Authors

Lemz & SeaGolem

Summary

This LIP proposes a reorganization of the Portfolio Sub-DAO council structure to better align with its evolving role and priorities. The proposed changes include adjustments to council composition, decision-making processes, and operational focus, reflecting the need for efficient management of liquid positions and capital.

Abstract

The Portfolio Sub-DAO's structure will transition to the following:

• Council Composition: 3 members, including 1 appointed team member/administrator and 2 elected members.
• Advisors: 2 advisors selected by the council, with 1 advisor focused on Launchpad opportunities and assisting with OTC deal flow management.
• Epoch Duration: Council terms will continue to be 6 months.
• Incentive Structure: Updated incentive structure to account for council as fund managers and not just approving deal flow opportunities.

Motivation

The Portfolio Sub-DAO has entered a new operational phase, necessitating a shift from solely analyzing deal flow and identifying early-stage investment opportunities to managing liquid positions and capital efficiency. The current structure does not adequately support these new demands, particularly in overseeing ongoing portfolio management and liquidation decisions.

These changes are intended to:

• Streamline the decision-making process.
• Optimize the management of both liquid and illiquid positions.
• Leverage expertise from aligned advisors to enhance portfolio outcomes. Update council member compensation to a more fairly aligned structure

Specifications

Overview

The proposed structure will include: Council Members:

• One appointed team member to act as an administrator, ensuring operational continuity.
• Two elected members from the community. *Council members make all decisions related to portfolio management. Advisors are encouraged to share their opinions but are not required for consensus on decision making.

Advisors:

• Two advisors selected by the council to provide guidance on OTC and deal flow management.
• One advisor will focus on Launchpad opportunities and assist in maintaining relationships with existing launchpad partners. Launchpad Opportunities:
• All decisions involving Launchpad deal flow will require consensus across council and advisors to maintain quality opportunities for the community.

Epoch Duration:

• Council members will serve for a term of six months, maintaining the existing duration.

Compensation:

• All council members will receive a $500 monthly stipend in addition to a share of profit from liquidations.
• Advisors receive compensation from OTC/deal flow opportunities on a per deal basis, typically between 0-5% of deal size. Actual compensation will be voted on and decided by the council, on a per deal basis.

Updated Incentive Structure: The team has agreed to grant their 15% profit allocation to fund to further incentivize the Portfolio Council to deliver portfolio performance and help with Ethlizards Buybacks.

New Fee Structure:

• 10% fee on profits realized by council members managing the treasury
• 5% fee on profits for council members signing new investments
• Ethlizards buyback: 10% of profits used to buyback Ethlizards NFTs that will be held in the Portfolio Sub-DAO treasury. *Existing deals signed by current and previous council members will still honor the 5% fee (1% per council member)

Rationale

This new structure addresses the Portfolio Sub-DAO's current operational needs while ensuring flexibility for future adjustments.

Key considerations include:

• Operational Efficiency: The presence of an appointed administrator ensures continuity and oversight, while elected members provide community representation.
• Expertise Integration: The inclusion of advisors ensures access to specialized knowledge and resources.
• Incentive Structure: The current incentive structure only compensated those who made the early stage deals, with no incentive to maximize return on liquidations. With these changes, we have appropriate incentives for each different aspect of the Portfolio Sub-DAO. For reference and comparison to traditional fund structures, they have a management fee (typically 1-2% annually) + a performance fee (typically 20% of profits).
• Team allocation pledged to increase Council Compensation and help Ethlizards buybacks: The existing incentive structure for the council was lacking and in order to increase this, changes in distribution are required. In order to protect the community’s allocation, the team’s 15% profit allocation has been pledged to fund this.
• Cost Considerations: The $500 monthly stipend for council members is a reasonable incentive to ensure active participation without straining the Portfolio sub-DAO’s budget.
• Ethlizards Buybacks: 10% of realised profits are used to buyback Ethlizards NFTs, to be stored in the Portfolio Sub-DAO treasury. Use of these NFTs will be determined by the community. These WILL NOT be used to vote on proposals.

By adopting this structure, the Portfolio Sub-DAO can effectively navigate its new priorities, ensuring that liquid positions are managed efficiently and capital is utilized optimally. Combined with the Ethlizards buyback structure, it ensures long term health and sustainability of the project.