Simple Summary;

Fractal is streamlining engineering resource to reprioritize traction and marketing in order to re-raise in January ‘24.

Our ask to the DAO is:

• To review this request for $336-360k and 9 months runway along with the idea of further review gates every 3 months. This budget will target traction with streamlined funds only going to the founders and part-time marketing.
• For any thoughts, questions or gaps around this plan please raise them in comments on the doc or discord.
• After tweaks and consensus (up and down vote), we will take the final outcome to Snapshot.

Abstract;

Fractal is requesting a Budget of $336-360k for 9 months runway. This is a 50% reduction in budget for the next 3 months to align with Decent’s Summer OKRs target. We’ve added clear traction + monetization KPIs (set by VCs) for what we need to re-raise in January. These KPIs will also form the backbone of Review Gates every 3 months until then to keep us honest (i.e. the budget could be changed further or paused ).

This budget will specifically go to the Founders + Marketing for a more lean, traction focused operation. This means current engineers will revert to other DecentDAO projects. Tom & Mike will support Fractal 100% whilst marketing will see their support pivot to other Decent projects after 2-3 months

With this plan, we want to hit 12-16 DAOs on Fractal by January 2024 with x1 monetized as a stretch goal. VCs have confirmed this would be more than enough to raise especially with additional KPIs of 72-96 leads, x2-3 user cases published & 40% of DAOs have 1 season's budget as $ TVL.

Motivation

As clarified in the recent LFG Decent Time, the bear market has cut VC deployed funds by 85%. The ventures that do raise had to be leading in traction & monetization metrics. Due to other priorities, we were behind on these metrics and so paused the fundraise after 2 months and 50 investor calls.

The good news is VCs love our team, problem and solution… they just haven't yet seen DAO tools be able to truly lock-in users and monetize (see appendix for real VC feedback screenshots). Fractal hasn't yet had the chance to actually sell into the market. There’s now a huge opportunity for Fractal to lead on this backed by macro headwinds of booming $ funds in Safes, layer 2s making DAO participation affordable and growing off-chain governance controversies (e.g. Arbitrum). We’re already seeing this with word of mouth alone pushing Bancor, ETH lizards (https://ethlizards.gitbook.io/ethlizards-white-paper/white-paper/structure), Civitas, (https://docs.playcivitas.io/whitepaper/introduction) MyosinDAO (https://www.myosin.xyz/) from being one feature away and AwakeVC to be already live on Fractal Mainnet. I can’t overstate now how much of an unlock Decent’s revamped marketing, 100% focus and being on Mainnet will be towards reaching these KPIs.

The January date to re-raise has been chosen specifically due to DAO lead times, not to coincide with Lumen raise, time to monetization and VC optics etc.

Specification

Fractal KPIs to re-raise in January

Fractal KPIs split by Month and resource required:

Further Rational

Below is the longer doc Fractal<>WSL curated together

Where we are now:

Fractal has learned over the last 3 months:

1. The core is strong - VCs believe in Mike and I as a team to tackle this problem. They believe the problem is very real and think that the our tech as the most composable and open source framework to tackle it as a foundation
2. VCs are down on DAO tooling - General investors are down right now on the space. They question the $ market size of this space (i.e. the # of users there are out there + the ability for vendors to monetize those users).
3. More sophisticated VCs starting to get bullish (…but slowly) - Those who are experts in governance (e.g. Greenfield, Struck, Fintech Collective, Tiago) do understand the $ opportunity. They are right now re-opening their thesis on this space… but need to be demonstrated evidence of traction on the metrics above to prove out the ‘why now’ narrative.
4. All VCs tightening their purses - Their LPs are pushing them to only focus on teams with clear traction and path to profitability.

We understand VC concerns but are with the bullishness of more sophisticated VCs. This is the time to invest in DAOs. This is based on i) the impact the upcoming bull market will have on the amount of assets sitting on-chain in Safe’s treasuries (already ~$62bn as of today but we estimate $450bn by DAOs alone by 2027) ii) the booming size of communities and how layer 2s are making it affordable for them to engage with DAOs at scale iii) when these communities realize off-chain votes like snapshot don’t have on-chain impact (see Arbitrum controversy).

Combine these with Fractal’s inherent capabilities (i.e. to extend any Safe into a no-code composable DAO without any switching cost) and we have a huge opportunity…. all we need is to get traction to prove it.

Marketing and BD are critical though. Since Mike and I joined - due to onboarding, the switch to Gnosis and then the raise - we have never had an opportunity to actually sell Fractal to users without other priority concerns. We have altered the correct venture building process of ‘Problem—> Build —> Traction —> Raise’ and instead gone for a process of ‘Build —> Problem —> Raise —> Traction’. This can work but traction needs to be our 100% priority going forward. Parker and Delma’s work to revamp Decent’s marketing is a huge unlock that should be exploited until Lumen is ready for their support (they estimate 2 months away)

Where we need to be:

After sessions with friendly VCs (e.g. Tiago, Cumberland, Fintech Collective etc) we have clarity on what it’d take for them to come into our round:

1. Goal #1 - Quantitative Evidence of Traction - we need to show a certain # of DAOs using Fractal on Mainnet (or our upcoming layer 2 Polygon). This doesn’t need to be huge (~10-16 DAOs) as long as they are the right profile and show engagement (see table below).
2. Goal #2 - Qualitative evidence of the ‘Right Traction’ - this could be either them moving funds (TVL) into Fractal or published case studies showing i) The problem the DAO faced ii) the requirements iii) how Fractal fit requirements and any gaps iv) what we did to fill those gaps iv) what was the beneficial outcome for the DAO

• Stretch Goal #3 - $ evidence - what was made clear would be most attractive, would be just 1 user who we monetized in a way that can be scaled to other users as we grow. This isn’t a hard requirement but something that supposedly would make them ‘open their pocket books’

These goals can be summarized in the below:

Note - i) On Fractal - simply means have created a parent or subDAO on Fractal ii) I can flesh out our core target separately but moving their funds into Fractal incrementally is the first goal MyosinDAO + ETHLizards (iii) ‘scalable monetization’ means earning revenue from a feature that is a core part of our project so we can build a narrative around why the next 1000 users will be monetized too.

This initial traction will legitimized us to VCs as the best way to extend a Safe into a composable subDAO that has a clear path to monetization. Post January seed raise, I see those funds pivoting to scaling only making 100+ DAOs by end of 2024 very possible.

How to get there:

The good news - The tech is awesome. We’re going to have AwakeVC on Mainnet with their complex DAO structure here. We also - via only word of mouth - are one feature away from locking-in EthLizards (require NFT based voting) and Civitas (require layer 2). These last features are scoped and in development so should’t take more than 1.5 months. Once we dedicate our new go-to-market Decent resources to this traction, I should expect it to grow 10x. This is absolutely critical and can combine with my existing strong relationships now with 10+ VCs, Gnosis Safe team, Snapshot team

The challenge - is that lead times for larger DAOs are lengthy (Bancor has been in our pipeline for 2 months already). Even for the ‘Right DAOs’ - who are agile enough to switch their existing Safe treasury instantly - a snapshot proposal to a community is the norm. Similarly, all the best DAO tools focus on thought leadership and being seen as experts to give user confidence. This takes time meaning throwing resources at quick traction isn’t likely to be effective especially in the context of a VC market timing that isn’t hot for DAOs this year.

Based on this we propose this plan below: (note- other options considered were here - Fractal - Budget Options for WSL consideration

We invests more funding to keep Mike and Tom 100% on Fractal as well as giving marketing hires ability to stay on Fractal in some capacity throughout the 9 months. This extra support should allow us to acquire 12-16 DAOs by the time we raise with 40% moving one quarter’s funding into Fractal and 15% doing case studies with us

We combine this timeline with ‘exit gates’ (i.e. to pause or lower resources) throughout to keep us honest that we’re not putting bad money down.

*Note i) Events are key to help with BD and bug bounty (or other internal engineer review) required to get NFT based voting live for ETHLizards ii) Product Marketing Specialist assumed at $10k month based on Jonathan’s quote / Fractional CMO at $24k per month based on Dara’s quote (but ‘fractional’ assumes 50% is their max capacity). Time declines after 2 months (Lumen support) but PMS partially supports for 6 months (until the new venture arises)

This could look like this over a period of 9 months with exit gates every 2 or so months:

We look forward to getting eyes on this from Workstream Leads and the broader DAO / contributors. Happy to talk people through it and pitch what we need and why 🚀