perspective naive. This is business and people are in it to make money, as quickly and easily as possible.
We're only all gonna make it if we are careful with the risks and hold on to every piece of wealth accumulated. We're not all gonna make it if we play it lose and act like there is no downside risk.
"The DAO is made up of over 100 contributors in my answer to Kleb I set out that - Advice and assistance carries with it certain inferences about the amount of time required and, as it would be remunerated in comparison to the ordinary compensation, it would be minimal if the assistance is a small part of their overall roll in a given week. I imagine it would only amount to a few hours a week from several DAO members depending on the advice or assistance required - it would of course vary from time to time, maybe less at the start but more in the week before they launch."
Having worked in an incubator before, there was a set of services every startup benefited from. This included mentorship, legal support, and technical resources. Every service was developed and specified as part of the program. Every startup engagement had a roadmap and it was generally the same for each project, because the incubator knew what worked and what didn't work.
I think you should also include a proposal of services and a roadmap for support of every startup. From vetting project to handing out cash and beyond, every step should be defined, every service for support specified.
"We would look at the founder and team’s background, experience, development to date and any industry references – in terms of vetting and additional considerations concerning selection. We would expect the any funding provided to be held in a multisig."
What about anon teams? How do you know the multi-sig wallet doesn't have all keys held/controlled by a single person or entity? Who does the vetting? What are the qualifications that says one project should be supported while the other not?
"The minimal work required from some contributors some of the time would be characteristic of their ordinary area of contribution."
Surely you're joking. Every project that participates in the incubator would require part time support from at least 3 DAO members if the incubator hopes to succeed. This is not insignificant or "minimal".
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Of course, as I said above, I appreciate your intent. I don't want to shoot your dreams out of the sky. Please recognize that this is not just an "upside always" game. In fact, it's quite the opposite. Please don't be so naive as to think that a successful incubator program would require minimal input/resources from the DAO. Please specify every single control and service that mitigates the risks.
I could not support this proposal, otherwise.
