[VOTE SUCCESSFUL] NEM Ventures Incorporation Proposal


#87

Hi All,

I’ve continued thinking alot about this proposal and have some questions/points to make:

  1. Firstly, I’d like to propose an alternative to the VC fund proposal. I propose we tweak it and instead create a virtual incubator. The incubator is designed to standardise the process for evaluating proposals ensuring all pass through the same set of gates towards NCF funding while increasing the chances of success for selected projects and increasing the value to NEM. The incubator would fund businesses to start/accelerate their business using NEM. Initially with a small, equity free starter grant (say 20k-50k) depending on how far along they are. They would be enrolled in the virtual incubator, assigned mentors/advisors and specific tasks they need to complete, like defining the problem, opportunity, solution, “Why blockchain”, business model, product/market fit, financial modelling, etc. Once they pass through the necessary gates/milestones, they may unlock some additional incubator-granted funding (say up to 200k) and at some point, the incubator takes an equity stake (we’d utilise the existing legal entities created for the VC fund).
    The goal here is to to make business ideas NCF investment ready (note: This would take the business closer to investment ready in the “real” world). These businesses would also get “Incubator Certified” and can then go on and request further money from the NCF fund in a standardised way via public vote (as today). As the business grows beyond the incubator, there would also be a programme to ensure the business has support to succeed. Note, this model covers both an initial allocation (say 5-10 million) and the remaining NCF funds. I genuinely think this model will better achieve what the VC fund is trying to accomplish. I know of several very experienced people I could approach to run or help start/run this incubator and/or explore the idea further. It could be run in a fairly decentralised manner, and we could stay quite true to the DAO.

Should the idea above not proceed and we continue down the VC path, I also propose:

  1. As mentioned by several people already, this is being rushed and vote should be delayed. 10 days is not enough to review a proposal of this scope. I propose adding at least another 10 days and a requirement of publishing:
  1. To remove any doubt whether the proposers (@DaveH, @kodtycoon & @Bwanamakubwa) have the best interests of NEM in mind, I propose that they remove themselves as executors and instead submit their CV’s into a pool of candidates for the vacant positions. A special exemption would be made by the NCF to pay a recruitment agency (with global reach) to find suitable candidates for running the fund. The NEM community should be able to propose candidates as well. From the pool of candidates, the NEM Committee, in a transparent way, chooses who will run the fund.

Again, as per my previous statements and as a business with an active proposal, we support change, we support equity stakes but bottom line, I still have a feeling deep down that the current proposal is not ideal. I hope the suggestions above are received well and as constructive feedback. I’m passionate about the success of NEM and am committed to see the NCF succeed, even if CarbonClick is not funded.


#88

The simple fact is that many companies now building on NEM wouldn’t have done so without the Community fund as a way to justify the expenditure. You have to understand that many C-Level people still don’t see the value in Blockchain and see it as expenditure that could be better used elsewhere while continuing down the same monolithic database routes.

The community fund for us lowered the barriers required in order to push forward with our blockchain project, otherwise it would most probably have been pushed back in favour of other projects we need to complete in the pipeline to a few years down the line - a few years is a LONG time when you are a start up.


#89

All the things you mention regarding incubators are possible in NEM Ventures, but not in current NCF form.

Though it can work if individuals are voluntarily contributing to a single fund, with their private capital. (such as indiegogo and kickstarter) - “Democratic” or “Decentralized” investments with a single financial source don’t work very well at all.

  1. Nobody owns any risk. This creates atmosphere of apathy. If a million dollars is handed out to a scam, “it’s no big loss to me!”
  2. Nobody has to do due diligence - So nobody does.
  3. Mob rule is rarely governed by logic and evidence. It’s emotional, and important decisions are often made on a whim. This is especially true with projects that have a humanitarian aspect, and is marketed well. Even if all business aspects are flawed, people will still support due to guilt and social pressure.
  4. The only part that’s truly decentralized anyway, is the votes cast by the small minority that come to this central forum to read proposals.
  5. Everyone has self bias. High majority of voters say they don’t trust politicians (yet they trust themselves to pick them better than most) Majority of drivers believe they are above-average drivers. Majority of employees would do things differently if in charge of their place of work.

Why don’t business owners just cede financial and business decisions to their employees? - Yet very often will employ and depend on a small group of advisers. Isn’t this backwards? Because after-all, the majority of employees knows best.


#90

Also wanted to add, I do agree with some criticism that has been made, by you and others.

This proposal isn’t ideal. No proposal is. Nothing is. And that is openly admitted. However, this proposal has the elements that allow things to adapt and evolve. - And this flexibility would be shared with proposed projects, if NEM Ventures is approved.

It’s not decentralized I agree, it’s not. If one wants decentralized investments, why not run an ICO? Seems quite ironic to bypass ICO, in favor of a central fund pool (NCF), then make statements about it not being decentralized enough.

The marketing could be improved.
Leading up to publishing, the community could have been engaged more. 20 days isn’t enough time for some.
Nobody is campaigning on telegram or elsewhere.
There is little for infographics and eye candy.
There’s no sales pitches being used whatsoever.
Didn’t spend personal funds to hire professional translators.
Although there is mention of past experience, the successes and connections of the persons involved are not being highlighted.

This proposal is a well written plan of action to address current problems. There is no focus put on persuasion at all.


#91

Thank you. I’ll try reading it.


#92

Just a thought, why would the guys who proposed NEM ventures spend their efforts to find somebody else to do it? I think part of the issue here is that plenty of people can say what can and should be done but noone is willing to pick up the torch themselves and go. There are people here willing to do it and that’s fantastic. We just need to make sure that the system is strong, as people are generally not. It would be great if the trustees could make themselves known and voice support, and the proposers show clearly what restrictions and incentives are imposed upon themselves.


#93

I’m with you, but you’re 2 steps ahead. Before even suggesting NEM Ventures, the issues should have been brought up with the community. People should have had the opportunity to contribute. Personally, I had only vague insights, and I thought the problems had been addressed with the recent revised NCF guidelines - then this proposal came out of the blue. If there had been some transparency into the issues, we could have actually worked together to solve the problem. The proposers have now invested heaps of time, effort and legal fees into something that I think could be improved on.

NEM Ventures could have been proposed as a system/model, without nominating who will run it and going into too much detail, starting heaps of legal work etc. and this system could have been contrasted with other systems, like my proposed Virtual Incubator model. Hell, we could even have had a public vote on which system to pivot to.


#94

I’ve just noticed on NEM RED that the Foundation blog post is now up again:


#95

The individual details are considered private information, however the summary total cost will be transparently available in the audited accounts being released and details of each person will be available to trustees.

The numbers have been discussed with key NEM representatives and agreed in principle, as above though I will leave it to those people to comment rather than naming, some of them have already commented on other aspects. The packages will be a combination of salary and vesting with the salary portion being a significant (30-50%) reduction in the team members current rates for other engagements putting most of the reward are risk and tied to success. Approx half the operating budget is expected to be used to cover salaries of up to 5 x General Partners, 1 x Analyst, 0.5 x admin and 2-3Non-Exec advisors.

The business plan and operating budgets will require agreement with trustees ahead of each year to ensure governance in place, this is likely (to be confirmed in governance set up in Q1) to take the form of an annual remuneration committee with the trustees signing off final decisions.


#96

(Catching up on a few replies - so you may get a few updates at once)

The remaining 66% will stay in the NCF trust and can be used for other strategic projects, or in due course, assuming it is successful a further mandate could be given for NEM Ventures to manage that. It also provides the fund with sustainability in the unlikely event this approach doesn’t work to allow an alternative one to be adopted. We do not think in the short term 1-2 years it is likely that such a large fund will be required to start this approach and so are transparently saying we don’t want to govern all the funds unnecessarily.

There are mechanisms in the DFA section of the proposal in exceptional circumstances to present opportunities that use those additional funds to the trustees, but the funds are not under Ventures’ control and it would require a significant consensus of the Ventures mgmt team and Trustees. I take your point on the information, I’ll reply the main thread with a simplified overview of the controls in place - we have tried as much as possible to put failsafe, checks and balances in place to govern both ourselves and any subsequent people transparently, I’ll reply separately on that one


#97

Let me give a five cents to your discussion. NEM blockchain now has some disadvantages compared with market competitors:

  • no smart contracts support
  • highest transaction fees then event ETH (EOS a more than 10 times cheaper)
  • low transactions volume

This is a simple sample, why I support to create NCF Ventures. It can be a good idea and push projects for NEM integration even project don’t like to choose NEM according to market competition. From my point of view, a decision to dedicate money for startups should be on the professional side, where people are clear for the market situation. They will never use “personal” conflicts to make a professional decision. They will focus only on points:

  1. is a business in production
  2. is a business can grow a transaction volumes
  3. is a business model enough to use expensive blockchain.

I guess it can help.


#98

The Incubator approach you have described is specifically why the NFP Trust is included in the proposal - it exists to manage the seed type grants, and coaching/mentoring where possible recipients of the funding is a key part of that.

Naturally, where an opportunity comes through from NFP to Ventures that has previously been a grant/research/scholarship recipient, more will be known about the idea and people (just as important), information will be more standardised and assessment of further investment, where they pass criteria, is expected to be streamlined.

Where this money is being given for free, it is likely that NFP will request community benefit of some kind - open sourcing code, helping another project, looking at assisting with core testing etc to help them join the community more pro-actively and provide some recognition for the use of funds.

I mentioned in an earlier reply but just copying here as well given it was mentioned here - the NEM Foundation blog post is now public again according to an update on NEM RED: https://blog.nem.io/memorandum-on-pending-candidates-for-nem-community-fund-ncf/


#99

@leoinker thanks for the summary and yep all of those are fair comments and we are the first to admit there are areas that could have been done better, there are also areas that could have been done worse.

We are of the opinion that the proposal is a strong option to move forward with transparent governance in a sustainable way; it will not be perfect for everyone and no matter which approach is proposed there will be pros and cons, particularly depending on viewpoints, people’s own experiences and interests etc. We have tried to be as collaborative as possible and will continue to do so ongoing.

We will try and address some of these during the vote as this discussion will still be open for that period as well. The consultation has been allowed to run past 10 days (we are now at 12 or 13 depending on timezones) to allow for further comments as well.


#100

A couple of valid queries have asked about the governance structure, I’ve extracted some from the proposal specifically which I think covers them but there have been a few questions so feel free to reply if further clarification of what is proposed is needed or with thoughts.

  • Use of Funds: NEM Ventures will control only those funds which it has under the legal entity, which will be gradually earned by meeting stated milestones and trustees can stop/delay this process if they are not satisfied, this applies to the operating budget and the investment budget.

  • The rest of the NCF will sit under the trustees, exactly as it does now under co-signatories, some of which are anonymous, some are not. When it is registered, the trustees will be legally known, and depending on jurisdiction may be publicly accessible or not (depends on registrar). These will be core, senior and long standing NEM community members, none of the Ventures management team will be part of this group.

  • Delegated Financial Authority (DFA) will be utilised, with a NEM Multi Sig approach to use of any funds for investment, this requires a majority and depending on the size of the investment this governance incorporates several majorities. This is covered in further detail on pages 15 & 16 of the proposal but the flow chart below outlines

Essentially, NEM Ventures only have DFA up to $750k and require 3 or 4 of the management team of 5 to agree, above that value, even if it is within the $10m budget but over $750k, it requires trustee and core dev approval in addition - higher the value, the more consensus is required. In exceptional circumstances (above $4m) it needs a strong majority from all three groups and would need to be for a very good reason, as agreed by all three groups, this is not expected to be used but is there in case a standout large opportunity presents itself to enable discussion and decision to be made IF necessary.

In addition to the controls above, Financial Accounts will be prepared quarterly and shared with trustees, audited annual accounts will be prepared and a summary shared publicly. We expect approx monthly reporting to the community and trustees, the detail of which will be defined in Q1 with the audit/governance advisors but at minimum will confirm which companies have been invested in, how many proposals have been assessed etc.

Where possible we envisage the auditors may also be able to play a part in this process, however it will depend on their own corporate risk strategies and insurance so we need to engage them first before that can be defined (see earlier comment about needing an entity for that) so this will be dealt with in Q1/2

I hope the above helps pull some of this out from the document. The key to all of the above is that we are trying specifically to make it impossible for any rogue individual or group to collude and misappropriate funds by using a traditional, transparent governance models which as the values (and incentives) increase, become stricter.


#101

Think this is a good idea. If they’re going to represent the community, they should be vetted by the community … A video interview with key questions could relax a lot of minds.

I believe the people put in charge of this are equally important with the document/proposal that is being submitted.


#102

Ok so firstly I agree we require clear and focused governance on this matter.
Set processes, with set business logic backed by a professional acumen.
We currently lack the ability to evaluate proposal effectively enough as so many factors need to be considered. We need a baseline checklist at the least, created by individuals that have experience in VC.
There are a lot of legal aspect and avenues the average joe cannot know about, due to lack of experience in this area.

So some questions and suggestions:

  1. Just to be clear, NEM VIP will only have allocation power to the amount requested. 2,5 mil per quarter. No more than that? So I am assuming this will be like a Test, proof period to iron out the process and to indicate that NEM VIC is capable of managing and running the NCF with all its governance that goes with it?
    If no, then I would rather an approach like this should be taken as to why not ?

  2. I am concerned about the centralized decision making as this can easily lead to corruption (Which we currently have to a degree anyways as the current trustees can withdraw as they wish, even if the community decided against it.) There should be a fail-safe mechanism to prevent any centralized corruptions or limit it at the least. We are talking about a lot of money and a lot more possibly in future when price increase, and where money is involved, corruption and power follows. (No disrespect to parties involved, but we need to be honest about this)

  • 1 suggestion out of many others, maybe the community should vote on a perioding period to release funds to NEM VIC, based on NEM VIC track record build up and indication of managing the investments etc.? Something like this. I just want to avoid the situation where to much power is given and NEM VIC can hold NCF ransom due to their voting power.
  1. NEM VIC would need to make some financial transaction transparent.
    Salaries paid to members, contractors etc. should be open an honest. The public should be able to identify when the funds are being miss-appropriated. I come from South Africa and believe me it happens a lot with centralized public institutions here, by paying sizable bonus, salary etc against no performance measure that justifies such payout.

  2. I agree that additional revenue streams need to be created out of the approved proposals that operate successfully after a given time. They should give back to assist in boosting and maintain the ecosystem. These revenue streams NEM VIC can transparently manage and maintain, as they worked hard to make this happen.

  3. We need progress checks and updates on proposals and how these projects are faring. This information needs to be gather on a perioding timeframe, compiled and presented in a reasonable, easy to understand way, accessible by any NEM community member that has more than 10,000 vested in their account.

  4. There a big mention of the Nem V members having connections, experience etc.
    So to indicated the commitment and believe in this process and their combined ability, I suggest that they raise additional VC capital outside NEM via their current pipelines to at least half the amount of what they are requesting. This should not be too tough to achieve based on the credentials and experience given, this will also give an indication of VC capabilities.

  5. Why not do a mini POC on one of the current proposals. Show to us your evaluation criteria & process, your recommendations and possible outcome forecast, how the proposal will be monitored throughout it’s life cycle etc.
    Give a budget forecast request for this and we can vote on it or the NCF trustees can give your to go ahead, we just want to see how the whole process unfolds. I can’t see why not.

  6. Also what is the back up if more than 20% of the signatories are incapacitated in any one of the decision points, which is NEM Ventures or Trustees or Core Dev?


#103

Hello Kailin-san,
This is Ayako from Engate, Inc. Now my team is preparing to submit proposal to NCF, and I do have some proposal to this new system that is under discussion here.

That is, cross-border financing, especially in equity, is too difficult to be handled among some projects. And it may risk to NCF losing quality projects that is beneficial to NEM eco-system and adoption of technology.

My proposal is, giving flexibility to the program. My team will surely struggle to handle cross-border equity finance, but we are POSITIVE to share our technical / business knowledge with community members for educational purpose. So actually one of my team’s plan is like this.

  1. build in-house NIS servers to process more than 120 transactions per second
  2. When our business would grow, we scale out to combine using both private mijin / public NEM chain in cross-chain transaction…
    My team is planning to give free lectures how to build system, security trouble shooting, the result of test, etc.

I also have other related information about our project prepared in English. Could I discuss this issue with you?

(Reference)
Engate to launch Live Video Entertainment for Sports powered by NEM Blockchain


#104

I was speaking with Kailin about this proposal and I am really thorn apart.

I like the idea of VC instead the CFP, currently we have like two dozen of commitee members controlling the flow of the funds into existing CFP projects. Projects can set up infantile milestones, like: “create a blog post”, “make a video” and earn huge amounts of funds in the process. This is a no and Venture Incorporation Proposal may fix it.

On the other hand who is choosing new representatives for VC? I would vote for yes if VC board memebers are nominated here on the forum and voted on ANNUALLY by PoI voting on the NEM blockchain. Otherwise it’s asking for more corruption and favorizing projects based on incentives rather than merit.

So I am rather against current proposal due to even bigger centralisation of power and excluding NEM community from any decisive actions.


#105

Hi tony,

Regarding the selection of board members, that will be performed by myself, dave hodgsons and david mansell. Should the trustees have any issues, or if we are not performing, which they would know as early as the end of Q3, they can remove us, shut the fund down or replace individuals. The governance structure is that way intentionally. How the trustees are selected, ive outlined in another post.

As for centralisation, I think i should outline the current issues with NCF as an example of why the centralisation you are talking about is actually exactly what the funds needs.

Currently the NCF has 5 cosignatories. I am one of them. I am also on the NCF committee to review and process proposals and milestones, so i see every moving part of the fund. The current committee is made up of volunteers, the majority of which are actually foundation employees.

To be more explicit:

  • 24 committee members

  • 14 are foundation

  • 10 are not foundation

  • Approx 18 are inactive

  • Approx 6 are active or semi active

    • Of which 2ish are community members
  • Approx 1-3, historically, verify milestones and review proposals because few want to do it, its a lot of work

    • Milestone verification is always fewer, even though it’s more important
  • 1 has the ability to make a transaction go through (me)

  • If i say no, it doesn’t go through.

This, is centralisation of power at its finest. The legal structure of the fund is decentralised, the management is geographically dispersed, but the power within the organisation is incredibly centralised. .

Generally i have taken up the lead role. This is partly due to my being a cosignatory and being quite active. This in itself is not so much of an issue, except that i shouldnt be the point of connection between decision and payment being processed. The other cosignatories of the fund are currently not and most likely will not be involved in the NCF processes. Therefore they relied on my vouching that milestones are completed and verified by committee.

Compounding this issue is that because the foundation has orders to remain “hands off” the fund, the decision making generally fell on the shoulders of volunteers, a very small minority of the NCF committee active participants. Generally there is little visibility for the cosignatories into the decision making process of the committee, and vice versa, so it would be very easy to falsify a payment. Given the fund is distributing 100’s of thousands of dollars regularly, this isn’t such a good system. This is not how the system should work and is difficult to fix without extreme measures that disrupts the status quo - hence this proposal.

It reached a point where possibly as few as 1-3 people, would review a proposal, or a milestone submission and because the majority of the committee are inactive, are foundation members, or a bit nonchalant or disinterested or busy, or over worked, its not done correctly in many cases and committee vote is practically non-existent and/or worthless. once approved and i would take a payment request to the cosignatories, announce the transaction and request they sign the transaction else nothing would progress at any kind of a reasonable pace.

This is a precarious situation, having one person as the connection, as one mistake or one bias decision could be deemed as an abuse of power.

There is also a legal concern. Many of us are publicly known, and if the funds distributed were ever used for criminal activity, the whole committee could be investigated by authorities with no resources or liability insurance. Thats not ideal by any means.

There does not need to be a legal entity in place for a centralised power structure to form and that is what has inadvertently happened. A transition to Nem Ventures would actually be far less centralised from a practical point of view, even if more central from a legal point of view.

Further, because there is literally zero oversight as to what happens to the funds, it’s quite possible that the funds paid out are embezzled, paid off to committee members to approve things, provided to terrorist organisations - which would probably have me investigated by a plethora of legal authorities and possibly put in prison, the project could just be an out and out scam and we wouldn’t know until its too late, a bill could be charged at 100x the value of what it should be to justify a payout and split the difference between entities involved. We just don’t know what happens to those funds, and we have zero legal protection for when something serious goes wrong - and at some point it will.

I understand the concerns about corruption and centralisation, and i share those concerns. The governance structure of Nem Ventures and the Trust has been set up to prevent such occurrences and move away from an already highly centralised, easily corruptible, easily cheated, broken system.

This proposal is intended to correct these issues and prevent any of this happening again while bringing sustainability to the ecosystem. Yes, it’s possible that there may be some malpractice by an individual or group with il-intentions, but with the oversight of the trust, audits and legal requirements of disclosure and so forth, the risk is MASSIVELY reduced and the onus of responsibility placed on those that can legally face retribution should there be malpractice and who also have an interest in making this initiative a success.

Finally, the current anon cosignatories could someday just simply decide “i want a bit of that”, send to an exchange, dump and walk off into the sunset on some tropical island. I doubt that would ever happen, but it IS a risk and possibility, and yes, it IS a possibility with the new trust, but its much less of a possibility because the parties involved would be known and legally accountable for the funds under their trust. This proposal is not about eradication of risk, or whether the fund becomes centralised or not. it’s about drastically reducing the risk already present and real, undoing the pre-existing power centralisation while bringing other initiatives and opportunities into the fray. I really cannot stress how serious the current issues and risks are, that are present in the current system and that get completely ignored. If the system worked well, this proposal probably would never have been written in the first place. Something has to be done.

The committee have done great things, and the successes so far are a testament to the work the committee has done, but the massive increase in demand on the fund has stretched the DAO organisation beyond repair and puts the fund itself at huge risk of complete depletion in less than 1-2 years. With little to no resources, the situation has deteriorated. Which is why i have formed a highly qualified team, with decades of experience and put this proposal to the community.

I really hope this sheds some light on the reasons as to why this proposal was born in the first place, and i hope now that those who did not realise the issues we are facing, that you will support this push to correct things.


#106

Tony,

Judging by the community almost always vote yes on any proposals, how do you trust the community’s judgement? I don’t. Most people are ignorant and won’t bother doing their own research, myself included.