FLI Product Deal Terms for products launched in Q4 2021 and beyond

[fallow8]

Introduction

This post presents the “new deal terms [that] are agreed upon and laid out to the community in a public forum” for any newly released products in the Flexible Leverage Index series (“FLI”) as contemplated in the Methodologist Negotiation Process proposed by @scott_lew_is, @setoshi, and @BigSky7 . In addition, it provides an explanation for tools used or produced throughout the process by @scott_lew_is , @BigSky7 , @setoshi, and myself. The tools seek to aid negotiation and to improve fairness and clarity for the ongoing relationship between Index Coop and Methodologists. As presented, they will be filled out for FLI, but the intention is for the tools to be adjustable and serve as guides for other Coop product negotiations (or future frameworks for such). For the avoidance of doubt, this is not intended to be a legally binding agreement, but rather a statement of intent for upcoming products in the FLI series (which will still individually undergo IIPs).

FLI Fee Split, Ongoing Responsibilities, and Other Terms Summary

Fee Split	The revenue generated will first be applied to gas costs applicable to product maintenance, and then, split 40% to DeFi Pulse and 60% to Index Coop.
Ongoing Responsibilities	Responsibilities for various functional areas will be split between DeFi Pulse and Index Coop. DeFi Pulse will take the lead on ongoing Product work. Index Coop will take the lead on Engineering and Business Development. Marketing will be a roughly evenly shared responsibility. For further details, please see the Ongoing Responsibilities sheet. These responsibilities will be evaluated on a monthly basis at a leadership meeting between DFP, IC, and Set to ensure they track with the assumptions of this negotiation.
Other Terms	These terms will be revisited periodically to see if adjustments are required, responsibilities need to be updated, or any other terms need to be added (e.g. exclusivity, noncompetition, or a product wind-down mechanic). This will occur 12 months from IIP approval. In addition, DeFi Pulse will only disclose certain proprietary information with Index Coop contributors who sign a non-disclosure agreement with Pulse, Inc.

Tools Used And Applied to FLI

Two primary tools were developed to describe the arrangement for FLI going forward and also serve as an aide to negotiation. They were:

• [Fee Split and Responsibilities Worksheet] - This is a sheet that breaks down responsibilities and contributions that compose a fee split into five categories: Intangibles, Product, Engineering, Marketing, and Business Development. Each of these categories has weights that can be adapted to fit a product (e.g. FLI has greater ongoing engineering requirements than sector indices) and each category has granular components that roll up to the category weights.
• Ongoing Responsibilities [Forthcoming]: The Ongoing Responsibilities sheet serves as a companion piece to the worksheet above to describe meeting cadences for coordination by functional area and expected workflow that matches the granular responsibility splits from the worksheet above.

In addition, we discussed concepts of noncompetition by the Coop and exclusivity guarantees by the Methodologist. In general, these should be reflexive commitments and can alter how each party views the economics of an arrangement. For FLI, there was difficulty in landing on a scope of products for non-competition that made sense or would have general buy-in from the community. All were comfortable with leaving these concepts to be addressed (or not) in coming months and committing to the above deal terms without guarantees on this front.

Taken together, these tools provide a framework for discussion between the Index Coop and Methodologists on how to share responsibilities and value contributions to both produce a fee split and optimize coordination for product success.

Next Steps

• The Ongoing Responsibilities sheet filled out for FLI will be shared next week. We’d like to spend a little more time on it and get more feedback from subject matter experts at the Coop and DFP to more closely represent how the workflow will look versus our recommendation.

• We wanted to share these materials for community feedback as a part of the Methodologist Negotiation Process. The proposed fee split and responsibility arrangement for FLI going forward will be subject to and voted upon via IIP once feedback has been shared.

[mel.eth]

Firstly, immense thank you to all here. The collective amount of time and thought that went into this is massive and evident. I’m particularly impressed by the breakdown of responsibilities directly informing the fee split. I’m in support of these recommendations as outlined.

Noting that in my view Index Coop DAO currently has no ability to offer an exclusivity guarantee. The product proposal process is permissionless. That said, perhaps there is some benefit to making some collective representation that the DAO will not solicit methodologies lacking sufficient differentiation from a launched product. I believe any update limiting the types of products we are willing to consider is a question for INDEX holders and there may be some benefit to posing the question more broadly: Should IC offer exclusivity guarantees? Not looking to try and advance the topic at this time, just noting the challenges of advancing it as I see them and if better suited to another thread I’ll pick it up when and where appropriate.

Thanks again to all - these talks have diverted the focus of these high-impact Owls, and to an extent those awaiting these suggested outcomes, from their desired workstreams; hopefully this post represents a shift toward peak productivity and alignment.

[catjam]

I’ll echo Mel’s thanks here – this was a gargantuan effort!

I’m excited to see DFP step into a product leader role for the FLI suite. Would love for IC product leaders to be helpful or active in the interview process for the new roles, if possible, and to start working on a collaboration framework for those products.

I was surprised by the 50/50 split on Marketing. The FLI pod (cc @afromac ) recently did a survey that showed only 10% of users associated FLI products with the DFP brand, and my understanding was that DFP has some legal limitations to how much marketing they are able to do. Would love some additional context for how the group arrived here!

[Matthew_Graham]

Hi @fallow8 & @BigSky7,

Stellar effort getting this done lads. It has been a massive task and it is fantastic to have this level of clarity and structure when discussing fee splits. It is miles ahead of any ongoing fee split discussion.

On that note, is this spreadsheet intended to be used for non FLI products ? I am conscious non FLI products have been eagerly been awaiting for visibility around how few splits are determined.

I see this spreadsheet levelling up how we determine fee splits on all types of products. But I want to make sure that is the widely accepted broad understanding we uphold as a community.