[DISCUSSION] Mantle EcoFund

[MantleCore]

The proposal is co-authored by Mantle Core Team and Mirana Ventures.

Background

Mantle is a high-performance Ethereum layer-2 network built with modular architecture; and aligned with BitDAO strategic interests via the $BIT token. Ecosystem funds have historically served as an important catalyst of growth for new emerging protocols and ecosystems, in particular, developer and dAPP adoption of a new protocol. This document proposes the first iteration of a Mantle EcoFund.

Objectives

Primary Objectives

1. Developer and dAPP adoption of Mantle

Secondary Objectives

2. Participation of reputable venture funds into the Mantle ecosystem

3. Sustainability of the Mantle EcoFund via fund performance and returns

4. Supporting builders of dAPPs

Note: The Mantle EcoFund design will need to balance the primary and secondary objectives above. Key design levers include: selectivity of investments (quantity vs quality); and degree of exclusivity to Mantle.

Proposal

1. Authorize the establishment of Mantle EcoFund 1 (with target size $100M from BitDAO) as per the details below.

2. Authorize the first capital call: $10M USDC from BitDAO Treasury.

Note: When the proposal is passed by the BitDAO community by a “Yes” vote, the project team(s) are authorized to take all necessary actions to accomplish what is contemplated in the proposal, including without limitation, forming one or more legal entities and executing necessary legal documents. All legal and operational structures and documents shall substantially reflect the terms and conditions that are set forth in the “Summary” and “Details” sections of the proposal. Any material deviation from or inconsistency with such terms and conditions, except where such deviation or inconsistency is more favorable to BitDAO community, shall make the legal structure and documents voidable by the community. For the avoidance of doubt, terms that provide more governance rights, investor rights, deploy less investment amount for substantially the same stake or interest, or otherwise provide more economic benefits for BitDAO shall be deemed as “more favorable terms”.

Summary

Details

Size and Fundlife

We propose to catalyse a capital pool of $200 million to be deployed within the Mantle ecosystem over the next 3 years from the Mantle EcoFund and Strategic Venture Partners.

• $100 million USDC would be provided by BitDAO from BitDAO’s treasury

• The Mantle EcoFund would co-invest with the Strategic Venture Partners with a 1:1 co-investment ratio

• As such, $100 million would be external matching capital coming from Strategic Venture Partners of the BitDAO and Mantle ecosystem when they co-invest with Mantle EcoFund opportunistically

Investment Mandate

The Mantle EcoFund should strive to be the ‘first money’ into teams building quality and innovative projects within the Mantle ecosystem. We would invest alongside the Strategic Venture Partners of BitDAO and Mantle Ecosystem, and start supporting projects at the Pre-seed and Seed stage with the option to double down on potential big winners with promising traction and stronger use cases with $BIT whenever possible.

For instance, an average ticket size of $500,000 per project from the Mantle EcoFund would provision for 200 projects building on Mantle. For follow-ons and later stage opportunities, it would depend on the fund raising dynamics and structure of each deal, subjected to review by the Investment Committee.

Investment Committee (IC)

To ensure adherence to industry best practices and rigour for venture investing, we propose that an independent Investment Committee be set up. Note that an “Advisory Committee” function is already served by Strategic Venture Partners who signal their assessment of each project through their investment decisions.

Policies - IC Membership

Policies - IC Investments

Strategic Venture Partners

The Mantle EcoFund shall invest alongside Strategic Venture Partners to support the growth of the ecosystem. These venture partners should be independent, qualified and reputable venture funds and/or founders that can provide in-depth industry and product experience, strong networks, and have demonstrated commercial success and returns for their own funds. Most importantly, these Strategic Venture Partners must share the same belief in supporting aspiring founders building on the Mantle ecosystem.

We believe that having a mix of funds and founders as Strategic Ventures Partners would provide new exciting opportunities as future growth for the web 3 ecosystem would be catalyzed by innovative products built by aspiring founders driven by significant market needs and supported by sustainable business and revenue models.

Funds who have expressed interest in being Strategic Venture Partners include Dragonfly Capital, Pantera, Folius Ventures, Play Ventures, Spartan, Lemniscap, Selini Capital, Cadenza Ventures, and QCP Capital. We welcome more partners who are keen to reach out and indicate interest.

Policies - Strategic Venture Partner - Membership

Structure, Fees, and Incentives

The deployment period for the first $100 million injection from BitDAO is targeted to be 3 years, with review on performance and key metrics by the Investment Committee twice a year.

For management fees, we would propose an industry standard 2% management fee to support the operating expenses of the EcoFund operating team (sourcing, due diligence, legal, portfolio support, fund admin, etc.).

Incentives - Strategic Venture Partners

In order to catalyse meaningful capital deployment into the Mantle ecosystem and stronger post-investment support from the Strategic Venture Partners, we propose that 20% of the investment returns of the Mantle EcoFund be shared with the Strategic Venture Partners after returning the initial capital contributed by BitDAO. This incentive provides for more financial alignment between the Mantle EcoFund and the Strategic Venture Partners, which translates to a stronger joint commitment to support founders and projects building on Mantle.

Note that each Strategic Venture Partner’s incentives shall be calculated independently based on their own EcoFund matched portfolio. The EcoFund may also request the Strategic Venture Partner to support due diligence and divestments.

Incentives - EcoFund Operating team

To incentivise the EcoFund Operating team, we propose a carry 10% (reduced from industry norm of 20% to 30%) of fund returns after principal has been returned to BitDAO. Note that this applies to the total portfolio and not sub-portfolios of each Strategic Venture Partner. For clarity, there will be no carry until the entirety of the investment principal ($100M) has been returned to BitDAO.

Policies - Fund Structure and Operator Incentives

Simplified Example - Using Two Strategic Venture Partners

Key Performance Indicators

Developmental Target

• More than 100 Projects deployed on Mantle Ecosystem over a period of 3 years

Financial Returns Target

• Target Multiple on Invested Capital (MOIC) of >1.5x

Analysis

Existing Models

Various models of ecosystem funds currently exist in the market; each with varying efficacy in addressing the key objectives outlined earlier and operating with different levels of efficiency. With the goal of creating a model and approach best suited and reflective of Mantle’s long term vision, we have evaluated 4 types of ecosystem funds (‘EcoFund’) based on information that is available publicly.

EcoFund Type 1: Soft commitment from investors

• Example: Oasis Protocol’s Ecosystem Fund

  • Investors pledge $XX to support the projects building on Oasis Network

  • MOU between Oasis & Investors

  • Oasis Network - Ecosystem

EcoFund Type 2: Tokens as incentives for investors and projects

• Example: Flow’s Ecosystem Fund

  • Investors pledge $XX to support the projects building on Flow

  • Flow Foundation provides Flow Token Grants to investors

    • Each investor acts as a decentralised grant partner

    • Up to 1-1 matching with tokens for Flow projects

  • MOU between Flow & Investors

  • Flow Launches $725 Million Ecosystem Fund to Drive Innovation Across the Flow Ecosystem

EcoFund Type 3: Independent venture fund with external LPs

• Example: Avalanche’s Blizzard Fund

  • A new venture fund managed by independent fund manager is set up with investors/institutions coming in as LPs

  • Fund is primarily returns driven and provides early access / investment opportunities for LPs to promising projects in the ecosystem

  • Standard subscription and limited partnership agreement between fund manager and LPs

  • Avalanche Developers and Investors Form $200M ‘Blizzard’ Investment Fund

EcoFund Type 4: Internal fund from treasury

• Example: Polygon’s Ecosystem Fund

  • Financed by the capital Polygon raised previously or from their treasury

  • Operated internally by Polygon team, focusing on both development goals and returns

  • Polygon Launches $100M Fund to Support DeFi Adoption

Comparison Summary

Recommendations

Based on the internal review of the pros and cons of the existing ecosystem fund structures in the market, we feel that for Mantle & BitDAO, we should innovate on existing approaches and design a model which is in line with the long term vision of Mantle. We believe that the proposed Mantle EcoFund structure would help achieve the following goals:

1. Ensure commercial alignment with reputable external investors to promote higher commitment

2. Strike a better balance between generating returns (for EcoFund’s sustainability and longevity) and achieving development goals for the Mantle ecosystem

3. Adhere to the industry’s best practices and rigour for venture investing

How to get involved

• Discuss the proposal in the comments below

• Reach out via: ecofund@mantle.xyz

[Prospektor]

It will be the most suitable to obtain a combination of 1 and 4 funds.

[jordi]

This vision makes a lot of sense to me, the community would benefit from having a strong ecosystem to interact with and vice versa! If done right can create some flywheel effects.

[Jack]

perfect ～supported！
Accelerate dapps

[bVd]

I think this proposal for the establishment of the Mantle EcoFund is a very exciting development for the Mantle ecosystem. The primary objectives of driving developer and dAPP adoption of Mantle and supporting builders of dAPPs are crucial for the growth and sustainability of the ecosystem. The proposed investment mandate and co-investment ratio with Strategic Venture Partners also sound like a smart approach to ensuring quality and innovation in the projects supported by the EcoFund. Overall, I am fully in agreement with this proposal and look forward to seeing the positive impact it will have on the Mantle ecosystem.

[kokodev]

As builder that is considering launching my project on mantle I think that option 4 would be best for the first few years. When you involve other entities you can run In circles and end up with paralysis by analysis. We need to streamline execution and capital deployment. I feel that one of the most attractive things about mantle and bitdao is the weight of the standing treasuries. as they say, keep it simple! Lets build our own house before we throw a block party. Also, if we cultivate a genuine builders family and everyone will come to us naturally. External LP’s will come if they see the ecosystem flourishing on a home grown level.

[Danillo]

Option 3 sounds appealing since LPs will gain early access to promising projects which are carefully vetted by the fund manager, this will provide opportunities to invest in projects that might not be publicly available, in addition the fund can pool resources from many LPs to make large investments when needed.

Also regulatory compliance is always a plus imo

[JohnSmith]

Looks like a plan I’m sure that you’ll be supported by the community in any direction Mantle will be directed to

[Lbrian]

Hey all, excited to see this proposal live on the forum. As a community builder in the $BIT Ecosystem, I’m very excited to see a fund for ecosystem growth and adoption. We’re already seeing a large interest from builders looking to develop their projects on Mantle. This fund will go a long way toward incentivizing those participants and inviting new ecosystem contributors.

I have a few questions and I encourage the rest of the Mantle community to join in providing feedback and asking questions here as well.

1. How should $BIT holders think about this proposal in terms of benefits for BitDAO? Will BitDAO be entitled to some % of returns in addition to the return of principal?

2. Where can $BIT holders learn about the portfolios of the Strategic Venture Partners involved? This will give BitDAO/Mantle community a view into what projects might be deployed on Mantle.

3. Do any of the ICs that aren’t previously mentioned elsewhere in relation to BitDAO hold $BIT or delegation?

4. How will Mantle incentivize mature projects outside of the “early stage” investment category to build on Mantle or Migrate to Mantle?

[0xLayer4]

You make a very valid point! I’m torn between 3 and 4, considering that 4 guarantees that Mantle remains community-owned and run by the BitDAO community, making Mantle, arguably, the most decentralized L2 in the space(once it launches), and 3, as you said, exposes the community to plenty of potentially exclusive opportunities.

However, we should also give this more time and take in more feedback from the community and study all our options before we make a decision.

But one thing is sure, Mantle MUST be funded in order to grow its ecosystem and increase BitDAO’s power, influence, and relevance in the space!

[bigDcarlton]

EcoFund Type 2 has my attention honestly, this option can help incentivize projects to build on Mantle by providing additional tokens that match the capital raised by investors, in return this will inc. project activity and drive innovation across the ecosystem.

Though I’m still wondering if Type 3 does indeed a higher commitment chance… let me know what y’all think

[Fishkilla]

Mantle EcoFund is a great idea. That’ll help ecosystem to grow. Type 3 or Type 4 looks good. But to tell the truth, who can call himself an expert of such a questions and discussions?

[MiranaVentures]

Great questions!

1. BitDAO is definitely entitled to the returns in addition to the return of Principal. The simplified example in the proposal illustrates that the capital back to BitDAO would be $161.8M after taking into account partner incentives and operator carry, a surplus of $61.8M in addition to the return of principal.

2. Investments done together between the Mantle EcoFund and the Strategic Venture Partners would be announced timely to the community. Wrt to the other portfolios of the Strategic Venture Partners, the community can visit their website and keep a look out funding announcements / PR releases.

3. All current recommended ICs hold $BIT and are here to support the growth of Mantle and the BitDAO ecosystem.

4. These would fall under the earlier Mantle budget that provides for grants and incentives!

[Schizo94]

I can go with type 4 because the EcoFund operators are very trusted members imo, and we as a community should have faith in them to carefully pick, choose and vet for projects that will be fully committed to their manifesto, roadmap & goals.

And I might be wrong here but the projects they choose to fund won’t be receiving their capital all at once, surely its based on milestones which will substantially reduce the risk of investment, right?

[cryp2heat]

I’m all for the Mantle EcoFund as long as it’s not option two. Giving out $BIT in return for investments just creates a lot of selling pressure on our main asset, and honestly, I think BitDAO has enough ecosystem accelerators that it has already funded who are more than capable of funding the appropriate projects and funnel them into the Mantle ecosystem. For example, I don’t see a need for Mantle to spend any of its funds on gaming projects because Game7DAO already has $500M in funds all from BitDAO, and it should be expected to be already on the move looking for appropriate projects and courting them with grants and developer support and guiding them towards the Mantle ecosystem.

I don’t think there’s an ecosystem accelerator for NFT or DeFi projects, so perhaps that could be Mantle’s focus with the ecosystem funds.

That’s just my two cents on the matter. Will keep visiting this forum to see what the rest of the community thinks.

[Evgeniy4374]

Good guys. Everything will turn out well, right guys, I support you.

[bullrunmark]

I agree with you on this. I don’t think there will be a need to blindly trust them, I’m sure they’ll still pass along any information they have and visit the community for suggestions moving forward. But totally agree with choosing type 4 as, in my opinion, it best maintains the community’s decentralization and interest in this venture.

[bigachuu]

Surely the $BIT community will play a role in selecting & approving the projects that receive funding, tho the initial phase is mostly setup by the fund managers from what I read.

[bullrunmark]

For sure, but the fund managers will still have to run proposals by the community before moving forward with anything. Also I’m sure if the community suggests something, the fund managers will consider it.

[Charles]

Surely we can expect over 200 projects in 3 years time, 100 is definitely an underestimation.

I could be wrong and that’s fine but the hype around L2s this year has definitely been a thing for builders, creators and users alike.