Investment Conference Series for Polkadot, with Revenue-share Model for Treasury

This proposal aims to obtain a marketing budget of US$1 million to sponsor a series of ~20 major established global family office summits and traditional investment conferences, which is where we see the greatest opportunity for bringing untapped capital into Polkadot. If successfully executed, this US$1 million in sponsorship costs will be repaid to the treasury in full. 

Background

This proposal is a revised version of Ref 899, which was narrowly rejected during confirmation period on 19 July. We have received a lot of positive feedback and many people have voted in favour (7/10 DVs voted AYE). The primary reason the Ref ultimately failed is because of three whale accounts (16hZ*, 156U* and 12k2*), who in combination control ~40m DOT voted against it. We don’t know who is behind these accounts, or why they voted NAY, but if you read this, please do reach out to us in the comments section or on TG: max462.

Regarding other community feedback, we have often heard suggestions that the event series should bring more direct benefit to the treasury. We have considered all comments and significantly revised our proposal, which we are excited to present below:

Key changes compared to Ref 899

1% Revenue-Share: In this new proposal, 1% of the capital raised by Harbour Industrial Capital (“HIC”) at these investment conferences from new LPs will be directly returned to the Polkadot treasury. If we successfully raise the US$100m through these events as planned, the US$1m in event sponsorship costs will have been fully repaid.

Equitable Distribution: This 1% will be taken directly out of the management fee that HIC charges its LPs, thereby cutting directly into our bottom line, while bringing a directly measurable ROI to the treasury.

Risk Sharing: There is no limit to this 1% deal: If we manage to raise US$200m, US$2m will be repaid. If we only manage US$50m, it will be US$500k. Some people may argue that there is a risk that the capital will not be fully repaid. While this is correct, HIC will also only receive a fraction in management fees, if we raise a much smaller fund. (We don’t take any salary out of the US$1m budget). Incentives for us to work hard and raise a fund as large as possible are therefore well aligned.

Fringe Benefit: We argue that this new Rev-share model with the treasury should be considered a fringe benefit to the treasury. Nice to have, but not the main reason to vote AYE. Instead, the key benefit to the Polkadot ecosystem – and therefore to the treasury – is bringing in fresh capital and creating a new large Polkadot ecosystem fund that otherwise would not exist. 

Comparison with other Events: As the funds will be used for event sponsorship, this proposal should primarily be evaluated through the same ROI lens as other Polkadot events (Decoded, Sub0, Consensus, Token49 etc). These often have similar price points for a single event as our series of 20 events. We believe that introducing Polkadot to very wealthy investors, raising a $100m ecosystem fund AND offering a direct rev-share to the treasury, creates a much better ROI to the treasury than many of these other events.

Head Ambassadors: Since we launched Ref 899, Max and Mario have been voted in as Head Ambassadors of Polkadot. We are extremely grateful for this trust, and will use our HA title to speak on behalf of Polkadot at the investment conferences. Like the other HAs, we will be drawing a salary from the position. We would therefore like to emphasise that the present proposal does NOT INCLUDE ANY ADDITIONAL SALARY for ourselves, but that we will be organising these events at cost.

No Other Changes: Other than that, there are no changes compared to Ref899. We therefore believe that everyone who voted AYE previously, should vote AYE again. At the same time we hope the additional benefit to the treasury will win over many more people who were previously on the NAY side. 

Proof of Work

Who we are and what we have done so far

1. As per Q1 2024, Harbour Industrial Capital has raised a Polkadot fund with AUM of US$10 million from around 50 LPs Exclusively deployed this in the Polkadot Ecosystems; Invested in over 20 parachains and other Polkadot-based projects.
2. Organisers of the Polkadot monthly meetup HK; speakers for Polkadot at many events including Sub0, ParisDOTcomm, Web3 Festival, WOW Summit, TeamZ and Polkadot PULSE.
3. TradFi background (Morgan Stanley, Deutsche Bank and Bank of China) and proven ability of bringing non-crypto native investors into Polkadot.

Why We Need a New Large Polkadot Fund

The unfortunate answer is: Because many traditional VCs still ignore projects building on Polkadot. Ask any team that recently tried to raise money from generic crypto VCs, a frequent reply is “You’ve got a good team and good idea, but why are you building on Polkadot?”. Sure, we believe this narrative will change over time as other capital allocators slowly begin to realise the potential of Polkadot. But in the meanwhile, we need a dedicated Polkadot-only VC, that helps all the exciting new projects building on Polkadot get off the ground.

It is a chicken-and-egg problem: If Polkadot based projects are starved of capital vis-a-vie those building in other ecosystems, Polkadot will never get the liquidity and “hype” that ultimately attracts more capital. Having worked in the ecosystem for many years, it’s sad to see quality Polkadot based projects migrate to other L1s/L2s, not because of the tech, but simply because they believe they have better opportunities to get VC funding there. We want to change that, and make Polkadot the place great builders go and access capital.

Family Offices as LPs

When looking to bring significant amounts of new capital into Polkadot ecosystems, we believe that Family Offices are the most promising investors. But why promote a Polkadot Ecosystem Development Fund, when people can just invest directly into Polkadot? There are at least three good reasons:

1. A familiar structure for FOs We will incorporate the fund in the Cayman Islands, as a standard GP/LP fund. This is the most common structure for VCs, and one that most FOs have probably used in the past for investment in VCs in different industries. They can wire cash to our bank account in the fund’s name, and get paid out the same way. No need to set up exchange accounts, or remember private keys. For crypto natives this may sound trivial, but for traditional FO who we target here this still constitutes a high barrier to entry.
2. Entire Ecosystem A simple investment into Polkadot may involve the purchase (and possibly subsequent staking) of DOT. However, to identify promising startups building on Polkadot requires in depth knowledge of the ecosystem and extensive due diligence. It is also exactly these startups to which we want to funnel the capital that they will require in their growth journey. It is unrealistic to expect FOs who come from different industry backgrounds to do this on their own.
3. Active follow-ups This may be the most subtle, but also the most important reason. Nobody “owns” Polkadot, hence nobody is incentivised to follow up with potential investors from the conference, arranging calls and continuing the conversation until the investment is made. Harbour Industrial Capital on the other hand has a great track record of converting leads into actual investors for Polkadot.

Why Harbour Industrial Capital?

Harbour Industrial Capital (HIC) is a private Polkadot VC fund, established by Max Rebol and Mario Altenburger in 2021. We are registered in the Cayman Islands and headquartered in HK. As of Q1 2024 we have an AUM of over US$10 million. We have raised this money from private investors such as Family Offices, and subsequently deployed it exclusively in the Polkadot ecosystem. Fund 1 held its final closing on 31 December 2023, and we are about three quarters deployed. The plan is to launch Fund 2 towards the end of 2024, with a target size of US$100 million.

Inclusive Representation of Polkadot

While Harbour Industrial Capital will take the lead in organising these events, we will actively bring a diverse set of people from within the Polkadot ecosystem to these events:

1. Head Ambassadors: In early June the new Head Ambassador (HA) program was launched, and we are planning to involve the newly appointed ambassadors in all our events. HAs have been elected by the community to officially represent Polkadot, and speaking on stage at these investment conferences will be a great showcase for the HA program, as well as being a major driver for new capital inflows to Polkadot. We will select HAs based on their public speaking track record and their location, preferring to work with those who are based nearby the conference location.
2. Polkadot-based Projects: We will publish a Call for Speakers, targeted at Polkadot-based teams, two months ahead of each conference. We will put them up on stage to speak about their projects, which at the same time will be a testimony to Polkadot capabilities. If investors in the audience subsequently get interested in this particular project they can exchange contacts and invest directly. At Harbour Industrial Capital we take pride in facilitating conversations between Polkadot-based projects and independent investors, and have a strong track record of doing so.
3. Parity and Web3 Foundation:  We will extend invitations to speak at these events to Polkadot’s senior leadership team. Of course we would love to have Gavin at some of our events, but even if he can’t make it, there are many other people we would like to involve. This could include Parity’s Investor Relations team, or experts from the Web3 Foundation to speak on a particular topic relevant to the conference.

Budget

Please find our proposed budget in the table at the bottom of the full proposal. Kindly note that this is still a draft, as the cost of many items are yet to be confirmed. Most importantly, the exact sponsorship fee will vary from event to event, and has to be negotiated with each event organiser. The numbers below are averages based on initial discussions we have had with different organisers. We have applied a discount of 50% for sponsoring an entire events series (rather than a one-off event), as all organisers prefer long-term partnerships and encourage them with such discounts. It is also the primary reason why we have decided to do this treasury proposal rather than go through the Events Bounty, which only supports one-off events.

Please also note that the amount between line items in this table may shift, depending on actual costs, so long as the total of US$1m is not exceeded. A key variable in this budget is the number of events we will organise. We propose 20 events throughout the fundraising period of two years. However, it may end up being 15 or 25, depending on the actual costs of the initial events.

This means, we will continue organising the fundraising events, until this budget is used up. We believe that this approach is well aligned with the interests of the treasury: The more events we are able to organise, the more commitments into the fund we are likely to get, and the more capital we will have available to invest back into the Polkadot ecosystem.

Revenue Share Model

1% of all funds raised from LPs will be returned to the treasury. This money will be taken out of the management fee that HIC charges its LPs. It therefore has no impact on the net investment returns the fund generates for its LPs, but only narrows the profit margin of HIC. Funds shall be returned to the treasury on a quarterly basis following completed capital calls that quarter. A transparency report disclosing the amount of funds raised from LPs at each event will also be published quarterly.

Continue Reading

The above is just a short summary. To read the proposal in full, including graphics and additional links please click here.