GM36.1 - gm.studio funding (10/01-11/30)

Author: Willyham & DeFi Beats

Proposal date: October 10 2022

Summary: This proposal aims to cover funding for the studio from October - November. We intend to change the cadence of funding to remove the overhead of needing to do monthly proposals and retroactive payments. This will give both the DAO and the studio team more certainty and flexibility going forwards. A note on things in flux. The DAO is currently pursuing legal advice on how to best incorporate the studio as a company. Whilst this is still in flux, we are anticipating a change where all proceeds from studio efforts (e.g. primary/secondary revenue from NFT sales) would go to the studio company. We’d then deduct costs and donate the profits to the DAO to be used for other projects on a regular cadence. If we do end up with that structure, this proposal will most likely be superseded by those changes, and we’ll clarify and vote on those changes where necessary. When reading this proposal, please interpret the funding requested as:

1. The maximum that the DAO will allocate to the studio if nothing changes
2. and the minimum that the studio is likely to spend if things do change. Expect that we’ll use this same proposal in 2 months time to continue funding in the same manner.

Funding cadence The proposal covers 2 months of costs, but we will not request the total funds in one transaction. In order to stay flexible, we will compute our costs and request that money from the DAO on a monthly basis. This allows us to have more flexibility and to only ask for money that we need. For example, in the event of us lowering the amount of work that we will do, the DAO will retain the excess funds.

Core team salaries It is very difficult to estimate how much work we’ll need to do over the coming months. To keep things simple, we will assume that our costs will be similar to previous funding cycles, up until the the incorporation of the studio. This is effectively the minimum that we can spend to ensure that we’re able to maintain the existing studio product. However, we ask that the DAO understands that we may need some flexibility in how we allocate money and spend time. For that reason, we continue to outline rates and expected hours, but reserve the right to allocate those hours internally at Willyham’s discretion. For example, we may need more web based work rather than contract work for a given month, so we’d allocate more hours for the web engineers. We will maintain our existing rates for time spent:

• Senior Developer = $125/hr
• Non-senior Developer = $65/hr We’ll maintain the existing core team. As a guideline, these are the hours that we have previously allocated:
• Willyham (senior) : 10 hours/week = 40 hours = 5,000 USDC
• Bhish (senior): 10 hours/week = 40 hours = 5,000 USDC
• cxkoda(senior): = 5 hours/week = 20 hours = 2,500 USDC

Other costs In practice we have found that we sometimes need to bring other people in to help with specific tasks. Whilst we can’t predict these too far in advance, we’d like to reserve the right to pay up to $2500/month for outside help. This is equivalent to 5 hours/week of a senior engineer or ~10 hours/week for a less senior engineer. If there was no need for using this time in a specific month, we would not include it in the payment between the dao and the studio wallets.

Infrastructure costs Funding for infrastructure is variable and slightly complex. As we use many tools which all have different billing cycles, it’s quite hard to get an exact amount that we’ll need in advance. For this reason I propose that we have a maximum allocation of $2000 and a minimum allocation of $1000. We’ll send $1000 month to our infrastructure credit card to cover existing spending. If our costs change substantially, we are able to request up to $1000 more per month without another proposal.

Promotion, Incentive schemes and other costs In the past we have used contractors to produce promotional materials such as videos for marketing our releases. We expect this to continue and would like to reserve up to $2000/month to fund this. We anticipate a month cost for carbon offsetting of around $250. We will continue our tradition of allocating 0.5 Eth to each core team member who is present for the day of the drop. In practice we have found that a release requires us to be online consistently for the duration of the drop (and afterwards), which can be ~10-12 hours of time. Allocating 0.5 Eth is significantly cheaper than paying for those hours. Additionally, we wish to allocate some potential funds towards incentive schemes to attract artists to the platform. For example, we may want to pay a referral bonus to anyone who introduces us to an artist that has a collection accepted by our curation panel. There may also be other mechanisms which we choose to use and these would be at the core team’s discretion. We are requesting a maximum of $1000/m for this.

Summary of spend As the spending is slightly flexible. we will outline the overall minimum and maximum spend. In reality we are likely to always have something in between.

Estimated profitability We will aim to maintain our existing cadence for collection releases over the next 6 month period. We can therefore expect to have approximately 3 drops. As drops can differ in their sizes and secondary volume, we can’t predict revenue exactly, but we can extrapolate from previous releases somewhat. If we have 3 collections with an average of 800 pieces per collection, all selling out for a price of 0.2 eth per piece, and the studio taking 15%, then we’d generate 72 Eth in primary sales. If each collection had 500 Eth volume on secondary sales, this would earn a further 37.5 eth for a total of ~110 eth. With eth at $1300 this would be approximately $143,000 for the 6 month period. If we spent our maximum budget every month, this would leave us approximately break-even after taxes (assuming 20%). In practise it is unlike that we’d spend our maximum budget every month. However, to generate more substantial profits for the dao, we’d need to either:

• launch a collection which had secondary sales on par with Factura or Mind the Gap. A similar collection would earn us a further ~50 eth, or ~$65,000.
• Sell more pieces (e.g. 3 collections of 1000 pieces if possible).
• See eth price appreciation
• Lower our costs
• Generate other revenue streams (merch, prints etc)

Future revenue share/bonus considerations Whilst we think the current highest rate of $125/hour for senior engineers is fair, it is certainly not a top of market rate. As such, all of the engineers currently prioritise other (non-dao) projects where they either have an ownership stake or earn more money. In order to change this, we’ve discussed a the possibility of changing our incentive mechanisms to replace the existing 0.5 Eth drop bonus with something new. However, the discussions about what this structure would be are still early and are generally more contentious, so they have been omitted from this proposal in order to simplify and ensure that the core funding we need is secured in advance. There may be a proposal in the future which changes this incentive scheme, which may or may not happen at the same time as any incorporation votes.

Sponsors: Defi Beats, Willyham