yVCVault for future investments

Came across this nice writeup on Yearn,

https://www.learnyearn.finance/start-here/yfi-maple-leaf-capital

what do you guys think about the idea of a yVCVault(as mentioned in the article) to fund some of the best defi projects in the space? Made a lot of sense to me. I’m sure we can attract the best defi projects in the space. The best teams would love to have the YFI community backing them. There could be interesting possibilities here. Thoughts?

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I’m for this. Have been considering how maximum value could be returned to YFI holders over time, and this is an incredibly synergistic path.

In my mind there is an elected council which creates and operates strategies specifically for YFI holders, and strategies like a vcvault would fall under this purview. There are power hitters in the YFI community that could deal source and be properly incentivized to manage something like this. But limiting to just YFI holders could also be too closed-minded / greedy(?)

There is a brief conversation around ‘on-chain v off-chain’ strategies in the most recent podcast between Andre, Hasu, and Tarun. Quite relevant.

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The vcvault could work hand in hand with the new Karma Dao incubation chat maybe? Seems like working together could be mutually beneficial.

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Oh my…

This is interesting.

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That was quite insightful…thx for the link. In the spirit of keeping with Andre’s ‘offline vs onchain strategies’ thinking…we could just focus exclusively on on-chain communities…kind of like a ‘VC for DAOs’. If we look around us there is a ton of problems that need to be addressed using decentralized solutions and there is a ton of dev talent in the defi space.

Just like Andre mentioned, most good developers just want to focus on their development work and not be bothered with community building and attracting capital etc…We could attract other such developers who have cool ideas that are addressing current pain points and launch them through the yearn community’s backing(ofcourse we could work with other established defi protocols as well to support a combined defi community launch…)

It solves the issue of attracting liquidity and community building for the developer and our community gets to launch cool much-needed products…win win…

We could come up with a vetting process…like a simple web page where developers can submit their proposals for community consideration.

Then a committee will evaluate and choose the ideas on a fair evaluation process…(this could happen either behind the scenes through a small selection community or on an open forum where the community as a whole debates and votes on different ideas…think similar to ‘product hunt’…or a combination of the two)

We could come up with a set of requirements like…the dev should have their system already deployed and working as a prototype such that the community can evaluate it? (may be they also should submit an audit report for their system?) - this would help weed out people who are not serious…

Once a project is selected then we can help them plan a big launch for their product…

This process will also help improve the security of yearn ecosystem…preventing episodes like what happened recently with YAM. Making sure these new projects are vetted before they request YFI and other defi project tokens for liquidity farming…the increased safety will be healthy for the whole ecosystem.

I know that the current state of the space is like the wild west…but if we implement some of these processes/guard rails…im sure we can bring some order to this chaos and improve the safety for the whole space… while providing a platform for talented devs from around the world to launch their products…its like hitting 3 birds with one stone.

I’m excited by the possibilities :slight_smile:

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ALL IN on this idea… Best way to leverage huge funds to help ecosystem and benefit from it.

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Incredible idea, like a grass roots campaign for solid defi developers. Why buy the car when you can own the factory, set funds aside for a DeFi Fatory :factory:

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The biggest challenge with VC investments when LP shares have no lock-up is the liquidity mismatch. Most VC funds are structured on 5 to 10 year terms. In crypto you have hybrid hedge/VC structures with side pockets setup for either the illiquid or liquid portions (i’ve seen it done both ways). LPs have the ability to opt out of one of the strategies.

At the very least, it would be important to develop a time horizon for holding investments or a clear strategy (ie: in the case of a 5x return, the fund will sell 50% of principal - I haven’t seen anything like this where there is a clear strategy for early stage crypto VCs based on disciplined return metrics).

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Also a part of KARMA DAO and I think it’s cool how VENTUREDAO Invested in KARMA. It’s kind of like how USV invested in Multicoin, but for DAOs.

Maybe the ultimate end game is that there are multiple yvaults with different VC style managers (including DAOs).

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Yes…was just reading about KARMA DAO…think there is a lot of synergy in working together to help each other to create mutual value.

Like you mentoned there is scope for multiple variations of capital deployment each with its own variations…

Broadly thinking about the life cycle of a project…Yearn might be able to provide value to projects in two broad categories…

i) Yield Farming Style Launches: Kind of like how YAM tried to setup their launch…enable yield farming through some of the top Defi governance tokens (like YFI and others). The project benefits by attracting liquidity and early adaptors. These launches would provide a pipeline of community vetted yield farming opportunities…while providing a safe arena for yield farmers to deploy their liquidity…but ofcourse the yield farming capital would be short term…to bootstrap the launch…

ii) Traditional VC style Vaults: I guess this would follow the more traditional style VC investment over longer time horizon and liquidity lockups. Here there are some interesting challenges/opportunities to think about what does the ‘onchain version of a traditional VC investment’ look like? What are the ways we can add transparency by introducing data/onchain tracking? what are the pros and cons? Here community vetted investment managers can come up with their own unique strategies and positioning to attract capital.

The projects could use these different options at different stages of their life cycle?

I could imagine a project in the early stage tapping the ‘Traditional VC’ vault containing longer term capital to build out an mvp…then apply for a yield farming style launch that would attract much larger pool of capital and buzz around the launch…

Really love this process of collective brainstorming…think we can really build something quite powerful here.

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May be it makes sense to approach it with a project specific sub-vault with its own rules/lockups…like an onchain angellist syndicate?

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Investing is not the same as farming. Shit happens and things change.

VCVault should have a multi-sig who can make decisions.

By putting funds into the VCVault you are trusting these people with your funds and are at their mercy.

That’s how VC works and this should be no different. Otherwise… nothing will get done.

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I agree with this. VC vault needs to be multi-sig and they need to be able to make decisions on their own.

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Yes, definitely worth looking at Angel List’s rolling fund model for this

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Agree - can have multiple VC vaults structured by investment theme (DeFi, Gaming, DWeb). Question is how can you confirm reputation of signers? Is this something that can be done on chain? ie: point to 2-3 year track record from a wallet or multiple wallets. Or will it be based on off-chain reputation (ie: verify identity, show track record, etc)

Great point…early on we might have to rely on offchain reputation as I would imagine it might be hard to find people with strong onchain metrics at this early stage in the game…then again we might be surprised!!

Over time I would imagine onchain metrics would start to play a bigger and bigger role…

I would imagine an onchain identity/reputation system would fit right into this…but thats just dreaming far out into the future :slight_smile:

The VCVault members need to be public figures. This is their “skin-in-the-game”.

By attaching their identity it greatly reduces the chance of them doing something illicit.

Note: I have believed in this idea since day 1 and would go public with my identity to become one of these people if you all should have me.

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You definitely need to delegate the responsibility of investing to a key group of 3 and trust that they will make good decisions.

They should have to stake a minimum amount of their own in the vault to guarantee skin in the game and be rewarded either with a fee and/or carry (if we are to draw parallels with traditional VC). Having a decent public exposure would help too.

Consensus in this game leads to zero.

Another suggestion would be to create a vault per investment, where anyone could participate and get exposure to that investment, paying the trust a % as carry (thinking AngelList Syndicates here). Not sure if accredited investor regulations would be a problem.

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+1 to a yVCVault, I would deposit a portion of my stack there and review/vote on funding proposals.

We are for no voting rights after you deposit. You put your money into the fund and are reliant on the multi-sig VCs to do the right thing. Otherwise it won’t work because it won’t move fast enough.

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