The Sustainable Ecosystem Fund

Ecosystem
1

Projects in our ecosystem have always had access to two core funding entities: layer 1 foundations and venture capital firms. The nature of their existence, how they invest, and who they are accountable to vary significantly. We look to explore that in detail below and propose a new model better positioned to drive domain-specific ecosystem success.

Layer 1 Foundations

Layer 1 Foundations, such as the NEAR Foundation, are non-profit stewards that seed every part of the ecosystem. They have a broad scope and serve to kickstart growth across the whole ecosystem. They are legally bound to pursue their purpose, and funds given to them cannot be removed for any reason except fulfilling that purpose.

This model is great for seeding NEAR as a whole but comes with many setbacks when addressing domain-specific issues, such as the ones witnessed in the NFT ecosystem. The broad scope of the foundation’s purpose means it is difficult to drive down into domain-specific growth, and foundation members require skill sets more focused on being NEAR generalists over NEAR specialists.

The measure for success for the foundation is the deployment of funds across all areas of the ecosystem under its legally bound purpose of seeding the ecosystem and shepherding core governance.

Venture Capital Firms

Venture capital firms are for-profit private entities that raise capital from limited partners to place strategic early-stage investments across specific focus areas. As a result, venture capital is a game of home runs, not averages. This fact is critical in understanding that a limited number of companies in their portfolio account for most of a fund’s returns. This fact has two significant implications for day-to-day activities as a venture investor: the first is that failed investments don’t matter. The second is that every investment these firms make needs to have the potential to be a home run.

A VC firm’s core focus is ensuring their general partners drive return on investment for their limited partners. Although they do incubate and accelerate their portfolio companies to increase their odds of this success, they will ultimately prioritise the ones that give them the most considerable returns the soonest.

The measure of success for VCs has and always will be their number of exits and the multiples they achieve in profits with the funds they’ve raised.

The Sustainable Ecosystem Fund

By combining the best parts of both models and accounting for the limitations those models suffer from regarding domain-specific success, incubation & acceleration, and sustainability, we propose a third model: The Sustainable Ecosystem Fund. The fund is a for-profit venture led by domain experts who deploy capital and expertise focused on driving mass adoption within the NEAR NFT ecosystem.

Funded by the NEAR Foundation, the fund acts as its own limited partner. Though profitability and ROI are essential for a for-profit venture, they are only important to the extent that the fund is perpetually self-funding and can continue to serve the funding needs of the NEAR NFT ecosystem and stay competitive in the wider NFT landscape.

The Role of NFTs in Mass Adoption

Given the right level of support, NFT projects can play a pivotal role in a layer 1’s adoption. For example, according to DappRadar, Magic Eden is the highest ranked dApp by the number of users with 214.1k users and the fourth highest by volume with $201.4m of incoming volume in Solana over the last 30 days. OpenSea and X2Y2 share similar accolades in Ethereum: OpenSea is the highest ranked dApp by the number of users with 349.7k users, and X2Y2 is the sixth highest by volume with $667.5m of incoming volume. The top 10 NFT marketplaces engaged with 900.5k users, while the top 10 DeFi projects engaged with 797.3k users over the last 30 days. This data shows that NFT ecosystems significantly impact user engagement across web3 and serve as the primary gateway for mass adoption, followed by DeFi.

Community Feedback

Since this proposal is for the community, by the community, we want to ask everyone: what if?

What if a Sustainable Ecosystem Fund for NEAR NFTs was established tomorrow? A fund spearheaded by NFT domain experts who could incubate projects and make well-informed, strategic investments, with the sole goal of driving mass adoption to NEAR NFTs.

  • How would you structure the fund?
  • What types of areas would you focus on?
  • Would you invest in NFT infrastructure, 1/1 art, generative mints, or all of the above?
  • How would you allocate weight to specific areas?
  • Is there something in the NFT space yet to be discovered you’re passionate about?

We would really enjoy hearing feedback from everyone in order to best serve the community.

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Hey thanks for asking for community feedback! Personally, I’d love to see some capable NFT funding and incubation by industry vets structured as an investment vs. a broad grants program that basically becomes a social welfare program for unsustainable projects and businesses.

The issues with foundation grants are many sided but 2 of the major ones are: lack of vertical expertise and the simple fact that grant giving attracts and produces more grant giving.

I guess I’m here to say, that if you are able to make successful investment decisions and incubate NFT projects, growing them into sustainable businesses. Helping projects raise their own rounds and spread their wings… I would be bending over backwards to give you those tokens!

In terms of specifics about the investment, I think you need to focus on cohorts or themes. As in DeFi there are DEXs, Money Markets, Perps, … The same is true of NFTs. Pick winners in the tried and true categories (of course innovative ones).

Then I would spend about 20-30% of the investment on “moon shots” and experiments.

Personally, I would stay away from big brand deals, this is like throwing money in the fire, and instead back startups that are looking to sell NFT technology into big brands. Let them raise the VC capital and burn it trying to sell into those big brands.

That’s it for now. Like what I’m seeing here… A LOT! :hugs:

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Do we think that the current iteration of NFTs which are, for the most part, pfp projects, would be the use case the tech needs to see in order to achieve mass adoption?

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Thank you for starting the right conversation @antisocialstudios :clap:

Irrespective of the L1, NFTs will be massive on any top chain.
Knowing that NFTs are most likely how crypto goes mainstream.

“As huge as DeFi will be in $ terms, NFT enable normal user use cases: social networks, luxury goods, music, video games, art, etc. These are things billions of people do around the world”.

  • Avichal (Electric Capital)

Their impact has ripple effects that I believe most do not appreciate fully.

NFTs are just a cooler way to organize as a community or group online (pfps/brand with better ways to power any type of creator). They are one of the most frictionless ways for innovation to happen in web3. They make it possible for a global community of talent to easily turn an idea into action with a community that can fund and organizes together with shared goals and incentives (anything can be birthed from an NFT).

We see top-down approaches when web3 projects use NFTs as a way to educate and onboard users and a community, although I feel it’s most powerful when it enables a founder/s with a vision and a supportive community something new to life - a community, product, service, etc).

You have @antisocialstudios that have created a strong brand that has attracted more people (and their ripple effects), they now run the Antisocial Labs (dev house for new projects + helping other NFT projects). They have also started this conversation on the forum, which if action is taken, could be very impactful for the growth of NEAR (they are not just a pfp) - ripple effects.

I came to NEAR protocol through the curiosity of NFTs (but wanting to support an ecosystem that I felt had the most upside potential as an L1). I started as just learning by trading NFTs and am now a co-founder on a project (birth from an NFT) building out what could be a very impactful wallet for the NEAR ecosystem - ripple effects.

I think we can all agree, that making successful investment decisions is the hard part (and the ripple effects are not always easy to understand, see, or be measurable). I would suggest that the goal should be less focused on the output of big successful projects (short-term visible) but rather on making the best supportive environment for NFT creators with an agile approach to how that support structure plays out (success being measured by the freq of new creators).

Regarding funding, across projects types in general (not just NFTs) we need to encourage more of an angel / micro investment supportive structure.

You make a great point that projects only really have two ways to get funded (NF or VC). Those are both pretty centralized approaches. It could be cool for the NF to match investments (1-10K to limit the risk) of a wide group of angels (core team, advocates, and founders that are known to be supportive of NEAR - but make it pretty easy for new people to join that can show a proven-track track record).

As a new project looking for funds, you could simply now rather go to a page, and look at the 300 approved NF angels (that are actively wanting to participate and help) and try to win over a few. This is also a much easier and more scalable approach to distributing funds and supporting the ecosystem with mentors/angels that can help be trusted stewards of capital for the ecosystem.

  • If projects meet KPIs/success criteria, maybe those angels can get better terms (dynamic model) + the founder/team can enter into the angel network).
  • Avoid big deals (throwing money at fire as @mattlockyer mentioned) and empower the smaller/independent dreamers with passion and hope that they can win with a bit of support.

That being said, I feel we should have dedicated resources to help

  • educate people on NFTs and how to increase the likelihood of success
  • Incubate them into cohorts with dedicated resources (as @mattlockyer mentioned)
  • Let them make use of the NEAR angel network, NF or VC thereafter (but this really goes for any type of project, Dapp, NFT etc).
    –
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  • How would you structure the fund?

I would like to consider the idea of Sustainability from the perspective of meeting real human needs, such as Food and Housing and at the scale of a small village structured to produce all essential goods and services onsite using a unique Business Model being developed at TheKinDAO.com to achieve that production.

This is similar in theme to FutureThinkers.org or CityDAO.io or really almost any attempt at organizing a physical community.

The difference here is the curious business model which must address two conflicting goals:

    1. Sustain the essential Production to ensure all occupants receive the essential goods and services they must have.
    1. Generate Profit for financial investors.

Of course Rent is ZERO when occupier is owner, which is great for occupants, but what about the poor investors?

So we see a conflict between the Financial Returns expected by investors and the Sustainability of humans within the Ecosystem.

To resolve this issue, we have developed a set of Tokens which allow groups to organize production for their own benefit without paying financial returns to others for essential goods and services while also allowing those occupant-owners to sell Surplus goods and services for Profit (though requiring some % of Profit be invested for the Consumer who paid it so every Consumer gains property ownership in the physical Sources required to produce the goods and services they need. This is patterned after the GNU GPL’s requirement that each user gain access to Sources.

Some % of Profit may also be paid to financial investors.

This should create a series of Minimum Viable Villages, each with very stable and mostly Rent-Free core “surrounded by” a Growth Edge where Surplus is sold to outsiders for Profit to satisfy traditional investors.