Proposing an Institutional Business Working Group

Institutional Business Working Group - Q3

authors: @Metfanmike @Fallow8

Situation

We are proposing the creation and Q3 funding of an Institutional Business Working Group (IBWG) starting on July 1st, 2021 to September 30th, 2021. The Institutional Business effort kicked off in March 2021 to explore a strategy around servicing institutional buyers of Index Cooperative products. This framework went through two iterations (first, second) and informed the Institutional Business vertical within the Business Development Working Group. We’ve always intended to develop an autonomous IBWG, but coordinated with @BigSky7 to branch certain activities off of the Growth Working Group for Q2 2021. After discussion, we’ve agreed it’s time to continue streamlining activity within the Coop to bring specialized contributors closer to impactful work.

What is the core problem(s) you want to solve?

High-net-worth individuals and institutional buyers of on-chain crypto products insist on a higher level of education, service, and security than retail buyers. The IBWG exists to be the primary resource for ensuring Coop products meet those needs.

The key takeaway from our initial conversations with funds and large institutions is that while institutional investors are highly interested in the theme of decentralized finance, they will only purchase if they have high confidence in security and execution. Our principal goal has therefore been to ensure the necessary infrastructure is in place to provide that confidence. We have been successful on that front and are starting to shift to a balance between infrastructure and awareness.

Our Q3 strategy will be to cement more custodial listings, to pass the market maker proposal with the rest of the community, and to lead multiple awareness campaigns for institutional and HNW buyers.

IB Q2 Accomplishments within BDWG:

  • Custodian listings
    • Listed DPI on BitGo, the first custodian to list DPI. The listing gives BitGo’s global institutional investor base a means to securely hold DPI.
    • We are in the pipeline with several major global custodians with whom we’ve developed relationships during Q2 to similarly list DPI. The more custodians that list DPI, the more institutional buyers that can purchase DPI (and therefore the more AUM, units, and holders of the product).
  • OTC Desks / Exchange Listings
    • We have reached a tentative arrangement (forum post forthcoming) with one of the largest global market makers to expand their activities with IC products. The better the execution an investor can expect, the more open they will be to purchasing DPI. This relationship also opens the door to more exchange listings, as CEXs look favorably upon token applications that are accompanied by existing market maker relationships.
    • In discussions with another desk with the goal of having at least two desks actively trading and ideally making markets in IC products.
  • Education/Awareness
    • Led the Miami BTC conference strategy to connect with several new key entities, as well as to deepen relationships with existing contacts.
    • Designed the DeFi Summer NYC event to attract both TradFi and DeFi communities. Secured the venue and the panelists from top DeFi protocols (dydx, Aave, PoolTogether) and The Block.
    • Partnered with CDWG to launch an Institutions landing page on the Index Coop website.
    • Developed Investor FAQs to standardize our responses to common investor questions.
    • Oversaw the standardization and updating of all IC product one-pagers through month-end June 2021.
    • Secured a speaking opportunity for Felix to speak at Consensus 2021.
  • Team
    • Onboarded @Lanks to run with Asian/European efforts.
    • Spearheaded the first IC onboarding process, now in use across the Index Coop.
    • Recruited @petedx to run with Korean translations to help open up new markets.

Why is this worth addressing today?

The Index Coop receives inbound interest for institutional purchases, and each custodian we speak to tells us that investors want indexed exposure to DeFi. We feel that DPI can be the tip of the spear for many institutional investors who want exposure to the space. Establishing a trusted relationship with those institutions will pay dividends for our entire product suite down the line.

Activities that IBWG will oversee:

  • Relationships with DeFi Market Makers
  • Institutional Investor Service Provider Listings (Custodians, Prime Brokerage)
  • Institution-targeted educational content (materials, webinars)
  • Centralized Exchange Listings

What impact will this project have?

  • Increase in unincentivized supply growth & unincentivized AUM
  • Increase in total holders
  • More exchange and custodian listings
  • Expanded secure purchasing options and market depth for institutional buyers
  • Position the Coop as a thought leader in the digital asset management space

Working Group Leaders

  • Nate Howard (Discord: fallow8)
  • Michael Taormina (Discord:metfanmike)

Request for Funding

We are requesting a budget of $60,000 and 2,550 INDEX over the next three months.

Working Group Leader Compensation: Total 2,550 INDEX (425 INDEX Per Leader Per Month)

Additional contributor rewards - $12,000 per month (Content production, bounties, regional coverage, and other efforts)

Licenses, industry associations, etc. - $4,000

Events and Conferences - $20,000

  • We’re anticipating hosting another event in the style of the NYC Summer DeFi Event (~$10,000 in expenses)
  • Requesting an additional $10,000 to attend conferences, expense meetings with investors/partners, and host side events at industry events where institutional investors and service providers congregate

Exchange Listings - Requests will be made outside of the working group funding. As was experienced with GWG and the Exchange Listings Wallet, the costs for individual listings are highly variable and unique to the listing. We will keep the community close on requests that fall under Exchange Listings but think making a guess for a given 3-month period is a waste of everyone’s time.

Organization - How will it work?

The IBWG will be led by two community members with an established track record of long-term high-leverage contribution to the Coop. The two co-leads will be directly accountable to the broader Coop community for the execution of the stated objectives.

IBWG leaders will assign stipends for regular contributors and 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.

Commitments

I am committed to Index Coop principles 1

I am committed to serving the entire Index Coop with my work.

I am committed to open, rapid communication: I know that clear, constant, public communication lifts up the entire Index Coop community. I am committed to this style of communication.

Shared learnings: I will share my progress, learnings with the entire community. I will ensure that anything I create is accessible beyond my own tenure for future generations of Indexers to access & build on.

Intellectual honesty: I am committed to growth and improvement. I am open to feedback and will use feedback to improve my work for the benefit of the entire Coop community.

I am committed to making Index Coop a welcoming, fun, and engaging community to work in!

10 Likes

Thanks both for the proposal. Would be great to see some numbers around sales that have been achieved by IB related actions already? Understanding of course that the bulk of recent efforts is yet to bear fruit with the NY event still to happen. Curious if those numbers can then be used to put some solid targets around:

Which at the moment just says ‘more’ of all those things, I don’t see anything that directly measures the success of this working group, or how any increase is tied back to IB work. Can it be measured by an increase in whale holders if we are targeting HNW? Do we get any insight into the amount held in BitGo and others?

Also looking at how this stacks up against Q3 priorities, how do you see your work impacting the tier 1/2/3 priorities? I think you could make a case for “Direct sales of Index products to high-demand audiences” but it’s not clear to me if this sits under BD or IB (or Growth). Who determines which audience is high demand and would efforts be better spent targeting on-chain whales for example. Keen to understand how you think about it given it was felt BD and IB should now be separate.

3 Likes

Listing the priorities as I see them and then some commentary in italics below.

Tier 1 Priority

  • Liquidity management
    I recognize this point is mostly about liquidity mining and different on-chain solutions but I do view efforts with market-makers, institutional capital markets, and centralized exchange listings as a pressure release for direct liquidity management by the Coop. We’re aiming for the day where liquidity is a function of high demand for our products and not something we nurture so directly. We don’t get there without engaging the above.

Tier 2 Priorities

Doubling down on the most effective growth/distribution tactics

  • Major CEX listing

This group proposes to take this initiative on and by splitting it off from BD allows for increased focus on this effort.

  • Direct sales of Index products to high-demand audiences - i.e. DAOs

As you say, this is a key premise of this working group. I think we view this priority differently so I will detail that below.

  • Educational content

The proposed leaders of this working group are already engaged in producing this content but we expect to continue those efforts with the production of investor-oriented materials, continued awareness/education events, and webinars.

Tier 2 Impact Orientation/Tier 3 Maintaining a long-term sustainable organization

I’ll speak more directly to this in direct response to a quote below, but this is well taken and we will expand the detail of how we intend to measure impact for the proposal.

To be clear, we’ve always felt IB and other BD initiatives were separate workstreams, but we coordinated with Simon for a prior proposal as we were getting more comfortable with the Coop and how things work. From both a strategy and execution standpoint, we have already been operating autonomously from the rest of BD. For the determination of high-demand audiences, I don’t think it’s optimal for the Coop to select one arbiter of what is or isn’t high-demand. Premises should be tested. Our premise is that DPI has the opportunity to be the first widely accepted on-chain index product in global institutional capital markets. That requires the groundwork of custody, exchange, and market-maker onboarding. But reaching that point would be a massive success for the Coop. How that is weighed against other high-demand audiences? I can’t speak to that quite so directly, but know that this prize is big enough that we need to be making strides toward it now.

We’ve confirmed with HNW buyers of $2.25MM of DPI purchases. That’s at a minimum, we’ve had conversations with others who have not confirmed amounts. As you called out, the efforts are early and that isn’t what we want to hang our hat on entirely. Tracking inflows from events and custodian listings should yield larger numbers. I’ll also add that, for example, centralized exchange listings has not yet driven significant AUM, but there still seems to be a consensus that that’s an impactful effort. That is something that could be challenged, but we view “making DPI accessible for institutions” in a similar light.

As I mentioned above, this is great feedback and happy to expand. The good news is that we can get aggregate holding numbers from custodians. We’re also pioneering attribution in the Coop by adding POAP badges to our event tomorrow. The proposal was based on the level of detail provided by prior working groups but I’d like to add a few more surgical suggestions:

  • Increase in AUM and holders attributable to custodian listings
  • One additional centralized exchange listing (or substantial progress on that listing subject to a waiting period)
  • AUM increases attributable to Events (via POAP badges)
  • Increase in whale holders of our products

We want to remain a little flexible within the working group and will endeavor to pack our monthly reports with as much measurable impact as possible for separate initiatives.

5 Likes

Overall, I’m a big fan of this proposed WG and its value add so far while it was part of BDWG.

I’d love to understand a bit more detail re what it’s past and future actions drive versus our KPIs and some WG-specific KPIs too. Some of this in the past, I just may have been a little unaware about, some of the future facing stuff would be good to understand more tangibly. E.g. - achieve 5 custodian listings by X, 10 custodian listings by Y.

Other than that, strongly FOR and look forward to receiving the updates on progress (should the motion pass).

2 Likes

@DevOnDeFi’s suggestion is spot on.

I have a great deal of professional and personal respect for @Metfanmike and @fallow8 - and am 100% behind standing up this WG. However, I would be keen to identify some clear WG specific KPIs and targets, for the quarter.

Could you define specific numbers for these?

I support this working group - @fallow8 and @Metfanmike are extremely competent contributors and I trust them to continue to growth the Coop in the right ways! This will be a good iteration for this group outside of BD and I think we will learn a lot and iterate from there.

3 Likes

Similar to my response in GWG III, my thinking about this proposal is influenced the vantage point that Coop may be spending ~$778,000 on growth in Q3 between GWG + BD + IB, as well as Q3 priorities.

Diving into questions :point_down:


Super curious:

  • How many of these have we received?
  • How many of we closed?

Centralized Exchange Listings

Noticing that 24 volume on KuCoin is ~$19,000 – Do we think HNW & Institutions buy from exchanges?

I’m curious to learn why this is a focus of this group.

On What Impact will this project have?

  • Echoing similar sentiment expressed by others, and similar to what I expressed with @Pepperoni_Joe’s proposal, the GWG III proposal and my comment in Investor Relations Q2 and Beyond
  • I appreciate the idea that uSupply and uTVL may rise if this WG is successful. However, it will be tough to link, “more custodian listings” with “increase in total holders" since there are a number of factors that influence total holders
  • So, what are some specific outcomes ? i.e. # custodians closed, # exchange listings, etc…

What does “expanded secure purchasing options” mean?

We are requesting a budget of $60,000 and 2,550 INDEX over the next three months.

  • Works out to a total of ~$111,000, if my math is proper (use the June 20-day MA for the INDEX denominated stipend).
  • Curious, what licenses & industry associations are needed?
  • What is “regional coverage”?
  • What bounties do you expect to put out? Could you explain a bit more about how you approach the bounties vs contributor rewards?
  • On the $20,000 request for events
    • $10K to run an event – How do we know if these are successful?
    • What outcomes were generated by the event in NYC? What learnings were generated from putting on that event? Do all events cost $10,000?
    • $10K to attend events – what conferences do you have lined up? What industry events do you plan to attend and hold side events?
  • Note to self that “Exchange Listings - Requests will be made outside of the working group funding”

I’m voting YES for this simply on the basis of getting BitGo to list DPI.

Institutions are scrambling right now to figure out the right way to invest in crypto. Let’s make sure that Index Cooperative products are an option for them.

@Metfanmike and @fallow8 have already demonstrated the massive value this group would bring to the Index Cooperative.

4 Likes

This is a great initiative and critical to success of Index Coop. I would like to echo your last post regarding Institutional Sales Strategy. DPI Institutional Sales Strategy

You listed Next Steps:

  1. Revamp DPI sales material
  2. Identify initial contacts for preliminary discussions.
  3. Incorporate feedback into improving the institutional sales framework.
  4. Launch sales effort.

Are these steps still in play for this Working Group?

Thank you all for the great questions. This is a perfect opportunity to delve further into our thought process on certain topics, so we appreciate the feedback.

IB Focus to Date

Outside of ~$2.25MM in confirmed DPI purchases, we don’t have satisfying hard numbers on this for efforts to date. This will change as custodians agree to provide aggregate information to us (BitGo has already done so).

Our initial customer development work and market research in March/April revealed a need to first focus on putting the necessary infrastructure in place to ensure security, liquidity, and strong execution. These are the HNW/institutional investor must-haves before most would move forward with buying crypto assets in general - and Index Coop products in particular. Expecting an institutional investor to purchase DPI with a Metamask on Uniswap simply isn’t realistic.

With the infrastructure in place (and the BitGo DPI listing filled a key outstanding gap), we are now shifting to more of a balance between ensuring the requisite infrastructure is in place and education/awareness of key product themes like decentralized finance.

Centralized Exchange Listings

Institutional Business != Institutional Sales. Interacting with institutions requires a specific skill-set and approach. Centralized exchange listings are therefore a natural extension of Institutional Business activities. Crypto custodians, trading desks, market makers, and CEXs interact in a broad, interconnected ecosystem for trading and holding crypto assets. When we list DPI on a custodian’s token list, we naturally move closer to listing DPI on its exchange, as many entities have both a centralized exchange and custody business (e.g, Coinbase, Genesis, Gemini). Similarly, when we partner with a trading platform or market maker, we also move closer to listing on exchanges because the market makers source liquidity from CEXs and therefore have relationships with the teams at the CEX responsible for listing new tokens.

The benefits flow in both directions. As we list on CEXs, we may open up more custodial opportunities (as some custodians have requested DPI to be listed on certain CEXs before they will in turn add DPI to their custodial token list).

In the wake of the KuCoin listing and Regan winding down his Index Coop involvement, @fallow8 proactively got involved with giving this strategy the requisite attention and dove in on learning what has taken place to date and working with market makers to think through the best CEX strategy moving forward. That includes tactics for turning the KuCoin situation around.

Measuring Success / Tracking Attribution of IBWG Activities

BitGo has agreed to share aggregate holdings data with us. They seem comfortable sharing metrics such as total AUM and # of wallets holding DPI on a periodic basis (e.g. monthly). With that reporting, this would represent the most accurate attribution of perhaps any Index Cooperative strategy to date. If institutions are holding assets at BitGo, it will be a direct result of this group’s efforts to strike this partnership and get DPI listed.

Concrete IBWG Goals for Q3

As I alluded to above, our efforts are increasingly a balance between ensuring the requisite infrastructure is in place and education/awareness. Tangible outcomes for Q3 would be:

  • List DPI across 2 additional well-known custodial token lists. This will allow more HNWs and institutional investors to securely hold DPI and other IC products.
  • Formalize a primary market maker relationship (forum post coming) and develop a relationship with at least one additional market maker as a secondary option. This will improve the execution for purchases of DPI and other IC products.
  • Host at least 2 webinars for HNW and institutional investors to generate education/awareness around key themes (e.g., decentralized finance).
  • Attend 1-2 industry conferences to bolster the awareness of DPI and other IC products across key partners, HNWs/institutions, TradFi, etc.

We believe that if we do the above, we will succeed in our infrastructure/education goals, which together will lead to more AUM and holders of IC products.

Institutional Business - even dealing with HNWs - is a B2B/enterprise strategy in its relative infancy. We are only now just about to gain an appreciation for what the consideration period/sales cycle/sophistication levels look like for existing institutional buyers of crypto that hold their assets at a global custodian.

The good news is that we’ll be getting the reporting that will help us put firmer numbers around what we can expect from AUM / # of holders going forward and will commit to reporting back those figures on a monthly basis so that the community is informed on the outcomes IB activities drive.

Clarifications

This refers to places institutions can purchase our products. Some HNWs and institutions may purchase crypto assets via Uniswap, but that’s just one option (and not the norm). Others prefer to work orders through trading desks (e.g., Wintermute), who source liquidity from DEXs and CEXs on behalf of institutional investors. Our goal is to ensure DPI can be purchased wherever HNWs and Institutions prefer to transact.

We have been engaging with the Multichain Asset Managers Association, which is a Swiss-based group of companies/protocols/etc transforming asset management through blockchain technology. The members include Bitcoin Suisse, Aave, Credit Suisse, etc. What we’ve discussed is presenting to both their existing membership but also a webinar and/or event for institutional clients in partnership with another member (e.g., Bitcoin Suisse). If we are able to access these audiences, we believe it’s well worth the investment to join the association.

This refers to just one possible approach for how we organize the IB team as it expands. We envision having contributors focusing on a given geographic region (i.e., LatAm, Europe, APAC, Africa, North America) rather than focusing on a given area/vertical of Institutional Business (i.e., Custodians, OTC Desks, IR Materials, Exchanges, etc.).

For example, if someone took responsibility for Latin America, the goal would be to ensure the necessary infrastructure in place for LatAm investors. This may involve custodial partnerships, trading desks, materials translated into the appropriate languages, relationships with exchange platforms, etc.

This has been our early experience working with @Lanks, who has focused on APAC and also helped with some of the European relationships.

Sure. In the past, we put out a bounty for understanding what conferences are taking place in the next 12 months to then determine which, if any, are worth attending (and why). Contributor compensation will be for broader weeks-long projects or initiatives or those looking to play ongoing roles. Bounties are one-off projects. As and if the Coop moves away from “bounties” we’d adapt as well but anticipate the need for a range of contributor engagement levels.

Event Strategy & Goals / Measuring Success

The goals of the event marketing strategy are to establish legitimacy/credibility/trust with TradFi and DeFi, to expose more individuals and entities to DeFi, and ultimately to drive more purchases of Index Coop products through that awareness and education.

We can assess whether or not we earned the trust of the audience by who showed up and their feedback. I’m putting together a broader report, but at a high-level, it’s many of the banks and institutions we’d want to show up. And the feedback has been universally positive.

We’re also pioneering the use of POAP badges to better understand attribution. This may be imperfect (people with multiple wallets, etc.), but we think it’s a worthwhile test.

I’ll be putting together a fuller report on the 7/15 event, but the high-level outcomes are a) we brought together 150+ TradFi and DeFi professionals in a key global financial hub, b) curated a high-quality speaker panel of DeFi experts, c) drove awareness of DPI and Index Cooperative through the opening remarks, and d) engendered trust with contacts, with whom we’ll be following up post-event.

On Conferences

Conferences are highly strategic for building and deepening relationships with partners For context, the BitGo relationship started at Bitcoin Miami, as did many others (names purposefully left off here but all listed in Notion).

For some conferences, the real activity happens outside the main conference event. That’s not a hard rule, but it’s certainly our takeaway regarding Bitcoin Miami. For that event, hosting a side event served for many as a better alternative and use of funds than spending on the actual conference tickets.

As of now, the conference we’re focusing attention on is Mainnet in September. Fortunately, this is based in NYC, which will help keep down costs for us NYC locals.

5 Likes

These seem like reasonable and easy to understand KPIs @Metfanmike - I know diving what comes from them is potentially not that helpful. Thank you for sharing. Go, go, go!

As I alluded to above, our efforts are increasingly a balance between ensuring the requisite infrastructure is in place and education/awareness. Tangible outcomes for Q3 would be:

  • List DPI across 2 additional well-known custodial token lists. This will allow more HNWs and institutional investors to securely hold DPI and other IC products.
  • Formalize a primary market maker relationship (forum post coming) and develop a relationship with at least one additional market maker as a secondary option. This will improve the execution for purchases of DPI and other IC products.
  • Host at least 2 webinars for HNW and institutional investors to generate education/awareness around key themes (e.g., decentralized finance).
  • Attend 1-2 industry conferences to bolster the awareness of DPI and other IC products across key partners, HNWs/institutions, TradFi, etc.
3 Likes

I am sympathetic to this coloring your perspective but am concerned that wipes out IBWG’s efforts to be lean while targeting high-reward efforts. Part of the rationale for creating a separate group was that the IBWG efforts do not require a significant amount of additional contributors to hit our marks. You see this reflected in the relatively modest contributor budget compared to other requests comprising that $778K. We do, however, want to make space for folks to step up and into IBWG-specific roles as we form our own workstream so tried to split that difference by asking for some budget there.

3 Likes