This proposal is the work of the team behind Elixir Capital in collaboration with members of the Arbitrum ecosystem. We welcome feedback and engagement (both on the forum and direct to us) about this proposal and how it can drive success for Arbitrum.
Update 7th June 2024:
On Tuesday 4th June 2024 the Elixir Capital team presented the Startup Collective in the bi-weekly Open Discussion of Proposals Call attended by delegates and the Arbitrum community. A recording of the session can be found on the link below.
Skip to 41.58 for the Elixir proposal: https://drive.google.com/file/d/1ZMIvinfKelMdtnVlabzsTwiaZVs2ZeDq/view Summary slides used can be found here
Additional Requested Information On The Proposal
Summarised below are enquiries we have received from community members, and subsequently their answers. We will continue to add to this on an ongoing basis and I encourage anyone to reach out directly to me if they would like to discuss any points.
We're super excited that we've been contacted by a number of teams interested in investment who are building on Arbitrum. While we build out a more formalised process as part of The Collective builders can get in touch here
As a startup how can I apply for investment right now?
TL;DR:
Note: Before we dive into the proposal, we would like to highlight our commitment to integrate this initiative into any larger construct/umbrella that the DAO decides on if this should materialize and not create any conflicting workstreams. As well as to make all the learnings and insights produced available to the DAO or Arbitrum Foundation.
Abstract
The booming Arbitrum ecosystem attracts innovative developers and a vibrant user base. This proposal establishes the Arbitrum Startup Collective, a comprehensive program designed to accelerate and bring capital to promising early-stage startups building on or migrating to the Arbitrum protocol and its related product suite.
The Arbitrum DAO has successfully launched several initiatives to attract new users and liquidity to Arbitrum through initiatives like grant programs for idea-stage and pre-seed startups (e.g RnDAO, PL, etc), and incentive programs (STIP, Backfund, LTIPP) for later-stage players and established protocols.
Building on this success, the Arbitrum ecosystem is now ready to explore other models (not grant-based) for:
In collaboration with the Arbitrum DAO, the current founders’ community, and the wider stakeholders; our initiative will aim to support and invest in up to 150 high-potential startups at the Seed to Series A stage and across verticals in the Arbitrum ecosystem over a three year period.
With the current up-cycle in the industry, there is a tremendous opportunity for growth and innovation. New market cycles bring higher token prices, which historically attract new builders and new users. Data from Electric capital’s developer report shows that the number of developers grew 3x during the 2021 bull market and grew 10x in the 2017 bull market.
Ethereum aside, Polygon and Solana are the top two ecosystems which have attracted more developers than any other ecosystem. Both have been amongst the most active in running venture-style ecosystem development programs such as the Polygon Accelerator, the Polygon Venture fund, the Polygon Village initiative, the Solana Ecosystem Fund, Solana Hackers House, and the Solana Super Team initiatives.
Arbitrum requires strategic investment initiatives to maintain its rapid growth and solidify its position as a leading ecosystem. While Arbitrum has achieved impressive success with a strong user base and Total Value Locked (TVL), competitors like Optimism and Polygon have deployed significantly more capital to fuel their ecosystem growth. Today, there are programs tackling both ends of the start-up growth spectrum in the Arbitrum ecosystem (refer diagram below) but it seems there is a clear gap at the Seed to Series A level.
Building a successful venture ecosystem cannot rely solely on capital deployed; it is about enabling existing participants, providing structured value creation & support to new participants, and creating hyper-connectivity - that ultimately reinforces a powerful ecosystem growth flywheel.
Leading startup accelerators like Y Combinator and Techstars demonstrate the power of structured programs. These programs cultivate vibrant communities where startups collaborate, invest in each other, and attract top talent, creating a virtuous cycle of innovation and growth (e.g Paypal “mafia” - the initial group of people who were with PayPal during its early days and that went on to establish influential companies like Tesla, SpaceX, LinkedIn, YouTube, Yelp, and many more).
The proposed Arbitrum Startup Collective targets strategic investments in up to 150 Arbitrum-focused companies at Seed to Series A stage with a comprehensive support program. This approach stimulates network effects, attracting talent while providing startups with a compelling capital and value creation proposition.
The Arbitrum Startup Collective will activate existing builders and ecosystem participants to serve as mentors and experts, while our team will be responsible for program management, community building across several regions, and founders’ support initiatives. This proposal is a long-term investment that will create lasting value within the Arbitrum ecosystem.
By establishing this Arbitrum Startup Collective now, Arbitrum can continue to solidify its leadership position and propel the network to explosive growth.
Ecosystem funds have historically played a crucial role as growth catalysts for emerging protocols and ecosystems, especially for the growth of developers and decentralized applications (dApps). As a result, new wallets have emerged, contributing to the growth of total value locked (TVL) and ultimately driving growth of the ecosystem.
We believe that the Arbitrum Startup Collective will help achieve the following objectives:
The Arbitrum Startup Collective aims to supercharge the ecosystem by fueling promising startups, attracting developers and dApps, driving more capital into the ecosystem, and ultimately maximizing returns for the Arbitrum DAO treasury.
a- Growth stage:
The initiative is designed to tackle three stages of growth to cover the startup lifecycle and provide optimal impact to the Arbitrum ecosystem through tracks of support and investing:
The program is envisioned as a three-year initiative. This timeframe acknowledges the maturity cycle of accelerator models and allows for cross-fertilization between different programs within the Startup Collective (e.g., scout program feeding into scale and follow-on programs).
Scout Program (Pre-Seed Focus): To identify the most promising founders in the ecosystem, we propose to leverage a Scout Network composed of experienced entrepreneurs and angel investors deeply familiar with the Arbitrum ecosystem. These scouts significantly extend the reach by leveraging their networks and industry knowledge to uncover innovative ideas before a Minimum Viable Product (MVP). Scouts get access to promising startups through various channels, including inbound, referrals through their network, and industry events. This proactive approach allows us to spot ventures before traditional funding rounds, ensuring we capture the most disruptive and impactful ideas for the Arbitrum ecosystem and serve as a feeder to the Scale Program (described below).
Scale Program (Seed to Series A stage): These companies already have a product with early users, or demonstrate early signs of success. Seed funding rounds are typically led by venture capitalists to complete product launches and refine growth models. Alongside a capital investment, the Arbitrum Startup Collective offers a structured program to provide additional support and value creation (details below). This program will go beyond just deploying capital and equip startups with the resources they need to thrive, including:
Follow-on (Series A+): For top performers from within the portfolio, the plan is to double down on winners to support them in later stages and maximize upside. Follow-on investments will be limited to companies coming from the Scout or Scale program described above who are proven to increase activity or adoption of Arbitrum
b- Geographical focus:
The initial focus of this initiative will be on Europe, Middle East, and South Asia to allow us to leverage our existing expertise and connections within this region. Although the program is fully remote and there are no requirements for teams to be located at any specific place, there will be in person events organized during the program to drive more collaboration between the teams.
c- Sector focus:
The Arbitrum Startup Collective is not sector specific and would consider startups across various sectors as long as they build on or plan to integrate with Arbitrum technology. However, to avoid any overlap with the RnDAO or the GCP initiative, collaboration tools and gaming will be specifically excluded from the Arbitrum Startup Collective to avoid any overlap.
Expected Outcome
The Arbitrum Startup Collective is designed to achieve a lasting impact on the Arbitrum ecosystem by fostering a vibrant community of talented developers, entrepreneurs, and users. The key expected outcomes for this initiative include:
By delivering on these ambitious yet attainable goals, the Arbitrum Startup Collective will propel Arbitrum to the forefront of the blockchain ecosystem.
a- Scout Program
Scouts are existing members of the Arbitrum DAO or community, experienced entrepreneurs with strong expertise in different domains, and likely already angel investors with a deep understanding of the challenges faced by early-stage founders inside and outside of Web3.
Once elected, Scouts can invest capital into opportunities by following the process below:
Note: Please note that these are structured as investments, not grants. The investments are made through the Arbitrum Startup Collective investment vehicle which will have the Arbitrum DAO as its sole investor. The Arbitrum DAO will therefore retain exposure to the upside from these investments and will receive distributions upon exit.
The Scouts will be incentivized and compensated for their contribution through an allocation of up to 10% of the upside generated from the investments attributed to them (i.e. if a scout refers a $50,000 investment that is subsequently exited with net proceeds of $500,000; that scout would receive $50,000 compensation). In addition, Scouts will have the opportunity to co-invest alongside the Arbitrum Startup Collective across all the referred opportunities via the broader Scout program.
b- Scale Program
The Scale Program is the cornerstone of the Arbitrum Startup Collective, offering a structured journey for seed to Series A startups building on Arbitrum. This immersive program provides tailored mentorship, access to a network of industry experts and investors, and crucial capital to help promising ventures accelerate their growth and navigate the critical early stages of development.
Note: Investments are not based on a fixed valuation structure (i.e. $250k investment at a valuation of $10M - similar to a16z Crypto Startup School, Y-Combinator or other programs). Given start-ups will be coming at different stages of growth, investment terms will be agreed with the start-ups on a case by case basis.
Throughout the program, startups will have access to:
Regular community events: opportunities to meet the wider ecosystem of web3 founders, investors, and partners globally at Web3 events in collaboration with the Arbitrum ecosystem participants
2x irl events for each cohort (beginning and end of the program)
demo days and investor day
participation in collaboration with major web3 events
Perks & Benefits: Curated discounts and product perks from a network of partners (e.g Nethermind, Quantstamp, Gateway, and existing Arbitrum ecosystem startups etc).
Access to strategic partners: Access to leading financial and regulatory authorities in Europe and the UAE; support to navigating regulatory frameworks and attracting potential investors.
c- Follow-on investments
Follow-on investments are used to double-down on high-performing portfolio companies to maximize returns for the DAO and amplify their positive impact on the Arbitrum ecosystem. This also de-risks the initiative, reducing the likelihood of capital being deployed into startups that are not contributing to the Arbitrum ecosystem.
The follow-on investments will be evaluated based on ecosystem contribution (transaction volume, user growth, developer communities) and financial performance. Only those exceeding expectations and strategically aligned with Arbitrum's long-term vision will receive follow-on funding.
d- Capital Allocation
This Arbitrum Startup Collective initiative is to be managed by Elixir Capital, an investment and accelerator firm specializing in supporting and investing in early-stage Web3 founders. Elixir Capital will be appointed as an external service provider to manage and oversee the day-to-day operations of the Arbitrum Startup Collective. Elixir Capital will dedicate a full-time team with the necessary expertise to handle various program aspects, including:
By leveraging Elixir Capital's expertise, the Arbitrum DAO's resource commitment will be minimized. Aside from the Oversight Committee's involvement in providing guidance and strategic direction, the DAO will not be required to allocate additional personnel to program execution.
Elixir Capital is a venture capital and accelerator firm backing early-stage Web3 founders building the digital economy of tomorrow, today. We partner closely with select ecosystems and protocols to support scalability, promote network growth, and facilitate onboarding and scaling successful start-ups. We are value-add, long-term investors who are fully engaged with building out the next generation of digital economies and the open internet.
Our team has proven experience in setting up and running programs for major Web3 ecosystems. We have run over 21 accelerator programs and accelerated more than 200 startups for ecosystems such as Polygon, Polkadot, Filecoin, and more recently, the Hub71 Digital Assets Program with the Abu Dhabi Global Market (the financial regulator of Abu Dhabi, UAE). The team also has relevant Web2 experience within corporate ventures at well-known brands such as Visa, AB InBev, and Rocket Internet as well as at Founder Institute, a California-based idea stage program.
To effectively operate the various programs, several key activities need to be undertaken:
These activities will be led by a dedicated core team from within Elixir Capital.
The core program team will comprise 3 FTE focused only on the Arbitrum Startup Collective initiative and will include the following members:
The additional resources that will augment the core team (up to 3 FTE) will comprise:
To maintain quality and appropriate oversight, the Management Team at Elixir Capital will allocate significant time to managing the program and delivering success for Arbitrum. These individuals will be the primary point of contact for the Arbitrum DAO, the Oversight Committee and the delegates.
b- Proposed Roadmap & Timeline
Please see below an indicative timeline for the various program workstreams.
We believe that based on the timelines of the proposal we could launch the Arbitrum Startup Collective by Q4 2024 (provided we have approvals in place by EthCC).
To ensure the successful execution of the Arbitrum Startup Collective initiative, we suggest establishing an Oversight Committee that can ensure proper progress and execution of this initiative. This committee will be responsible for overseeing progress, co-defining milestones, approving payment releases, and fostering strategic alignment with the Arbitrum DAO.
Note: Several initiatives have suggested an “Oversight Committee” as a governance and oversight mechanism. We are proposing here a similar structure to some of the other proposals (for example RnDAO) but ultimately we are happy to align with the preferred governance model established by the Arbitrum DAO.
Composition and Selection
Responsibilities
Contracting and Autonomy
Compensation
The proposed Governance Committee fosters transparency and accountability for managing the Arbitrum Startup Collective. It empowers the program to achieve its goals while ensuring alignment with the Arbitrum DAO's vision for a vibrant and thriving ecosystem.
Legal Arrangements
The appointment of Elixir Capital as the external service provider to manage and oversee the day-to-day operations of the Arbitrum Startup Collective will be documented through legal agreements encompassing both program management and investment management functions.
Service Agreement
A formal service provider agreement will be established between the Arbitrum DAO (legal wrapper entity, TBD) and Elixir Capital (Cayman). This agreement will clearly define the scope of work, outlining Elixir Capital's responsibilities in detail including:
The service agreement will establish clear performance metrics to evaluate the effectiveness of the service provider. Regular reviews will be conducted by the Arbitrum DAO (through the Oversight Committee) to assess performance against these metrics.
The service provider’s compensation will be structured to incentivize strong performance and alignment with program goals. It is based on a fixed fee basis to cover core program management activities and is paid based on specific milestones.
In the event of underperformance or non-compliance with the service agreement, the Arbitrum DAO will have the right to terminate the agreement with reasonable notice. A clear process for transitioning program management to a new service provider will be outlined within the agreement.
Investment Agreement
A separate investment agreement will govern the management of funds allocated to the Arbitrum Startup Collective. This agreement will establish a framework that ensures:
Given the investment nature of the program, we will appoint a professional fund administrator (such as NAV Consulting, Formidium, etc) to manage the vehicle and ensure compliance with the investment agreement. This appointment offers several benefits:
The investment capital will be contributed to the investment vehicle following a capital call schedule which would likely be twice annually to fund program activities and investments. Upon successful exits, the generated returns and distributions will be returned to the Arbitrum DAO, the sole investor in the program. The investment agreement will include clawback provisions that allow the Arbitrum DAO to recoup investment funds if they are not invested within the investment period.
The investment manager compensation will be structured to incentivize strong performance and alignment with program goals. It is based on a combination of a fixed management fee and a performance-based fee that incentivizes the investment manager to generate strong returns on the invested capital.
Note: A formal contractual agreement ensures clarity, transparency, and accountability in the program's execution and delivery. It outlines expectations for both parties and protects the interests of the Arbitrum DAO as an investor (e.g upside capture, deployment of funds, fund administrator, reporting, etc).
Phasing & Budget
Over a three-year timeframe, the program envisions a total investment capital of $50 million. This will be allocated across different investment stages:
Notes: All prices in $ARB as of April 23th 2024
Similar to other initiatives (e.g M&A, AVI, and GCP), we propose a phased approach, starting with a pilot program covering the first year. This allows for:
The budget to operate the pilot program for 1 year is a total $14.5 million (90% for investments) and will be allocated as follows:
| Operating Expenses Breakdown - Pilot Phase - | |
|---|---|
| Program expenses | $1.4 million/year for program management staff (Scout, Scale, Follow on) |
| Marketing / Events | $0.3 million/year to build awareness for the program and attract top talent |
| Advisors & Council Members | $0.3 million/year for Oversight Council members and engage industry experts to guide and mentor startups |
| Total: | $2.0 million for Pilot Phase (12 months) |
Following the pilot phase, the Arbitrum DAO (through its Oversight Committee) will assess the program's performance based on the predetermined metrics and achieved results. This phased approach ensures a measured and data-driven decision-making process for the Arbitrum DAO, maximizing the program's potential for success.
Please note that there are no management fees charged for the investment activities during the Pilot Phase as the team efforts will be mutualized.
To ensure the successful execution of the Arbitrum Startup Collective initiative and hold the program manager accountable, a robust reporting and measurement framework will be established. This framework, a common industry practice, will involve:
a- Program Reporting
The Elixir team will prepare and share the following reports with the Oversight Committee:
In addition to these reports, the Arbitrum Startup Collective team will hold monthly calls with the Oversight Committee to discuss program progress, address any feedback, and ensure alignment with the Committee's expectations.
b- Investment Reporting
The Elixir team will also provide the Oversight Committee with regular updates on the program's investment activities:
This comprehensive reporting structure will ensure the Arbitrum DAO, through the Oversight Committee, has the necessary information to effectively monitor the program's performance and make informed decisions.
We have been working on putting together this initiative for the past couple of months and we would like to thank @coinflip ,@krst, @chainlinkgod, @soby, and the AVI Working group for their feedback and contribution to this proposal.Preformatted text
This proposal is the work of the team behind Elixir Capital in collaboration with members of the Arbitrum ecosystem. We welcome feedback and engagement (both on the forum and direct to us) about this proposal and how it can drive success for Arbitrum.
Update 7th June 2024:
On Tuesday 4th June 2024 the Elixir Capital team presented the Startup Collective in the bi-weekly Open Discussion of Proposals Call attended by delegates and the Arbitrum community. A recording of the session can be found on the link below.
Skip to 41.58 for the Elixir proposal: https://drive.google.com/file/d/1ZMIvinfKelMdtnVlabzsTwiaZVs2ZeDq/view Summary slides used can be found here
Additional Requested Information On The Proposal
Summarised below are enquiries we have received from community members, and subsequently their answers. We will continue to add to this on an ongoing basis and I encourage anyone to reach out directly to me if they would like to discuss any points.
We're super excited that we've been contacted by a number of teams interested in investment who are building on Arbitrum. While we build out a more formalised process as part of The Collective builders can get in touch here
As a startup how can I apply for investment right now?
TL;DR:
Note: Before we dive into the proposal, we would like to highlight our commitment to integrate this initiative into any larger construct/umbrella that the DAO decides on if this should materialize and not create any conflicting workstreams. As well as to make all the learnings and insights produced available to the DAO or Arbitrum Foundation.
Abstract
The booming Arbitrum ecosystem attracts innovative developers and a vibrant user base. This proposal establishes the Arbitrum Startup Collective, a comprehensive program designed to accelerate and bring capital to promising early-stage startups building on or migrating to the Arbitrum protocol and its related product suite.
The Arbitrum DAO has successfully launched several initiatives to attract new users and liquidity to Arbitrum through initiatives like grant programs for idea-stage and pre-seed startups (e.g RnDAO, PL, etc), and incentive programs (STIP, Backfund, LTIPP) for later-stage players and established protocols.
Building on this success, the Arbitrum ecosystem is now ready to explore other models (not grant-based) for:
In collaboration with the Arbitrum DAO, the current founders’ community, and the wider stakeholders; our initiative will aim to support and invest in up to 150 high-potential startups at the Seed to Series A stage and across verticals in the Arbitrum ecosystem over a three year period.
With the current up-cycle in the industry, there is a tremendous opportunity for growth and innovation. New market cycles bring higher token prices, which historically attract new builders and new users. Data from Electric capital’s developer report shows that the number of developers grew 3x during the 2021 bull market and grew 10x in the 2017 bull market.
Ethereum aside, Polygon and Solana are the top two ecosystems which have attracted more developers than any other ecosystem. Both have been amongst the most active in running venture-style ecosystem development programs such as the Polygon Accelerator, the Polygon Venture fund, the Polygon Village initiative, the Solana Ecosystem Fund, Solana Hackers House, and the Solana Super Team initiatives.
Arbitrum requires strategic investment initiatives to maintain its rapid growth and solidify its position as a leading ecosystem. While Arbitrum has achieved impressive success with a strong user base and Total Value Locked (TVL), competitors like Optimism and Polygon have deployed significantly more capital to fuel their ecosystem growth. Today, there are programs tackling both ends of the start-up growth spectrum in the Arbitrum ecosystem (refer diagram below) but it seems there is a clear gap at the Seed to Series A level.
Building a successful venture ecosystem cannot rely solely on capital deployed; it is about enabling existing participants, providing structured value creation & support to new participants, and creating hyper-connectivity - that ultimately reinforces a powerful ecosystem growth flywheel.
Leading startup accelerators like Y Combinator and Techstars demonstrate the power of structured programs. These programs cultivate vibrant communities where startups collaborate, invest in each other, and attract top talent, creating a virtuous cycle of innovation and growth (e.g Paypal “mafia” - the initial group of people who were with PayPal during its early days and that went on to establish influential companies like Tesla, SpaceX, LinkedIn, YouTube, Yelp, and many more).
The proposed Arbitrum Startup Collective targets strategic investments in up to 150 Arbitrum-focused companies at Seed to Series A stage with a comprehensive support program. This approach stimulates network effects, attracting talent while providing startups with a compelling capital and value creation proposition.
The Arbitrum Startup Collective will activate existing builders and ecosystem participants to serve as mentors and experts, while our team will be responsible for program management, community building across several regions, and founders’ support initiatives. This proposal is a long-term investment that will create lasting value within the Arbitrum ecosystem.
By establishing this Arbitrum Startup Collective now, Arbitrum can continue to solidify its leadership position and propel the network to explosive growth.
Ecosystem funds have historically played a crucial role as growth catalysts for emerging protocols and ecosystems, especially for the growth of developers and decentralized applications (dApps). As a result, new wallets have emerged, contributing to the growth of total value locked (TVL) and ultimately driving growth of the ecosystem.
We believe that the Arbitrum Startup Collective will help achieve the following objectives:
The Arbitrum Startup Collective aims to supercharge the ecosystem by fueling promising startups, attracting developers and dApps, driving more capital into the ecosystem, and ultimately maximizing returns for the Arbitrum DAO treasury.
a- Growth stage:
The initiative is designed to tackle three stages of growth to cover the startup lifecycle and provide optimal impact to the Arbitrum ecosystem through tracks of support and investing:
The program is envisioned as a three-year initiative. This timeframe acknowledges the maturity cycle of accelerator models and allows for cross-fertilization between different programs within the Startup Collective (e.g., scout program feeding into scale and follow-on programs).
Scout Program (Pre-Seed Focus): To identify the most promising founders in the ecosystem, we propose to leverage a Scout Network composed of experienced entrepreneurs and angel investors deeply familiar with the Arbitrum ecosystem. These scouts significantly extend the reach by leveraging their networks and industry knowledge to uncover innovative ideas before a Minimum Viable Product (MVP). Scouts get access to promising startups through various channels, including inbound, referrals through their network, and industry events. This proactive approach allows us to spot ventures before traditional funding rounds, ensuring we capture the most disruptive and impactful ideas for the Arbitrum ecosystem and serve as a feeder to the Scale Program (described below).
Scale Program (Seed to Series A stage): These companies already have a product with early users, or demonstrate early signs of success. Seed funding rounds are typically led by venture capitalists to complete product launches and refine growth models. Alongside a capital investment, the Arbitrum Startup Collective offers a structured program to provide additional support and value creation (details below). This program will go beyond just deploying capital and equip startups with the resources they need to thrive, including:
Follow-on (Series A+): For top performers from within the portfolio, the plan is to double down on winners to support them in later stages and maximize upside. Follow-on investments will be limited to companies coming from the Scout or Scale program described above who are proven to increase activity or adoption of Arbitrum
b- Geographical focus:
The initial focus of this initiative will be on Europe, Middle East, and South Asia to allow us to leverage our existing expertise and connections within this region. Although the program is fully remote and there are no requirements for teams to be located at any specific place, there will be in person events organized during the program to drive more collaboration between the teams.
c- Sector focus:
The Arbitrum Startup Collective is not sector specific and would consider startups across various sectors as long as they build on or plan to integrate with Arbitrum technology. However, to avoid any overlap with the RnDAO or the GCP initiative, collaboration tools and gaming will be specifically excluded from the Arbitrum Startup Collective to avoid any overlap.
Expected Outcome
The Arbitrum Startup Collective is designed to achieve a lasting impact on the Arbitrum ecosystem by fostering a vibrant community of talented developers, entrepreneurs, and users. The key expected outcomes for this initiative include:
By delivering on these ambitious yet attainable goals, the Arbitrum Startup Collective will propel Arbitrum to the forefront of the blockchain ecosystem.
a- Scout Program
Scouts are existing members of the Arbitrum DAO or community, experienced entrepreneurs with strong expertise in different domains, and likely already angel investors with a deep understanding of the challenges faced by early-stage founders inside and outside of Web3.
Once elected, Scouts can invest capital into opportunities by following the process below:
Note: Please note that these are structured as investments, not grants. The investments are made through the Arbitrum Startup Collective investment vehicle which will have the Arbitrum DAO as its sole investor. The Arbitrum DAO will therefore retain exposure to the upside from these investments and will receive distributions upon exit.
The Scouts will be incentivized and compensated for their contribution through an allocation of up to 10% of the upside generated from the investments attributed to them (i.e. if a scout refers a $50,000 investment that is subsequently exited with net proceeds of $500,000; that scout would receive $50,000 compensation). In addition, Scouts will have the opportunity to co-invest alongside the Arbitrum Startup Collective across all the referred opportunities via the broader Scout program.
b- Scale Program
The Scale Program is the cornerstone of the Arbitrum Startup Collective, offering a structured journey for seed to Series A startups building on Arbitrum. This immersive program provides tailored mentorship, access to a network of industry experts and investors, and crucial capital to help promising ventures accelerate their growth and navigate the critical early stages of development.
Note: Investments are not based on a fixed valuation structure (i.e. $250k investment at a valuation of $10M - similar to a16z Crypto Startup School, Y-Combinator or other programs). Given start-ups will be coming at different stages of growth, investment terms will be agreed with the start-ups on a case by case basis.
Throughout the program, startups will have access to:
Regular community events: opportunities to meet the wider ecosystem of web3 founders, investors, and partners globally at Web3 events in collaboration with the Arbitrum ecosystem participants
2x irl events for each cohort (beginning and end of the program)
demo days and investor day
participation in collaboration with major web3 events
Perks & Benefits: Curated discounts and product perks from a network of partners (e.g Nethermind, Quantstamp, Gateway, and existing Arbitrum ecosystem startups etc).
Access to strategic partners: Access to leading financial and regulatory authorities in Europe and the UAE; support to navigating regulatory frameworks and attracting potential investors.
c- Follow-on investments
Follow-on investments are used to double-down on high-performing portfolio companies to maximize returns for the DAO and amplify their positive impact on the Arbitrum ecosystem. This also de-risks the initiative, reducing the likelihood of capital being deployed into startups that are not contributing to the Arbitrum ecosystem.
The follow-on investments will be evaluated based on ecosystem contribution (transaction volume, user growth, developer communities) and financial performance. Only those exceeding expectations and strategically aligned with Arbitrum's long-term vision will receive follow-on funding.
d- Capital Allocation
This Arbitrum Startup Collective initiative is to be managed by Elixir Capital, an investment and accelerator firm specializing in supporting and investing in early-stage Web3 founders. Elixir Capital will be appointed as an external service provider to manage and oversee the day-to-day operations of the Arbitrum Startup Collective. Elixir Capital will dedicate a full-time team with the necessary expertise to handle various program aspects, including:
By leveraging Elixir Capital's expertise, the Arbitrum DAO's resource commitment will be minimized. Aside from the Oversight Committee's involvement in providing guidance and strategic direction, the DAO will not be required to allocate additional personnel to program execution.
Elixir Capital is a venture capital and accelerator firm backing early-stage Web3 founders building the digital economy of tomorrow, today. We partner closely with select ecosystems and protocols to support scalability, promote network growth, and facilitate onboarding and scaling successful start-ups. We are value-add, long-term investors who are fully engaged with building out the next generation of digital economies and the open internet.
Our team has proven experience in setting up and running programs for major Web3 ecosystems. We have run over 21 accelerator programs and accelerated more than 200 startups for ecosystems such as Polygon, Polkadot, Filecoin, and more recently, the Hub71 Digital Assets Program with the Abu Dhabi Global Market (the financial regulator of Abu Dhabi, UAE). The team also has relevant Web2 experience within corporate ventures at well-known brands such as Visa, AB InBev, and Rocket Internet as well as at Founder Institute, a California-based idea stage program.
To effectively operate the various programs, several key activities need to be undertaken:
These activities will be led by a dedicated core team from within Elixir Capital.
The core program team will comprise 3 FTE focused only on the Arbitrum Startup Collective initiative and will include the following members:
The additional resources that will augment the core team (up to 3 FTE) will comprise:
To maintain quality and appropriate oversight, the Management Team at Elixir Capital will allocate significant time to managing the program and delivering success for Arbitrum. These individuals will be the primary point of contact for the Arbitrum DAO, the Oversight Committee and the delegates.
b- Proposed Roadmap & Timeline
Please see below an indicative timeline for the various program workstreams.
We believe that based on the timelines of the proposal we could launch the Arbitrum Startup Collective by Q4 2024 (provided we have approvals in place by EthCC).
To ensure the successful execution of the Arbitrum Startup Collective initiative, we suggest establishing an Oversight Committee that can ensure proper progress and execution of this initiative. This committee will be responsible for overseeing progress, co-defining milestones, approving payment releases, and fostering strategic alignment with the Arbitrum DAO.
Note: Several initiatives have suggested an “Oversight Committee” as a governance and oversight mechanism. We are proposing here a similar structure to some of the other proposals (for example RnDAO) but ultimately we are happy to align with the preferred governance model established by the Arbitrum DAO.
Composition and Selection
Responsibilities
Contracting and Autonomy
Compensation
The proposed Governance Committee fosters transparency and accountability for managing the Arbitrum Startup Collective. It empowers the program to achieve its goals while ensuring alignment with the Arbitrum DAO's vision for a vibrant and thriving ecosystem.
Legal Arrangements
The appointment of Elixir Capital as the external service provider to manage and oversee the day-to-day operations of the Arbitrum Startup Collective will be documented through legal agreements encompassing both program management and investment management functions.
Service Agreement
A formal service provider agreement will be established between the Arbitrum DAO (legal wrapper entity, TBD) and Elixir Capital (Cayman). This agreement will clearly define the scope of work, outlining Elixir Capital's responsibilities in detail including:
The service agreement will establish clear performance metrics to evaluate the effectiveness of the service provider. Regular reviews will be conducted by the Arbitrum DAO (through the Oversight Committee) to assess performance against these metrics.
The service provider’s compensation will be structured to incentivize strong performance and alignment with program goals. It is based on a fixed fee basis to cover core program management activities and is paid based on specific milestones.
In the event of underperformance or non-compliance with the service agreement, the Arbitrum DAO will have the right to terminate the agreement with reasonable notice. A clear process for transitioning program management to a new service provider will be outlined within the agreement.
Investment Agreement
A separate investment agreement will govern the management of funds allocated to the Arbitrum Startup Collective. This agreement will establish a framework that ensures:
Given the investment nature of the program, we will appoint a professional fund administrator (such as NAV Consulting, Formidium, etc) to manage the vehicle and ensure compliance with the investment agreement. This appointment offers several benefits:
The investment capital will be contributed to the investment vehicle following a capital call schedule which would likely be twice annually to fund program activities and investments. Upon successful exits, the generated returns and distributions will be returned to the Arbitrum DAO, the sole investor in the program. The investment agreement will include clawback provisions that allow the Arbitrum DAO to recoup investment funds if they are not invested within the investment period.
The investment manager compensation will be structured to incentivize strong performance and alignment with program goals. It is based on a combination of a fixed management fee and a performance-based fee that incentivizes the investment manager to generate strong returns on the invested capital.
Note: A formal contractual agreement ensures clarity, transparency, and accountability in the program's execution and delivery. It outlines expectations for both parties and protects the interests of the Arbitrum DAO as an investor (e.g upside capture, deployment of funds, fund administrator, reporting, etc).
Phasing & Budget
Over a three-year timeframe, the program envisions a total investment capital of $50 million. This will be allocated across different investment stages:
Notes: All prices in $ARB as of April 23th 2024
Similar to other initiatives (e.g M&A, AVI, and GCP), we propose a phased approach, starting with a pilot program covering the first year. This allows for:
The budget to operate the pilot program for 1 year is a total $14.5 million (90% for investments) and will be allocated as follows:
| Operating Expenses Breakdown - Pilot Phase - | |
|---|---|
| Program expenses | $1.4 million/year for program management staff (Scout, Scale, Follow on) |
| Marketing / Events | $0.3 million/year to build awareness for the program and attract top talent |
| Advisors & Council Members | $0.3 million/year for Oversight Council members and engage industry experts to guide and mentor startups |
| Total: | $2.0 million for Pilot Phase (12 months) |
Following the pilot phase, the Arbitrum DAO (through its Oversight Committee) will assess the program's performance based on the predetermined metrics and achieved results. This phased approach ensures a measured and data-driven decision-making process for the Arbitrum DAO, maximizing the program's potential for success.
Please note that there are no management fees charged for the investment activities during the Pilot Phase as the team efforts will be mutualized.
To ensure the successful execution of the Arbitrum Startup Collective initiative and hold the program manager accountable, a robust reporting and measurement framework will be established. This framework, a common industry practice, will involve:
a- Program Reporting
The Elixir team will prepare and share the following reports with the Oversight Committee:
In addition to these reports, the Arbitrum Startup Collective team will hold monthly calls with the Oversight Committee to discuss program progress, address any feedback, and ensure alignment with the Committee's expectations.
b- Investment Reporting
The Elixir team will also provide the Oversight Committee with regular updates on the program's investment activities:
This comprehensive reporting structure will ensure the Arbitrum DAO, through the Oversight Committee, has the necessary information to effectively monitor the program's performance and make informed decisions.
We have been working on putting together this initiative for the past couple of months and we would like to thank @coinflip ,@krst, @chainlinkgod, @soby, and the AVI Working group for their feedback and contribution to this proposal.Preformatted text
This is a good initiative, but I think we need to go in a different direction here
It seems to me that it is better and easier to simply invest money in VC, since they have better networking and competencies than any commission that can be created
This is a good initiative, but I think we need to go in a different direction here
It seems to me that it is better and easier to simply invest money in VC, since they have better networking and competencies than any commission that can be created
Considering that the best VCs work with early access to projects (before it is available to the general public), there will be no opportunity to get into really good projects at an early stage without their help.
This is a good initiative, but I think we need to go in a different direction here
It seems to me that it is better and easier to simply invest money in VC, since they have better networking and competencies than any commission that can be created
This is a good initiative, but I think we need to go in a different direction here
It seems to me that it is better and easier to simply invest money in VC, since they have better networking and competencies than any commission that can be created
Considering that the best VCs work with early access to projects (before it is available to the general public), there will be no opportunity to get into really good projects at an early stage without their help.
