Dove Mountain Weekly #4

Treasury Diversification Deals As A Newcomer In The Crypto Funding Space

Hello world, and welcome to Dove Mountain Weekly #4!

Today, we are digging into treasury diversification as a new fundraising model.

In 2018, Andreessen Horowitz announced they had invested $15M in MakerDAO by directly acquiring 6% of the total 1 million MKR coins in circulation. However, not many deals like this followed.

The past nine months have seen a resurgence. In November 2020, Alameda Research and Pantera Capital revived this practice through the direct purchase of BAL tokens from the Balancer Labs treasury.

Since early 2021, a few DAOs have decided to raise funds through treasury diversification. Most of them argue such a funding method is key for a project’s ability to survive and execute through a bear market. Almost all of these deals went through a formal DAO governance process. A few did not - for example, Synthetix has a multisig of 3 people empowered to make deals along these lines. 

The purchasing amount goes from $700k up to $73M, showing how diverse treasury diversification can be. On average, 6% of the native token supply has been transferred to strategic investors.

DAOs and investors have to reach an agreement on deal terms, and especially on lockups and vesting schedules. Still, a 1-year cliff /1-year linear unlocking schedule seems to have become a standard for such deals over the last few months. Investors want to get the best price while DAOs try to avoid a supply shock. The three most popular pricing methodologies have been:

• Applying a discount on a time-weighted average price

• Defining a fees stream multiple

• Taking the spot price

Most of the projects decided to sell their tokens in exchange for stablecoins (DAI or USDC), not to be dependent on the volatility of its native token’s price. Friends With Benefits exchanged FWB Pro against a mix of ETH and USDC. Lido decided to divide the deal into two parts, both selling a part of the DAO treasury against ETH, instead of stablecoins.

The most active investors ParaFi Capital, Dragonfly Capital, Blockchain Capital, Paradigm, DeFiance Capital, Nascent, The LAO, and Coinbase Ventures, all participated in two deals. Except for Lido, angel investors, corporates, and foundations have been relatively absent. Tier-1 funds represent undoubtedly the most common deal participant here.

Even if treasury diversification is relatively new, it has been going from a best practice to a real trend in a few months only — at crypto-speed.
Beyond obvious advantages in terms of protection against a potential market downturn, such a treasury diversification via direct purchase from strategic investors has the added benefit of bringing in long-term value-aligned investors, which can vote and draft governance proposals.

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Feel free to have a look at Dove Mountain Data, the richest dataset ever publicly released on crypto fundraising rounds.

We have included last week’s 15 fundraising rounds:

• DeepDAO ($3M) — with participation from Hypersphere Ventures, Digital Finance Group, LD Capital, Moonwhale Ventures, YBB Foundation, SevenX Ventures, AU21 Capital, TRG Capital, JRR Capital, Incuba Alpha Labs, Illusionist Group, bitfwd, Puzzle Ventures, PAKA, Kernel Ventures, Lancer Capital, Waterdrip capital, LVT Capital, Infinite Decentralization Capital, Kolektivo Labs, Moon Capital, BlueHelix, ArkStream Capital, Morningstar Ventures, DAO Maker, Ellipti, Stratos, Andrey Shirben, Jemma Xu, Sergei Chan, and Vishal Kankani.

• Sherlock ($1.5M) — with participation from IDEO Colab Ventures, A.capital, Scalar Capital, DeFi Alliance, Alex Angel, Alex Berto G, Chris Spadafora, David Truong, Diane Dai, Don Ho, Felix Feng, Hart Lambur, Ivan Zhou, 0xb1, Jasper de Gooijer, Jordan Momtazi, Josh Buckley, Kain Warwick, Kerman Kohli, Mariano Conti, Mark Borsten, Michael Ng, Rajeev Gopalakrishna, Ric Burton, Richard Ma, Sidney Powell, Sunny Aggarwal, Will Price, and Zubin Koticha.

• Synthetify — with participation from Alameda Research, BuildHodl Capital, CMS Holdings, Divergence Ventures, Solana Foundation, DeFi Alliance, and ei ventures.

• Unchained Capital ($25M) — with participation from NYDIG, Stone Ridge Holdings, Ecliptic Capital, Starting Line, and TVP Bitcoin Venture Fund.

• Impossible Finance ($7M) — with participation from True Ventures, CMS Holdings, Hashed, Alameda Research, SinoGlobal Capital, IOSG Ventures, Divergence Ventures, GBV Capital, Mgnr, Lemniscap, Primitive Ventures, Incuba Alpha Labs, BR Capital, ​​Coin98 Ventures, Ternary Capital, The LAO, Maple Leaf Capital, LongHash Ventures, Bitscale Capital, Sandeep Nailwal, Kain Warwick, Jordan Momtazi, Bette Chen, Ruitao Su, Bobby Ong, TM Lee, Larry Cermak, Calvin Liu, Leo Cheng, and Suji Yan.

• Pontem ($4.5M) — with participation from Mechanism Capital, Kenetic, Alameda Research, Delphi Ventures, Animoca Brands, and others.

• 2CrazyNFT ($1.7M) — with participation from DCI Capital, DTS Capital, AU21 Capital, Supertarget Capital, ExNetwork Capital, GD10 Ventures, Tidal Ventures, Magnus Capital, MXC Exchange, MDA Capital, Minted Labs, Chain Ridge Capital, Designated Capital, Blocksync Ventures, Megala Ventures, Orion Protocol, GTA Ventures, Ignition, Clouds Capital, X21 Digital, Stakely, Twin Apex Capital, Chronos Ventures, and Wings Foundation.

• Endaoment ($2.5M) — with participation from Framework Ventures, Distributed Global, Station 13, DeFi Alliance, and Chapter One.

• Composable ($7M) — with participation from Advanced Blockchain AG, Rarestone Capital, Divergence Ventures, New Form Capital, DFG (Dynamic Fintech Group), Maven11 Capital, 4SV, Hypersphere Ventures, Blockchain Capital, PNYX Ventures, CMS Holdings, Alameda Research, SOSV, The Spartan Group, LedgerPrime, LongHash Ventures, Cluster Capital, and Pluto Digital Assets.

• Lithium ($5M) — with participation from Pantera Capital, Alameda Research, Huobi Capital, OKEx BlockDream Fund, NGC Ventures, LongHash Ventures, and GBV Capital.

• Panther Protocol ($8M) — with participation from Rarestone Capital, Master Ventures, DeepVentures, Moonwhale Ventures, Alphabit Digital Currency Fund, ExNetwork Capital, MarketAcross, Nextgen, Protocol Ventures, Titans Ventures, Insignious Capital, Kosmos Ventures, Ellipti, BlockArk, A195 Capital, Aquablock, AU21 Capital, Arcanum Capital, Lunar Station, Dutch Crypto Investors, EscolaCripto, Genblock Capital, BlackDragon Capital, CSP DAO, Berezka DAO, Skynet Trading, and BaseTwo.

• NFT20 ($750k) — with participation from DeFiance Capital and Stake Capital.

• Alkimiya — with participation from Dragonfly Capital, Derek Hsue, Castle Island Ventures, Robot Ventures, and General Mining Research.

• Sigmadex ($4.2M) — with participation from LD Capital, GBV Capital, Moon Inc., PNYX Ventures, NGC Ventures, Rarestone Capital, SkyVision Capital, 3Commas, Spark Digital Capital, Marshland Capital, Hillrise Capital, DeepVentures, GD10 Ventures, DAO Maker, Shima Capital, One Block Capital, Signal Ventures, ExNetwork Capital, Kyros Ventures, AU21 Capital, Tenzor Capital, Basics Capital, Lancer Capital, Titan Ventures, and Regain Ventures.

• ARCx ($1.3M) — with participation from Dragonfly Capital, and Scalar Capital.

We have also added the following investors: ROK Capital, Supertarget Capital, MDA Capital, Kolektivo Labs, BlueHelix, ArkStream Capital, MarketAcross, and many angels.
As we received a lot of positive feedbacks and comments, we will be publishing new formats in the upcoming days (👀).
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See you next week for another issue,

The Dove Mountain Team