#37 DAO-to-DAO investments. The Smart Ape Watch
Disclaimer: Everything we write in "The Crypto Insider Report" is an x-ray of the industry as we see it, through the lens of publicly available information. We are not financial advisors.
Building out the space: DAO-to-DAO investments
BitDAO and PleasrDAO, two of the most well-known DAOs, have decided to form a partnership. BitDAO will invest $6.5 million in PleasrDAO (95% ETH/USDT and 5% in BIT tokens) and work on multiple potential collaborative efforts between the two communities.
BitDAO is a Bybit-backed investment DAO, with prominent investors including Peter Thiel’s Founders Fund, Dragonfly Capital or Pantera Capital. Besides benefiting from a 2.5% per day donation of hard assets to the treasury from Bybit (amounting to $2-4 million / day), it grows its treasury and portfolio through investments in other projects and DAOs (using Bybit’s financing to direct capital and resources to builders in the space). It also has incubators and labs that work with their projects (and not only) to further develop their narrative. PleasrDAO is one of the leading DAO in the world of history of innovation in digital art, known for its purchases of The Doge NFT, pplpleasr piece, rare Wu Tang album, or pieces by Steve Aoki and PussyRiot.
The initial proposal can be found here and stands as an interesting case study. It starts in a Web3-, crypto-friendly way with a “gm” and continues with 11 pages layout of the investment opportunity, a description of PleasrDAO, its DAO development history, a brief overview of its members and core team, an overview of its treasury, a case study for The Doge NFT fractionalization process, a section on the benefits it brings to BitDAO and a financial projections page.
In a recent Twitter space, the teams were invited to discuss the investment. Culture fit is important in traditional M&A (some big mergers have failed because of this reason), but it is key in DAOs. BitDAO and PleasrDAO are taking a sequential approach by keeping the communities independent (usually BitDAO prefers that its investments behave like autonomous entities) and, in time, allow gradual, permissioned access. The investment is seen as synergistic and non-competitive/complementary, given that the two DAOs can benefit from their expertise. Moreover, a D2D relationship is seen as more important than a VC investment, given another DAO may be more knowledgeable of the issues and goals that its target experiences.
The timing for a D2D relationship needs to happen as early as possible in the life cycle given the complexities to run proposals and engagement through larger communities. They are eager to try out governance models that would entail both tokens and NFTs. A high degree of focus will be on community building and exploring crossovers b/w the digital and physical worlds. The same level of excitement will be placed on IRL events. One of BitDAO’s key value propositions is that it organizes long-term meetings with projects it is incubating and encourages them to think about how they can work together and create synergies. Their vision is that they will direct resources to these residencies and hackathons to see how relationships can be built and the future of society can be shaped.
Coinbase Lays Off Staff After “Growing Too Quickly”
One of the biggest recent downsizing announcements came from Coinbase, which announced that it will lay off around 1100 employees. Brian Armstrong, the CEO, is blaming this on the apparent recession and a potential upcoming crypto winter. CoinDesk writes that targeted employees found out about it in their personal inboxes, as the corporate email addresses were disabled swiftly. Harsh.
The apparent recession and potential crypto winter are definitely ruining everybody’s party, as other companies such as BlockFi, Crypto.com, and Gemini have reduced staff. However, they also expose the fast pace at which well-funded companies grew in an attempt to capitalize on a favorable market. Coinbase had about 1000 employees in total at the start of 2021. According to CoinDesk, they are laying off approximately that same number of people just now, and to further put things in perspective, they plan to reach 5000 total employees after this move. One and a half years later. Looking back at this hypergrowth, Brian Armstrong mentions in the message he published that they indeed grew too quickly.
As we’ve mentioned in the past when citing Sequoia’s presentation to portfolio companies, these times are hard and they are forcing companies to adapt and endure. This might mean slowing down the pace of growth, cutting down costs, and in extreme situations even letting some people go. But the companies that manage to stay afloat in these turbulent times are the ones that will succeed in the long term, learning from their mistakes, building sustainably, and, essentially, leaving their competitors in the dust.
The Smart Ape Watch
Luxury watchmaker TAG Heuer has entered Web3 by joining forces with the well-known NFT community around the Bored Ape Yacht Club and CLONE -X with the launch of a new feature that allows users to display their NFTs on the dial of their Connected Caliber E4 smartwatch.
Current owners can support the feature with a free update via Apple's App Store and Google's Play Store.
"Verified NFTs are displayed in a hexagon with a cloud of particles gravitating around the image. Some NFTs are still images, and some are animated GIFs. TAG Heuer’s watch face will support these formats in crisp detail, with animations looping infinitely," the watchmaker said.
Furthermore, they went another step into web3 when they decided to brainstorm the watch’s appearance and functionality with the Bored Ape Yacht Club, Cryptopunks, CLONE-X, and World of Women communities.
A few days before this announcement, the CEO Frédéric Arnault announced that TAG Heuer partnered with BitPay to allow crypto payments in thirteen cryptocurrencies on its U.S. website, including Bitcoin, Ethereum, Litecoin, and the infamous Dogecoin.
And by the way, Arnault, a well-known Web3 enthusiast, bought a Bored Ape NFT last month and made it his Twitter profile picture.
Nike, Prada, Coachella, Super Bowl, Adidas, Dolce & Gabanna, and MAC are just some of the many examples of brands and companies that strategically used NFTs to provide a different and unique experience for their customers. Some others are going directly for the Metaverse.
The future is near!
The investor and the investee
Earlier in May, Merit Circle, a gaming DAO, started a proposal on their forum about refunding Yield Guild Games’, the giant play-to-earn DAO, seed investment while also removing their $MC seed tokens.
Merit Circle’s main point is that YGG hasn’t brought the expected value to the DAO and, as such, did not act like the kind of investor they expected. Since they’re almost direct competitors, MC’s proposal states that without further value-added besides the investment (a total of $175.000 at $0.032 per $MC, a mere 22.77x at current prices) they aren’t sure this is how things are supposed to be between the two.
On the other side, however, YGG claims that the deal was an exchange of tokens for capital without any other services such as marketing or strategy.
The problem? The deal has been signed by Merit Circle Ltd., the counterpart of the DAO, controlled mostly by executives of Merit Circle and early investors. What does this mean? It means that contributors could put everything to a vote but there’s no guarantee the company will indeed cancel and refund the investment.
Now, their governance strife finally ended with a mutual agreement to terminate the relationship and buy out YGG’s investment for $1.750.000 (10 times the initial investment) since there is no legal mechanism to refund their contribution.
Will this set a precedent for future strategic partnerships and investors? It might. Clearing any possible confusion before agreeing to invest could be in the sights of future investors to not let this happen again. But this also shows the lack of regulation in the space and we hope to see this create healthy discussions in the space, followed by solutions.
For more educational crypto content, check out the links below:
The Stakeborg DAO Talks on YouTube: https://www.youtube.com/playlist?list=PLOrFZZifNn4Nx4nSQL3WS52ALPXgrTSVG
Discord channel: https://discord.com/channels/901898461568442458/903006233584341052
StakeborgDAO Quarterly Reports: https://docs.stakeborgdao.com/reports/dao-quarterly-reports
Stakeborg Academy: https://academy.stakeborg.com/