This document will lay out the current status of the Index Coop OTC Sale and outline next steps.
In April of this year, the community passed IIP-32: Index Sale which laid out the mandate to raise $10 million through a direct sale of the INDEX token to select investors. The proposal was voted on to facilitate the execution of a strategic fundraise to diversify the Index Coop Treasury. The reason for this raise was two-fold.
Derisk the IC protocol and balance sheet by acquiring stable assets. While our treasury governance token balance was high, the reality was that in order to ensure long-term survivability we needed protection against any prolonged market downturn. We needed confidence that routine operations (specifically contributor rewards) could continue uninterrupted through any market conditions.
On-board value add partners who could evangelize Index Coop and help our protocol grow. The core thesis was that blue-chip investment funds would be able to leverage their significant connections throughout the ecosystem to support IC.
In both respects - the strategic raise was a massive success. We raised $7.75 million dollars in stable coins and today the impact of our investors continues to grow - whether that is their support in major protocol votes or the collaborations currently ongoing with many community members and various funds.
In early June, three major funds reached out to participate in the raise. Due to the fact that we were still $2.25 million short of our original target, and the high value add potential of the three funds, we agreed to continue conversations with these funds.
While all three had committed to participating in the sale by late June prior to our official announcement - their extensive legal and financial due diligence took significant time to complete. Alongside this, they worked with BDWG to identify custodial solutions. This entire process took just over two months. The process is currently wrapping up and they are ready to fund the contracts.
We are aiming to roll out those contracts over the next several weeks. Upon completion that will bring us to a total of $10 million raised in stable assets. This will mark the end of the mandate laid out in IIP-32.
I firmly believe that we should execute this deal. All three funds have strong reputations in the space and will be a big value add for our protocol. I believe that we should honor our commitment to these funds and allow them to participate in the OTC Sale at the previously agreed-upon deal price of $24.26 per token.
IIP-32 contains two key clauses:
The BD team is nominally allocated 300,000 INDEX tokens to sell for ETH and/or stablecoins (USDC or DAI).
We have raised $7.75 of that $10 million. From this section of the IIP the mandate remains to raise an additional $2.25 million. However, the second clause complicates things. The allocation of INDEX sold during this raise exceeded the nominal amount laid out in this second section of the IIP ( 322,803 total INDEX was sold). Based on the above information, I see three potential ways forward.
Continue to raise the remaining $2.25 million and accept capital from all three funds under the existing terms and conditions. This will exceed the nominal allocation.
Do not raise the remaining $2.25 million, and not accept capital from all three funds. This will leave us short of the total $10 million laid out in the IIP.
Work with the funds, community, and existing investors to build and propose a new IIP that will enable them to invest through an updated structure.
Each of these options has pros and cons. We will need informed community discussion and feedback to identify and execute the best option.
Who these investors are:
Sequoia Capital India
- Sequoia helps daring founders build legendary companies, from idea to IPO and beyond. Sequoia Capital India operates in Southeast Asia and India where they actively partner with founders from a wide range of companies, across categories, including BYJUs, Carousell, Druva, Gojek, OYO Rooms, Tokopedia, Truecaller, Zilingo, Zomato and more.
- In partnering with Sequoia, startups benefit from close to 50 years of tribal knowledge and lessons learned working with companies like Airbnb, Alibaba, Apple, Dropbox, Google, LinkedIn and Stripe early on.
White Star Capital (Neil) - $500 thousand
- $50 million crypto fund (investors in Paraswap, Rally, Superfluid, Liquality, Alethea, Ledn, Multis, others)
- Ability to bolster product integrations (Paraswap, Superfluid, Ledn, etc.), distribution partners (institutional tradfi + government LPs that can further distribution past the crypto-natives), upcoming liquid fund (liquidity provisioning)
Blockchain.com Ventures (Sam) - $750 thousand
- Investors in Set, 0x, Aave, Zerion, Eco and many others. Portfolio includes many potential product integration partners with leading consumer on-ramps in various geos, such as Argentina, Brazil, Indonesia and the African continent
- Over 76m wallets allows for material distribution of Index Coop products. Blockchain.com is a top 5 most visited crypto website and accounts for double digit % of all BTC transactions. Support in the exchange and wallet product would offer significant consumer exposure
- Exploring a branded Index product would bring further distribution and product offerings, with a trusted and well recognised brand with almost a decade of operating experience. Blockchain.com is looking to bolster its DeFi offering and INDEX would be a perfect partner
- Significant expertise in building and scaling crypto companies
- Our internal DeFi fund has already been getting exposure to INDEX via providing liquidity in prior programmes. We’d look to expand this project in a more meaningful way going forward
- Top tier legal, regulatory and security expertise which has enabled us to safely and compliantly secure billions of dollars of assets
Requirements for execution:
- Update Engineering team when addresses have been collected from all parties
- Deploy vesting contracts
- Coordinate with Treasury for information tracking
- Ensure that all stakeholders / community members / relevant WGs remain updated and aligned
I firmly believe that community comes first and we need to identify major ways to ensure that core contributors to the Coop have a major stake in protocol ownership. While this is not directly tied into that discussion - I believe we need to continue our fruitful discussion of how best to reward long-term community members alongside early investors.
What feedback do you have? - a lot has changed since the original IIP and we want to ensure broad community alignment before moving forward (even it is decided that an IIP isn’t technically needed).
If you have objections please help us find solutions to move this conversation forward so we can reach a fair solution for all parties.
Next steps around the Index Community sale in light of this discussion? (One potential model is to award options to all early-contributors allowing them to purchase $100k worth of Index at the deal price of $24.26. These options could vest linearly over the next 18-months.)