SLCF Investment DAO: The Incubation of a Web3 Fund by SuperLayer to Diversify the RLY Network Association Treasury
Hello Rally Community,
Introduction / TL;DR
Hi, I’m Amit Mukherjee, a former VC-turned web3 founder. With the support of @KevinChou, @mvellank, and Superlayer Chief Product Officer Saad Rizvi, I am proposing a groundbreaking project that has the opportunity to transform both web3 investing and treasury diversification for web3 protocols.
In collaboration with Superlayer, the RLY Network Association, and Syndicate, I will lead the creation of SLCF (SuperLayer-Chainforest), a community-first Investment DAO that specializes in diversifying treasury protocols. This incubation will be built on top of the community/DAO that I founded called Chainforest. Chainforest curates a diverse and cohesive ecosystem of exceptional individuals to learn, explore and build web3 together.
In the creation of a community-first Investment DAO, the RLY Network Association benefits by:
- Creating a uniquely structured vehicle that has been optimized for diversifying the RLY Network Association’s treasury, foregoing the need to sell down $RLY immediately to fund
- Creating a Superlayer incubation with 100x ROI potential
- Creating a great community environment for Superlayer founders
- Creating an avenue for RLY Network and Superlayer leadership to build deep relationships across all of web3
Superlayer would incubate this Investment DAO in exchange for equity in the management company, and RLY Network Association’s Treasury would serve as the LP Anchor.
For the creation of SLCF, I am asking for an initial anchor LP investment of $10M USD worth of $RLY from the Association. SuperLayer will also be incubating and investing into the fund separately for a 20% stake in the management company, which entitles SuperLayer to 20% of the management fees and carry generated by SLCF.
About Me
In building an Investment DAO, I draw upon my unique background combining web3 entrepreneurship with nearly a decade of top-tier VC experience.
I spent 9 years as a venture capitalist at NEA, a leading firm with over $25B AUM. At NEA, I invested in groundbreaking consumer Internet companies such as Duolingo, Masterclass, Robinhood, Uber, Snap and Bytedance.
Today, I am a full-time web3 builder. I founded and manage Chainforest, a community DAO that curates a diverse and cohesive ecosystem of exceptional individuals to learn, explore and build web3 together. I am also involved with a variety of other community-based web3 projects, including: leading an NFT collection for the U.S. Senate Candidate Morgan Harper, advising on web3 projects across P2E gaming and collectibles, and serving in a DAO-elected Treasury role for Friends With Benefits.
- Why RLY Network Association and Superlayer Benefit from Incubating a web3 Investment DAO and Diversifying Its Treasury
- Evolution of Chainforest DAO
- Establishment of Chainforest as an Investment DAO
- SLCF Investment DAO’s Economic Relationship with RLY Network Association and Superlayer
1. Why RLY Network Association and Superlayer Benefit from Incubating a web3 Investment DAO and Diversifying Its Treasury
Across web3, protocols struggle to diversify their treasuries, keeping most of their treasury in the protocol’s native currency. Such large pools of capital benefit from diversification. Diversifying a treasury can diminish risk in the volatile crypto world, and provide upside and exposure to new and interesting web3 projects.
However the energy and mechanics required for a protocol to invest for proper diversification are challenging. Realistically, evaluating all potential investment opportunities in web3 is difficult when a team is also focused on growing a Protocol. Additionally, there are logistical complexities for a protocol to sell its native token, which can cause both a taxable event and downward token price pressure.
SLCF Investment DAO’s incubation can help solve these treasury diversification challenges for protocols, beginning with the RLY Network Association. As explained later, our community-based investing approach will surface a constellation of exciting investment opportunities. We’ve partnered with Syndicate to accept Rally’s native token, $RLY, committing to only selling down the token when Chainforest has found an actionable investment opportunity. We’ll also explore ways to deploy RLY where the recipient won’t sell immediately. We’ll also explore token swaps.
SLCF Investment DAO eventually plans to expand beyond the diversification of Rally’s treasury by diversifying the treasuries of other Protocols. We also expect this vehicle will be uniquely well suited to smoothly diversify the assets of founders of protocols. RLY Network Association will benefit from this as well, since SLCF Investment DAO will be seeded by Superlayer in exchange for equity in its management committee. If Chainforest expands successfully as a fund, it could imply tens or even hundreds of millions of USD of management fee streams and carry profit dollars back to the RLY Network Association.
Chainforest will provide additional synergies to the RLY Network Association as well, offering a thriving community of operators to support Superlayer founders and creating relationships across the web3 ecosystem for potential collaboration opportunities.
2. Chainforest DAO and its organic evolution to an Investment DAO
Chainforest initially started as a learning group (on Slack of all places!) of crypto founders, operators, and thinkers. Since then, it has evolved into a vibrant DAO (with the $RAIN token), primarily run on Discord, of 250 builders in the crypto space. Chainforest’s community actively covers every area of crypto with surprising speed and thoroughness. Chainforest’s membership includes a diverse array of experienced founders, first-time founders searching for an idea, developers, designers, marketers, and finance professionals. Because the community is referral-based, the caliber of membership is high.
Chainforest today features a sprawling, ever-growing ecosystem of activity:
- Thoughtful daily discourse across all of web3 - L1s, DeFi, NFTs, Gaming, etc.
- Deep dives on key projects and ecosystems (Terra, OlympusDAO, P2E gaming, etc)
- Incubations (GuildBuild - P2E Guilds-as-a Service; Arkive - collectibles museum drawing upon Olympus tokenomics)
- Newsletter (link)
- Meetups in NYC, Miami, SF and LA
- Leadership development forums (groups of 10 members receiving free coaching from executive coaches trained in Conscious Leadership Group and Enneagram principles)
- Quick Alpha sharing for NFT drops, IDOs, etc. (early identification of LUNA, OHM, Chain Runners, and other projects)
Rather than a community built for the purpose of investing, Chainforest is a community built for community’s sake. This is our unfair advantage, and why Chainforest’s culture, diversity, and talent is difficult to replicate. Our amazing members enjoy building together (without protocol provided financial incentives) and get great benefit from doing so! One illustrative example is our work with Arkive. As founder Tom McLeod explains:
“Arkive was an idea of mine that had been simmering for a few months…Amit suggested we create a Discord channel and potentially work with Chainforest members to accelerate the project. Now,1/3 of the core team is fellow Chainforest members, and we are excited to have Chainforest participate in the earliest round of funding.” - Tom McLeod, founder of Arkive
Chainforest is organically transforming into an investment DAO. At the early stage, a number of crypto founders began building their companies, turning to Chainforest members for help. This led to Chainforest members becoming investors, advisors, collaborators, and early employees. Several of our members have rigorous investing backgrounds and derive great pleasure in exchanging their views with the group, sharpening their own investment judgment. Founders also organically build trusted connections and uplevel their skills both informally through meetups and formally through the Chainforest Leadership Development Program. After discussing with Kevin, Mahesh, and Saad, I now recognize that becoming an investing DAO supercharges all our current activities, creating an even stronger community that we can continuously reinvest in using the proceeds and returns from the fund.
3. Building SLCF Investment DAO
Because of web3’s speed of innovation and depth, Superlayer and Chainforest both believe that a community oriented approach to investing will trump more traditional approaches to investing.
In a traditional fund, 5-10 key decision makers sit around a table and vote on investment decisions. This group will be responsible for all elements of the investing process: sourcing and identifying opportunities, evaluating opportunities, and then, particularly for private, VC-oriented deals, convincing a founder to take its capital over a competitive firm’s capital.
In Chainforest, a community of hundreds of crypto operators will source and flag ideas that they find interesting. Because they are actively operating in the web3 space, they have a unique lens into each project’s ability to succeed. This community also provides incredible value for founders. Chainforest’s community’s collective expertise across hiring, marketing, product and engineering will support founders in accessing talent and learning best practices to successfully build. In particular, we believe Chainforest’s Leadership Development Program will be a huge asset to founders, who will both learn skills to lead more effectively and also develop deep bonds with the community.
The community’s wide networks and the overall value proposition for founders from the Chainforest resources, such as the Leadership Development Program, will help Chainforest convince founders to take Chainforest’s funding.
Because these ideas are introduced, vetted and supported by community members, SLCF can run with a much leaner team than traditional VC funds. This means that we can share a significant chunk of profits back to the community. For example, if SLCF raises $20M initially, triples the value of that capital, and compensates the community with 30-50% of carry (at a 30% carry rate), that means we can provide $4-6M of rewards to the community for behavior that they are already doing. With 250 members today, that’s over $15,000 in rewards per person! As Chainforest scales, it would be possible to distribute 10x+ more rewards to each member of the community, while staying small and nimble.
| Seeing | Picking | Winning | |
|---|---|---|---|
| Traditional Fund | Limited group of investors (1-20) responsible for sourcing | Investors lead their own diligence efforts, limiting their scope to their own area of expertise. | Win primarily on brand because most firms operate similarly |
| Chainforest | Hundreds of DAO members can float an idea at any time. | DAO members have deep expertise in different areas of crypto and find a lens that only an operator could have | Founders immediately benefit from Chainforest membership. They are part of a community, receive help from the community, and can earn $ from participation |
Because of Chainforest’s diverse community, which covers all areas of crypto, our investment strategy would naturally be quite broad as well. In terms of a preliminary strategy, about 60-70% of the fund will be reserved for early stage bets, at the Series Seed, Series A, or IDO stage. About 5-10% of the fund will be reserved for collectible NFTs, and 20-30% of the fund will be reserved for concentrated positions in liquid tokens.
4. SLCF Investment DAO’s Economic Relationship with RLY Network Association and Superlayer
Accepting a protocol’s native token is a challenge. We have worked with Syndicate to solve this problem, and we are also working with a team of experts in accounting and legal to ensure appropriate currency management. SLCF will accept $RLY currency risk and will account for the dollars that Rally deploys based on when $RLY is converted into another currency. Structurally, this investment vehicle will be structured as an accredited investment DAO. This will give SLCF maximum flexibility to invest across equities and tokens. The DAO will provide amazing benefits to the community and will share a material portion of the carry received from successful investing with community members. In order to maximize speed and consistency, decision making on investment selection will be concentrated with the General Partnership. I will initially serve as the sole General Partner.
Superlayer Involvement
- Fund will be co-branded with both SuperLayer and Chainforest brands. Working names are either “Superlayer-Chainforest Investment DAO” or “Chainforest-Superlayer Investment DAO” or “SLCF Investment DAO”. This branding will benefit Superlayer from a marketing standpoint, and we expect Superlayer will receive other soft benefits for being involved with such an innovative new investing concept.
- SuperLayer provides - investment, and support across legal, finance, tax, economic design, and LP fundraising
- SuperLayer receives - increased awareness of SuperLayer brand, funnel of talent and new project incubations, deeper network in web3, marketing and events potential
Superlayer’s incubation and investment into the project will yield a 20% stake in SLCF’s management company. This means that as SLCF’s assets under management expand, Superlayer will receive a steady stream of management fees, and 20% of carry. In the event that SLCF scales successfully, this will result in a VC-like homerun return for Superlayer, which directly benefits the Rally community.
RLY Network Association Investment DAO Commitment and Fee Structure
Capital Committed: RLY Network Association’s treasury will commit $10M USD worth of $RLY for Chainforest to invest in investment opportunities. $RLY will be calculated based on the Foundation’s typical calculation for average $RLY price over time.
Carry: SLCF will receive 30% carry
Management Fees: SLCF will charge 2.5% in management fees annually
Term: Fund lifecycle will be 12 years
Proposal to Association:
An initial anchor LP investment of $10M USD worth of $RLY from RLY Network Association
Progress Updates:
In addition to weekly meetings to discuss progress with @KevinChou, @mvellank, and Saad, I will post quarterly updates for the RLY Network Association community covering:
(1) Performance of existing investments
(2) New investments made
(3) Overall fund metrics (cash available, IRR, TVPI, DPI)
(4) Updates about the Chainforest community, its people, and its programming. New notable members, new thought pieces released, etc.
Thank you for your time and consideration.
Amit Mukherjee