We are proposing Q4 funding (October 1st, 2021 to December 31st, 2021) to continue the Institutional Business Working Group.
The Institutional Business Working Group (IBWG) is the primary resource for high-net-worth and institutional investors (HNW/II) interested in the Index Cooperative product suite. Institutional interest in DeFi continues to increase and has the potential to drive massive growth in Index Coop product TVL as institutions move beyond exposure to bitcoin and ether. The IB strategy began as a sub-vertical within the BDWG and became a full-fledged working group in mid-July 2021. This post will report the group’s progress against Q321 goals, share lessons learned, and detail the group’s goals for Q4.
Thus far, the group has pursued a two-pronged strategic focus on infrastructure and education/awareness. This strategy was informed by conversations with various types of HNW/II investors during spring 2021 and has been continually refined ever since.
Infrastructure. The IBWG’s goal is to ensure Index Cooperative products are supported across the institutional ecosystem to meet HNW/II needs for security and execution. The tactics employed are:
- Custodial token listings, whether at qualified custodians or within MPC wallet solutions.
- Market maker relationships, which enhance liquidity & trade execution and are a pre-requisite for Tier I CEX listings.
- Tier I centralized exchange listings.
Education. IBWG aims to make HNW/IIs aware of the key crypto themes to which IC products provide passive exposure, like the Metaverse or DeFi. The tactics employed to drive awareness are:
- Index Coop-hosted events/panels
- IBWG presence at industry conferences (ideally with speaking opportunities)
- High-quality investor relations materials (monthly fact sheets and product presentations)
- Content to generate awareness on key crypto themes (e.g., DeFi 101 webinars)
- Increase in unincentivized supply growth & unincentivized AUM
- Increase in total holders
- Centralized exchange and custodian listings for IC products
- Expanded purchasing options and market depth for institutional buyers
- Position the Coop as a thought leader in the digital asset management space
- Context: Market makers enhance liquidity across the crypto ecosystem and provide over-the-counter trade execution. HNW/IIs often prefer to work large trades through such platforms and also benefit from the added liquidity in both decentralized and centralized exchanges provided by market makers. Listing assets on Tier I centralized exchanges – which helps penetrate the mainstream market of both retail and HNW/IIs – requires professional market makers.
- Accomplishments: During Q3, the goal was to formalize a relationship with a market maker to tee up a broader initiative to list Index Coop products on centralized exchanges. We spoke with multiple maker makers and found Wintermute’s construct to be the most attractive. The initiative was socialized across the community. We held a community call with Wintermute’s CEO and received feedback in IBWG meetings and the forum. That process resulted in an improved construct that better aligns incentives towards the ultimate goal of a Tier I centralized exchange listing for both IC products and the INDEX governance token.
Custodial token listings
- Context: Many HNW/IIs prefer the extra security provided by qualified custodians (i.e., BitGo) or MPC solutions (i.e., Fireblocks, MetaMask Institutional). The crypto assets a custodian supports must go through a review process (legal, compliance, technical) before being formally added to a token list for customers. In addition to meeting HNW/II investors where they are, listing assets at a custodian helps build relationships with entities that often have formal exchanges (e.g., Coinbase) and provides a captive audience for content campaigns (i.e., co-hosted webinars).
- Accomplishments: During Q3, we successfully secured asset support for DPI at both BitGo and Coinbase Custody. BitGo now also supports INDEX and partnered with Index Cooperative to announce its support of DPI in mid-July. During Q3, we also confirmed support for Komainu.
- We have a third global custodian that has verbally committed to supporting DPI. However, this is pending a successful review and is not yet fully greenlit for support.
- Tracking Performance: Ultimately, the metric for success with obtaining support for IC products at a custodian is higher AUM and # of holders. The reality is that HNW/II sales cycle is longer than for retail or DAO Treasuries, who are more familiar with crypto assets than most investors. In general, the institutional segment is just beginning to understand DeFi. To that point, while we have DPI asset support at BitGo, none of their clients is currently holding any. This is why we feel strongly about getting in front of their customers and testing the webinar concept.
Centralized Exchange Listings
- Context: As alluded to above, our CEX strategy has pre-requisites (market-maker, custodial token listing, legal opinion) and was not a primary focus during Q3. This will change in Q4.
- Market-maker relationships
Index Coop-hosted Events
- Context: We aim to host high-quality, cost-effective events, with a diverse mix of attendees to expose more people to DeFi in general and Index Coop products in particular. In doing so, we generate awareness, spotlight the Index Coop brand, and further enmesh the Coop into the broader DeFi community.
- Hosted “DeFi Summer NYC," which brought together 150 attendees from both TradFi and DeFi to hear a panel of DeFi experts from leading protocols dydx, Aave, and PoolTogether, moderated by Mike Dudas. Secured a Midtown NYC venue for free to keep the event cost-effective but high quality.
- Hosted “DeFi Happy Hour” after Day 1 of Mainnet. The event was planned in partnership with UMA, Perpetual Protocol, and Stake DAO, which helped to drive costs down 75% for a rooftop event in the heart of Times Square, across from the conference venue. Over 180 attendees joined.
- Tracking Performance:
- It’s difficult to measure attribution for events. These campaigns intend to drive brand awareness and product awareness. We experimented with using POAP badges for the event. 64% of the attendees received a POAP badge. @jdcook ran an analysis measuring the average holdings across this cohort of attendees, comparing what they held prior to the average holdings since the event. The average holdings went from ~9k DPI units to ~32k DPI units. Assuming a DPI price of $330/token, that equates to ~$7.5mm of value.
- Context: Conferences are ideal situations for deepening existing relationships with partners and starting new ones. Our conference strategy is purposely lean. We do not plan on attending more than two conferences per quarter. We will opt for side events over purchasing the actual conference tickets. Whenever possible, we will use speaking opportunities to amplify our message (and reduce costs, as speakers receive free entry).
- Accomplishments: During Q3, Mike attended Digital Asset Summit in NYC, which was an institutionally focused conference. Nate and Mike both attended Messari Mainnet, where Mike represented the Coop on a panel to discuss “Building a Crypto-native BlackRock” with Felix. Token2049 will be one of our Q4 conferences. Mike will be keynoting a presentation on “Decentralizing BlackRock.”
- Tracking Performance: Attribution is also tricky here. What we know: hundreds of conference attendees watched the panel in person and others watching live with a virtual pass. The panel was the main story in “What I Learned This Week,” an investor newsletter that has been around for 30 years.
- Context: Product materials are a reflection of the professionalism of the organization. It is also an expectation of HNW/IIs to review collateral such as product presentations and monthly fact sheets.
- Accomplishments: During Q3, we coordinated with CDWG and the various product teams to produce monthly fact sheets for DPI/FLI/MVI, as well as revamping the DPI presentation in line with the new styling guidelines. Coordinated with Bankless to produce BED materials and Titans of Data for DATA materials (these are still in process).
- Context: Securing asset support at custodians doesn’t mean much if custody clients are not yet aware of the products. Our custodian partners have already done the work of attracting HNW/IIs interested in crypto. We are well served to lean on these relationships to get in front of their client base to discuss key crypto themes that align with the Index Coop product suite. A DeFi 101 webinar naturally leads to, “Oh, by the way, we actually support a product that provides diversified, passive exposure to this theme.”
- Accomplishments: Admittedly, this work did not get as far as we would have liked in Q3. We wanted to have hosted webinars under our belts. BitGo has confirmed that we will co-host a webinar for their clients and prospects, and we continue to have discussions with two other custodians interested in doing the same. But now we need to actually host the webinars, and this will be a focus in Q4.
- Index Coop-hosted Events
- During Q3, @ajay55 and @Eric_Tomaszewski began working on how to attract/engage with family offices and registered investment advisors (RIAs) and will be converting that effort into a formal IBWG vertical in Q4.
- Why Family Offices?
- Generally, family offices are more nimble than other types of institutional investors and can modify an investment strategy more quickly to incorporate new assets classes like crypto assets.
- Why RIAs?
- RIAs are trusted conduits to access more potential holders. Per an NYDIG Survey early this year, financial advisors have always been considered the trusted guides to help clients navigate an ever-changing financial world. Not surprisingly, that includes new asset classes, like cryptocurrency. 82% of clients expect their advisors to be knowledgeable, but only 21% of clients have brought it up. Understanding this gap and closing it is critical.
- Clients and advisors alike want access to cryptocurrency yet there are specific hurdles that stand in the way. The regulatory market is nuanced, education is lacking, and access isn’t simplified or streamlined in a preferred way for advisor comfort.
- Ajay and Eric will be working to:
- Tailor educational content that speaks to this audience.
- Access fintech platforms that represent potential bridges to advisory firm assets.
- Secure support for IC products on leading platforms that family offices and advisors look to for alternative assets.
- Why Family Offices?
- Partnerships with fintech retail platforms represent another emerging focus for IBWG.
- Platforms like Robinhood are moving into crypto, providing additional places to list Index Coop products in order to access the mainstream market outside of centralized exchanges.
- Relationships with Market Makers
- Institutional Investor Service Provider Listings (Custodians, Prime Brokerage)
- Institution-targeted educational content (materials, webinars)
- Centralized Exchange Listings
- Integration with RIA Digital Asset Service Providers
- Outreach to family offices interested in digital assets
- Attract $10mm in new AUM from IBWG efforts.
- Launch effort to list IC products on centralized exchanges.
- Meet with Wintermute to develop prioritization and framework.
- Secure legal opinion on Index Coop thematic products to help tee up centralized exchange listings.
- Connect with Tier I exchanges and manage the token application process until we have support.
- Conduct at least two webinars with custodians on key crypto themes.
- Continue working to have DPI supported at more custodians. Our goal is an additional two Tier I custodians. We will also work with existing custodian partners to build processes for supporting non-DPI products.
- Organize IBWG Notion and onboarding process.
Working Group Leaders
- The IBWG will be led by two community members with an established track record of long-term, high-leverage contributions to the Coop. The two co-leads will be directly accountable to the broader Coop community for the execution of the stated objectives.
- Listed core contributors will have subject matter responsibility for the listed verticals and receive a fixed stipend.
- IBWG leaders will award discretionary payments to incentivize activities that directly enable the WG to accomplish its strategic priorities.
- The IBWG will host weekly meetings that are open to the entire community and we encourage attendance and participation.
We are requesting a budget of $124,000 and 2700 INDEX for the next three months.
|Assumed INDEX price||$36.12|
|Working Group Leaders||$21,672||$21,672||$21,672||$65,016|
|Nate - 100% Fixed INDEX||300||300||300||900|
|Mike - 100% Fixed INDEX||300||300||300||900|
|Core Contributors (50% commitment)||$10,836||$10,836||$10,836||$32,508|
|Ajay - 100% Fixed INDEX||150||150||150||450|
|Eric - 100% Fixed INDEX||150||150||150||450|
|Total Contributor Rewards||$36,008||$39,508||$43,008||$118,524.00|
|Assumed Additional Contributors||1||2||3|
|Legal Expenses for Security Review||$25,000||$25,000||$25,000||$75,000|
|License for Family Office Database||$0||$16,000||$0||$16,000|
|Total Operational Expenses||$25,000||$41,000||$37,000||$103,000.00|
- We are budgeting $75k for the legal work required to get a security opinion on Index Cooperative products. In our discussions with custodians/exchanges, this is a common ask. This figure is based on estimates received previously. We will make every attempt to be efficient (either from a cost perspective or picking up EU coverage as well).
- We are exploring getting access to a database of family office contacts and have included that ask. This product could greatly assist in our outreach efforts. We are getting a demo of the product soon, but it is possible that we do not move forward.
We are committed to Index Coop principles 1
We are committed to serving the entire Index Coop with our work.
We are committed to open, rapid communication: We know that clear, constant, public communication lifts up the entire Index Coop community. We are committed to this style of communication.
Shared learnings: We will share our progress and learnings with the entire community. We will ensure that anything I create is accessible beyond our own tenure for future generations of Indexers to access & build on.
Intellectual honesty: We are committed to growth and improvement. We are open to feedback and will use feedback to improve my work for the benefit of the entire Coop community.
We are committed to making Index Coop a welcoming, fun, and engaging community to work in!
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