Polkadot Growth Initiative (PGI)

Ecosystem
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We propose to establish the Polkadot Growth Initiative (PGI), a curated on-chain bounty for the Polkadot ecosystem aimed at supporting upcoming Polkadot projects with a co-investment.

These co-investments would be fixed at 10% of the projects funding goals and execute only if:
→ The project launches on Polkadot
→ A legal entity is incorporated with a Deloitte KYB credential
→ Positive on-chain evaluation by the Polkadot community
→ at least 23.33% of funding goals raised by external (non-PGI) investors

Polimec provides the necessary infrastructure to conduct the entire funding process in a regulatory compliant, transparent and decentralized manner.

This benefits the Polkadot ecosystem beyond its signaling effect by adding incentives to build on Polkadot and bringing innovative use cases and adoption, while optimizing success trajectories for Polkadot projects by harmonizing stakeholder interests.

Please find the full proposal write-up here: Polkadot Growth Initiative (PGI) - Google Docs

We’re happy to put this initiative forward to the community and of course discuss and further elaborate our thinking process on any questions that may arise. Our plan is to go live with an on-chain proposal on Polkadot after the initial discussion round in the forum and potential improvements coming from that.

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Good Initiative! :clap:t2:

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I love it, this approach is excellent for founders, one of the main problems I face as a founder is choosing a SAFE or a SAFT, and for my VC contacts, web3 is wild.

I support this initiative, which is the web3 approach for a VC task, diversification; the bounty, will help drive more investment if Polimec and Polkadot are the “current” leaders of the financial rounds, this is something that will help the ecosystem to grow, no doubt.

Most BD approaches should have this Initiative in their offering portfolio.
LFG Polimec!

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The Polkadot Growth Initiative (PGI) is a fantastic step forward for the Polkadot ecosystem. By offering co-investment and clear criteria for project support, it ensures that only the most promising projects receive funding.

The use of Polimec’s infrastructure for a transparent and decentralized funding process adds a layer of trust and professionalism.

This initiative not only incentivizes innovation but also aligns the interests of all stakeholders, paving the way for successful projects on Polkadot.

A great move for the community!

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I am in full support of the Polkadot Growth Initiative. It is quite the natural, imperative step towards implementing a culture of innovation and growth in the Polkadot ecosystem. By setting transparent criteria for co-investment and taking advantage of Polimec’s compliant, truthful, transparent, decentralized funding infrastructure, PGI ensures that high-quality projects receive due support. In this way, it would usher in new use cases while optimizing project success for the benefit of the community in its entirety, so I look forward to seeing its implementation.

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Would like to jump in to to make some comments in contrast to my apparently well timed post.

I would like to start by saying I generally support the direction of the initiative, and think it captures a good balance of experimentation at a lower risk due to the parties involved and structures suggested.

Some questions:

  • Why is the investment using only DOT, rather than some or all in USDT?
  • With $2,400,000, how many teams do you plan/predict to support?
  • Given the experimental nature of the project, how long do you think it will take (let’s say from the approval of the treasury proposal) before you can evaluate the success of the initiative?
  • What is Polimec’s cut of a successful funding round?

Some high level feedback:

If you had a chance to look at some of my responses as a result of my post about using Treasury as a VC, I stated that parachain teams should be providing value / access to their products for all DOT holders if the treasury will be used to fund them. I am not sure the treasury getting some of the parachain tokens quite captures that.

Do you agree with the sentiment about bringing value to all DOT holders as a minimum bar for receiving treasury funds? If so, perhaps you might have ideas on how you would establish that requirement in the funding process.

EDIT:

The PGI will participate with a maximum lockup period for the mainnet tokens at the time of launch to ensure long-term interest alignment. This means that the mainnet tokens will linearly unlock over a span of 52 weeks after the mainnet launch.

Also, this reads to me “the treasury will be at risk for holding the bag”.

What are the lockup periods for founders / other investors? “Long-term interest alignment”, to me, is when all parties are locked into the long term success of the product.

What might I be missing here?

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Hey Shawn,

thanks for your feedback - likewise, really liked your post and agree regarding accountability. A structured approach is required for such an initiative to reduce risk and align incentives between all involved parties – the long-term goal is to benefit DOT holders through growing the number of verticals our ecosystem has first-class access to.

  • Why is the investment using only DOT, rather than some or all in USDT?

→ Mainly for technical reasons, for the treasury proposal call and process of the on-chain bounty to be mostly automated (i.e. code- rather than trust-based). USDT/USDC would need to be received via AssetHub in the treasury proposal call and limitations on minting amounts persist.

For the participation itself, this does not make a difference: An oracle accounts for the USD contribution also in the DOT participation. Also, talking from the perspective of traditional portfolio management, it makes more sense to slowly diversify the DOT into “ecosystem beta” through multiple smaller higher risk investments rather than sell for USDT/USDC and reallocate over time.

  • With $2,400,000, how many teams do you plan/predict to support?

→ The $2,400,000 will support a total successful funding amount of at least $7,992,000 ($5,592,000 / 23.3% coming from non-PGI investors) and up to $24,000,000 for various projects. While it is not possible to pin this down to an exact number (as funding targets are determined by the teams), we expect it to fund more than 35 projects over the next 18 months.

  • Given the experimental nature of the project, how long do you think it will take (let’s say from the approval of the treasury proposal) before you can evaluate the success of the initiative?

→ The success can be evaluated and monitored based on three KPIs, such as:

  1. Amount of projects building on Polkadot mature enough for a funding round to attract external capital (quarterly numbers)
  2. Successful launch and traction of funded teams (quarterly after launch)
  3. Ecosystem growth in terms of end user numbers of funded projects

Happy to hear your thoughts on this though!

  • What is Polimec’s cut of a successful funding round?

→ Polimec takes a 10% fee on the first $1M, 8% on amounts $1M-$5M, and 6% after that in the tokens of the projects. The fee is distributed to stakeholders and the full write-up with examples can be found here: Reward Payouts

Fully agreed, treasury spends should bring value to all DOT holders. In this initiative, the treasury gets something in return immediately – a stake in the token of a project planning to add long-term value to the Polkadot model, which relies on a strong ecosystem of applications building on its infrastructure and leveraging its unique technical capabilities. However, I see the token more as an add-on in this model: The core value for DOT holders will be brought by growing the pie for all through a vibrant and attractive ecosystem to build in and applications to use.

We have made great progress on multiple fronts already to reduce barriers of entry – access to funding remains one of them, but also serves as a “quality control” to only fund promising teams and ideas. With the PGI, DOT holders basically say: “Hey, we’ll help you get started if you can attract at least twice as much external capital as we’d give you”. This seems to me to be a natural and fairly web3-aligned arbiter of who gets supported.

Lastly, regarding the vesting period, Polimec is set up in a fair way that is not skewed towards certain actors – there is no “holding the bags” scenario other than usual investment risk, which the external capital also bears. For how this is implemented in our protocol in detail, please see here: Funding Round

Hope this clears up some of your questions and where we’re coming from – appreciate your inputs.

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I think this is a very nice iniative as it solves one of the problems faced by founders and early projects building on polkadot …

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This is how I interpreted “holding the bags”–the Polkadot Community gets “a stake in the token of a project,” but that token is volatile and (as a start-up, particularly one in blockchain) high-risk. And while the external investors bear that risk as well, Treasury shoulders the lion’s share (77.7%? or am I misunderstanding?).

This is not an objection to the proposal–I’m still thinking it through, but I like the general direction.

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We fully support Polimec’s proposed Polkadot Growth Initiative, as it somewhat aligns with our idea of using the treasury as an investment tool! The benefits are obvious, but there are some execution challenges. Still, Polimec’s initiative is a great experiment! Without trying, the benefits and drawbacks remain theoretical, right?

I think Shawn raised an excellent point: DOT holders should benefit from these investment activities. Can I interpret this to mean that DOT holders participating in OpenGov could gain access to these projects’ products and receive part tokens from the investments? I believe this would energize the entire community and encourage more DOT holders to engage in governance! What do you all think? Can we discuss this further?

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I can’t speak for Shawn, but I think one way to benefit all DOT holders would be for the new chain to use DOT as a fee token, at least as an option in a bring-your-own-gas function.

More importantly, though, the appeal of a using Treasury to fund speculative, for-profit projects is contingent on those projects’ likelihood of success. Voters can’t assess that likelihood very well unless the project opens up its books and lays all the relevant information out for public scrutiny, so imo full transparency, open source, etc. is the bare minimum bar for this kind of an arrangement to even be worthy of consideration.

Question for the OP: If enacted, will PGI have a transparency/OSS requirement?

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Thanks for your feedback.

The treasury co-investments are fixed at 10% of the projects funding goals and hence do not have the lion’s share.

Meaning a minimum of 23.33% (as otherwise participants refunded by the protocol) up to 90% is raised by external investors.

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Thanks for your responses @LucaPolimec.

My main suggestion based on your responses is: Polimec should not take a cut of the funds being contributed to by the treasury.

I hope the reasoning for this is obvious, but if you disagree, I would like to hear your perspective.

Also, is there somewhere I can learn more about why 33% is the threshold for a successful raise? I assume if a team is asking for X, that 1/3 of X is perhaps not enough to be successful to execute their project, which makes the investment much more risky from my perspective.

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Very welcome and appreciate the feedback @shawntabrizi .

The Polimec protocol does not take any cut from contributions from investors into projects. Hence, there is no cut for the PGI contribution and every contribution yields a direct investment at 0% fee.

The 33% threshold needs to be reached that the project is able to accept the funds from the raise as the protocol reimburses all participants automatically if that threshold is not reached (rejection of raise) - as the project likely cannot deliver on their anticipations. Projects need to raise more than 75% of their funding target so that evaluators are not slashed and more than 90% for evaluators to receive rewards in the form of project tokens directly which is deemed a successful raise.

You can find more information directly here: Reward Payouts

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I think this is a good initiative overall. My main feedback is that 23.3% of non-PGI capital is a pretty low threshold. Would you consider raising it?

If I understand correctly, at the moment you could do a 100k raise, with $23.33k from private investors, and $76.66k from the treasury (!) That’s not particularly attractive in terms of bringing in fresh capital, and more of a redistribution tool of treasury funds.

I would propose to raise this threshold to at least 50%, arguably even higher. As a reference point, for our new ecosystem fund we are targeting a 70% rate of capital that comes from outside the Polkadot ecosystem.

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Thanks for your feedback @Max

As lined out in the replies above:
The treasury co-investments are fixed at 10% of the projects funding goals. Meaning in your example of a $100k raise, $10k would come from the treasury and a minimum of $23.33k up to $90k from private investors.

Hope that helps to clear the misunderstandings of the initiative.

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Hi @xiaojie_PolkaWorld

We appreciate your support!

Bringing value to the Polkadot ecosystem and its token holders is at the core of PGI!

As stated in the reply above:
“In this initiative, the treasury gets something in return immediately – a stake in the token of a project planning to add long-term value to the Polkadot model, which relies on a strong ecosystem of applications building on its infrastructure and leveraging its unique technical capabilities.”

The tokens received in return for the investment made by the PGI are at the disposal of the Polkadot Community (DOT holders) and to be managed by it - the same way as other treasury funds are. If the community decides to reward OpenGov participation with (part of) those tokens, then this is how they are going to be allocated.

Let me know if you have any other questions :pray:

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PGI presents a compelling opportunity by offering an alternative route for the treasury to invest in Polkadot projects.

One of Polkadot’s key strengths is its ability to promote projects and products that enhance the utility of its ecosystem. By diversifying the treasury’s portfolio to include investments in Polkadot-based projects, we can generate significant returns and benefit the entire community.

Supporting initiatives with the treasury demonstrates the community’s commitment to its growth. Also, this support can help founders attract external investment, as investors are more likely to feel confident when they see strong community support.

I wish you great success with this initiative.

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@LucaPolimec I have taken a quick look at the Reward Payouts link, and def can say the “Issuer Fee Allocation” table is cool and makes sense to me.

But I am confused with your two replies since they are giving me different answers.

My question is trying to figure out: are there incentives / ways for Polimec to gain by using treasury funds to support teams, even if they might not be successful.

Your first comment made me think that Polimec is getting 10% of the DOT coming from the treasury for teams raising less than $1M.

The second comment says Polimec takes no cut.

Can you help clarify this confusion?

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Excellent initiative brought by Polimec, which guarantees that users who do not have the capacity to enter an initial round of financing can do so through this protocol.

Although the detail would come in the Deloitte credential, due to the restrictions of some countries.

But otherwise I agree with the initiative.