Request for comments: A Strategic VC Initiative for Gitcoin

[daniel-ospina]

Strategic VC Initiative for Gitcoin

Executive Summary

Gticoin’s problem space (funding what matters) is experiencing VERY rapid change with many opportunities emerging. If Gitcoin is to thrive, it needs to approach this landscape with a robust innovation approach.

Gitcoin is uniquely positioned to establish a pre-seed venture capital fund (likely via Allo.Capital) leveraging its treasury assets, industry reputation, and ecosystem connections. This strategic initiative would diversify Gitcoin’s impact while creating new value streams during a period of rapid change and business model evolution. Enabling return on investment and collaboration with the broader ecosystem.

Note: this vision is compatible as far as we can see with “Gitcoin 3.0”. Whereby a ‘market’ operated by Gitcoin is described where different mechanism compete to fulfill the objectives of ecosystem partners.
The VC style fund explored here (together with a venture studio idea that’s adjacent to this proposal) can serve to incubate and scale capital allocation mechanisms in said Gitocin 3.0 market, while enabling incentive-aligned open innovation (i.e. collaboration with builders beyond Gitcoin internally-funded teams by providing capital in a way that can regenerate Gitcoin’s treasury as said projects mature).

Rationale

Companies need to keep up with technological development to avoid disruption and obsolescence. As a result they employ multiple mechanisms that we can learn from and leverage in a network/DAO. The 3 most prominent mechanisms are:

• For exploring very early-stage ideas: Venture studios (or the more traditional accelerators and incubators)
• For aligning with projects that have initial traction but still early: Venture Capital funds (or corporate VCs)
• For incorporating mature businesses into the company: Mergers & Acquisitions

These mechanisms enable a company and DAO/ecosystem to interface with entrepreneurs and external projects effectively, instead of talent leaving to start up and external projects becoming competitors.

M&A is high risk and very capital-intensive, high-risk and potentially high-reward, while also requiring a very comprehensive setup. This leads us to suggest revisiting it later once core business models are more mature.

Venture Capital funds require about minimum $5-8mn to set up at a micro scale, and although this amount exists in Gitcoin’s treasury, it would be a big bet. However, not all the funds need to come from the Treasury but can come from many Limited Partners who bet on Gitcoin’s ability to deploy funds. Given Gitcoin’s strong network, this is something we find exciting to explore.

As for Venture Studios, they require about minimum $2-5mn to test out, which is significant but feasible. On the downside, venture studios are operationally complex and require capabilities that Gitcoin hasn’t got inhouse at present. This leads us to think that a partnership here would be ideal. Note: we might propose for RnDAO (venture studio and product ecosystem focused on CollabTech) to partner with Gitcoin at some point.

So for now let us focus on exploring the VC fund.

Why Now?

• Changing Landscape: The rapid evolution in blockchain and AI requires agile positioning and being able to bet on many ideas irrespective of them being originated inhouse or not.
• Treasury & Network Strength: Current holdings enable strategic capital allocation across multiple initiatives, while additional capital can be raised.
• Business Model Innovation: Need for Gitcoin to diversify revenue streams beyond current programs and explore models that bring financial sustainability.

Gitcoin Strengths

• Reputation & Network: Established thought leadership position provides premium deal flow
• Technical Expertise: Deep understanding of on-chain capital allocation mechanisms
• Distribution Channels & Community: Ability to amplify portfolio companies through existing networks
• Emerging Thesis: Developing perspective on AI and on-chain capital allocation creates unique investment lens (RnDAO is currently working with Allo.Capital to advance this thesis definition through a research project and book)

Implementation Strategy

1. Explore fit: VC can be a dirty word. We’d explore way to mitigate the negative and amplify the positives.
2. Dedicated Leadership: Recruit team to lead day-to-day operations
3. Initial Capital: Allocate portion of treasury assets as cornerstone investment
4. LP Recruitment: Leverage reputation to attract additional limited partners
5. Thesis Development: Focus on AI and on-chain capital allocation mechanisms
6. Strategic Origination: Partner with entities like RnDAO ($2M potential investment opportunity) for originating venture that the VC fund can then scale.

Synergies with Existing Business

• Complementary Function: VC arm operates alongside grants program and other mechanisms
• Knowledge Transfer: Investment insights strengthen core product development and vise versa.
• Network Expansion: Portfolio companies become natural allies in the ecosystem
• Mission Alignment: Supports developing systems to fund what matters

Risk Mitigation

• Portfolio Approach: Diversified investments manage individual project risk
• Strategic Reserves: Maintain sufficient treasury for core operations
• Governance Alignment: Ensure investment decisions support broader Gitcoin mission
• “Zebras” and Revenue focus: explore new investment approaches such as The Calm Company Fund’s Shared Earnings Agreement that mitigate some of the downsides of VC.

Recommended Next Steps

1. Disucss interest and viability
2. Formalise proposal with community to create a workgroup and define the thesis and approach
3. Define governance and decision-making framework
4. Begin leadership search process
5. Allocate initial capital commitment & fundraise from LPs
6. Establish partnership with strategic venture origination partners

Recap:

This initiative represents an opportunity to extend Gitcoin’s impact while navigating market uncertainty through strategic capital deployment and ecosystem development. At this stage, is an idea we’re curious to explore. Please let us know your thoughts.

[LuukDAO]

Interesting idea - wondering what other GPs in this initiative could be. Having some risk capital to solve and accelerate Ethereum’s biggest challenges sounds like a big win for the industry.

[daniel-ospina]

I’m surprised about the lack of replies here and wondering why that is. Lost in the feed? lack of interest? not sure what to think? I’d love to know your perspective

@kyle @Sov @deltajuliet @ccerv1 @meglister @MathildaDV @connor @thelostone-mc @souptacular @trent

[meglister]

Hi there – thanks for the tag! I’m departing Gitcoin with the business unit winddown and no longer participating in governance, and suspect the same for most of the folks you tagged

Might have better luck posting on the Allo Capital forum, as you note this is aligned with their focus!

[owocki]

@daniel-ospina

I’m surprised about the lack of replies here and wondering why that is. Lost in the feed? lack of interest? not sure what to think? I’d love to know your perspective

for me the main thing is trying to figure out what gitcoin 3.0 is (which is an ongoing disucssion and very wet clay rn). i think in a month ill be in a better position to comment.

@meglister

Hi there – thanks for the tag! I’m departing Gitcoin with the business unit winddown and no longer participating in governance, and suspect the same for most of the folks you tagged

here is a list of the current active stewards => Tally | Gitcoin

[ccerv1]

Hi @daniel-ospina

Thanks for the tag and for laying out a thoughtful vision.

I appreciate the initiative, but personally I don’t think this is the right fit for Gitcoin 3.0.

As Kevin mentioned in this recent post, Gitcoin already has exposure to venture-style initiatives through Public Works and Allo Capital. These initiatives were structured to sit outside of Gitcoin governance, and I think that separation is important to maintain.

My view is that Gitcoin governance should stay focused on its core differentiator: decentralized capital allocation for public goods. That’s a big enough challenge – and one we haven’t yet solved in a durable or scalable way. Building and overseeing a VC fund would not only introduce additional complexity and risk, but could also blur Gitcoin’s mission and erode trust from the community that sees us as a neutral coordination layer.

To be clear, I’m not against experimentation in the ecosystem. But I don’t think Gitcoin governance should be the vehicle for that experimentation when it comes to venture investing. If there’s interest in exploring these ideas further, I’d encourage doing so through external entities like Allo Capital or in partnership with other aligned orgs that could do the heavy lifting on the dealflow side.

[owocki]

@ccerv1

As Kevin mentioned in this recent post, Gitcoin already has exposure to venture-style initiatives through Public Works and Allo Capital.

FYI

1. I’ll be surprised if we ever see a single wei back from public works. I left a comment here stating why.
2. Allo.Capital is still in the liminal state of figuring out what it is, and a possible future state is a fund/VC… but we’re not sure yet if thatll get off the ground.

[Hydrapad]

Gitcoin has always been a hub for web3 innovation and growth. Here is an idea, why not fund projects/startups via Hydrapad in return for tokenized equity or gov token. As a launchpad, we can work closely with Gitcoin governance team and the community at large. We will facilitate everything needed to a due diligence, It would be an interesting idea to see how it would function. Would love to jump in a call to do a live demo if given opportunity.

Test Site: https://test.hydrapad.com/ ( currently deployed on Polygon mainnet for testing ) there could be issues with ui/ux - ( work in progress )