My first post here on Gitcoin, hope I’m doing this the right way!
I’ve been interested in the concept of impact markets for about 2 years & I’ve seen some discussion of it here at Gitcoin.
This post seeks feedback on formalising it as a public good funding mechanism held on a bi-yearly cadence. In this post I’ll go through the nitty grittys of what impact markets are, why Gitcoin should launch this & the go-to-market strategy. I’d appreciate any feedback, especially on the next steps!
1. What are Impact Markets
Impact markets create a VC ecosystem for funding social impact. Investors get impact shares (or rights to the hypercerts issued by a project) upon funding a team. If the project succeeds, grant funders buy out the shares at a premium. More details here
Impact Markets potentially allow investors to make money by funding soup kitchens
- Why Gitcoin
a. The regular grants round is limited to reaching donors; impact markets would allow us to reach investors too, strengthening the degen to regen pipeline.
b. We can bolster our evaluation capability, as grant funders assess projects before buying out certificates.
c. Position ourselves at the forefront of the public goods meme by attacking the coordination problem from two fronts, QF grants rounds and impact markets, reducing any single point of failure
3. Go to Market
a. Run an impact market round every 6 months. In the first 2 weeks, projects seek funding from investors. Funded projects then deliver over the next 5 months. The final 2 weeks are kept for evaluation.
b. Limit the initial rounds to journalism and open source software, as the output from their projects is wholly online & can thus be evaluated by anyone without need for trust in the claims made by a project.
c. Keep a ratio of 1.5x investor money for 1x of grant money. If $1500 is invested in projects over the first 2 weeks, then only $1000 in grant money is made available for buying out hypercerts of successful projects in the final 2 weeks. Periodically revise this ratio based on feedback from investors & donors.
This will be appealing to grant funders as they only fund successful projects + they get a multiple on their funding (1.5x more of projects get funded if they give via our impact market than if they give it directly). Investors in good projects should be able to make 2-3x returns while bearing the risk of non purchase of the impact certs of dud projects.
I’m going to end this post with an image I’ve seen here. We have the grants protocol up and running to support ImpactDAOs attacking Moloch; the second pillar we need to create is Ether’s Phoenix , which this work stream hopes to do.
Additional Reading: manifund.org is running a pilot impact market with Scott Alexander buying $40k of impact certs in September 2023