GSE: A Financial Analysis of Guilds and Projects

Governance
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Summary

The GSE recently used a portion of our budget to fund a workgroup whose task was to perform a financial analysis of the DAOs projects and guilds each season for the past 3 seasons. This is a post to share the results and offer ideas on how this can be used to make smarter funding decisions and stronger proposals.

We are all responsible for the DAOs success.

Information must be transparent and readily available at all times. This is especially important in a DAO where every decision is made by the community with sometimes limited view and context. DAOs are an important step forward in giving those who build the ship a say in where the ship goes. The right to be a part of the decision-making process comes with great responsibility. We are all responsible for the outcome of BanklessDAO. If the DAO thrives, you are responsible. If the DAO dies, you are responsible. It is the leadership’s responsibility to provide you with the information you need to be confident that every vote you make is moving this ship in the right direction.

The GSE released the BanklessDAO Constitution and Community Handbook which acts as our current operating system. It’s a summary of our structure, our processes, our mission, vision, and values. This view of our organization is extremely helpful to understand our current state. Another important piece of information is the current state and trending direction of our financials.

Responding to community sentiment.

One of the major threats identified in the strategic survey was overspending. It’s a valid concern. If all the funds in our treasury go to 0, our DAO dies. There seems to be a consensus that the flow of funds across units needs to be reassessed. If we were to reallocate today, we would be guessing how much each unit should have. The data has been limited leaving the answer to “how much” a mystery. With the financial analysis of guilds and projects, the GSE and anyone else who is interested will be able to make stronger recommendations based on data instead of speculation.

When creating recommendations for the reallocation of resources, profit/loss is only part of the equation. Brand recognition, community building, and others are important variables to consider. Any improvement proposal that is created as a result of the financial analysis should take these variables into account.

Results

The full results are posted below. One thing is obvious - The community was right. We are overfunding. Almost every project and guild has a significant amount of BANK leftover season after season. This shows we can achieve our priorities with less funding. What’s interesting is that if we reduce funding to guilds and projects, or create more milestone-based funding mechanisms. We can allocate more funds towards things like in-person events to boost our exposure and impact, tackle our compensation problems, and attract strong talent. In fact, according to the data, if you add up all the left-over funds across all projects and guilds in season 3, we would have had an extra 8.5M BANK.

Calculating in the average BANK price in season 3 of $.0436, that’s
$370,600

Calculating in the median BANK price in season 3 of $.0388, that’s
$329,800

Someone check me on this cuz…whoa.
Average BANK prices were calculaed from CoinGecko.

Next steps

First I’ll mention a disclaimer that I’m assuming this data is correct based on the findings of the Analytics Guild. If you held a leadership position in a guild or project, review the data and call out any discrepancies.

Assuming everything in the report is accurate, I invite you all to fork this and discover more insights and share them with the entire DAO.

We need a bit more information such as ending season 4 numbers. Analytics guild will be providing this.

Use these findings to help you make decisions on future funding proposals. If you’re a role holder or proposing a project, be honest with the amount you’re asking for in season 5. If you’re on the Grants Committee, use this historical data to help guide future decisions.

Let’s use this to reassess our funding processes, procedures, and criteria.

Let’s also use this to look at the roles guilds and projects play. Personally, I feel strongly that guilds should be strictly education and community building with funding used to create educational resources and grow the intelligence of our community. The assumed outcomes include a more skilled community → stronger project contributors → better execution → more successful projects → a more successful DAO.

Most importantly, this data needs to be kept current. I charge the Treasury Guild with this task.

Find the full report here. Please fork and share your own conclusions.

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This is super interesting! Thank you for pulling this together so we can all share this insight. Though I haven’t been too vocal about it, I share the concern of overspending. This tool will help us be more accountable to ourselves, each other, and the DAO.

In particular, I find the “Guild Fin Pivot Table” tab (aka the “Over Estimate” tab :sweat_smile:) insightful. Estimating can be difficult and, for most, is largely based on past experience, with a bit of knowledge of what the next season might hold. Some things I consider are:

  • the DAO is still relatively young, we have just over a year of precedent for activity and spending. I think estimates will improve with time, in this respect.
  • market fluctuations can affect seasonal spending considerably. Forecasts made in a bull market playing out in a bear market are likely to contribute to over-estimation.
  • I had one more point but now it has left my brain. Maybe I’ll edit later if it comes back to me.

With that said, I still think we need to be diligent about estimation and spending. On the one hand, unspent funds retained by the guild are going to be spent on guild-related activities in the future, but on the other hand, BANK accumulating in a guild multi sig might promote reduced spending scrutiny (i.e. “let’s spend this just to get it spent”, or “hey we have all this BANK, let’s, uh, do something with it?”).

These are just some initial thoughts. I look forward to other insights and perspectives.

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My question is why was there leftover allocation? There could be a variety of reasons. Was it that roles went unfilled or someone left midway? Was there allocation for initiatives that are still on the books but not yet claimed/spent? Was it lack of being specific enough about itemizing the full budget?

Given the price volatility of BANK some projects may have accounted for any leftover budget surplus at the end by earmarking it for future undefined initiatives in a time of need. Should guilds/projects aim for treasury sustainability and does surplus at the end of a season reflect poor management of funds?

Using surplus as a measure of responsible spending sounds like it could encourage reckless spending simply to so budgets don’t get cut.

Here’s a random thought to address this from the allocation side instead of the asking side.

It could be worthwhile for the DAO to consider some form of ranked choice voting for seasonal allocations. A quadratic funding mechanism with grant rounds such as how Ocean DAO members allocate is one example I’m familiar with.

They set a fixed amount for the DAO to allocate each season and measures funding against value perceived by the ecosystem which it serves. Guilds would have a set total allocation they share and so would projects. Then, members vote within each group (projects/guilds) and the results allocate the seasonal budgets according to where members feel value is being created.

A minimum funding floor could be applied for guilds to ensure enough goes to sustain the effort, but if members vote for them to get more, then they get it.

A maximum funding cap could be applied to each project, potentially with increasing tiers for projects that apply multiple seasons in a row to allow for increased amounts if the community still supports it - but not so much that they squash out new projects by earning an outsized number of votes. If the community doesn’t vote to support it, then they don’t get funding.

Here’s an example of what this kind of allocation based on diff groups with min, and max looked like for the most recent round.

They just announced moving to a retroactive funding model for future rounds to promote sustainability of the treasury by increasing project alignment with the ecosystem. It’ll be interesting to see how the next round looks but that may be an option to consider as well.

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I have a few big questions with this statement:

  • When did the community state that overfunding was an issue? Personally I suspected such, but I don’t remember the community ever expressing this. Was it unearthed as part of the survey the GSE did? A link to that would be helpful if so.
  • How does a guild/project having BANK leftover mean that that they overspent? I feel like I’m crazy asking this but doesn’t that indicate the exact opposite - that they spent LESS than they had asked for?
  • What does overspending even mean? To me, it would be something like “this normally costs $10 but we spent $20”. Can you tell me how these numbers show we are overspending?

It was brought to your attention in the Discord discussion, but it feels like the methodology isn’t sophisticated enough to be making broad generalizations like “We are overfunding guilds/projects”. This is mainly due to the fact that you are using hard dates to show whether or not guilds/projects have spent requested BANK by the end of the season, but many guilds/project disbursements don’t fit with these dates.

For instance, many guilds/projects have spent 0 BANK by the end of the season in your chart, but it was because they did a single seasonal disbursement at the end of the season AFTER the hard cutoff date. Similarly, guilds/projects with monthly or regular disbursements would be counted as “overfunded” even if they spend all that money the next day.

Finally - many of these guilds/projects simply reduce funding asks by leftover amounts in the following seasonal budget cycle. Here are some examples. If surplus is deducted from the following season ask, then are they really overfunded?

I completely agree with this statement. I appreciate the work that has gone into this report, but if I am being honest, I’m struggling to understand the story these numbers are telling, and I have no idea how I would use these numbers on the Grants Committee.

How do you suggest we do that? Forgive me if I’m asking stupid questions, but it all seems so hand-wavy to me. I need concrete next steps, and I’m not getting them from this spreadsheet and companion post.

Also - I noticed the GSE isn’t in the spreadsheet. You guys have >2M BANK to deploy, how much of that is left over? How much of that have you spent on this report?

What is the multisig of the GSE anyway? I see that the funds were disbursed from the BanklessDAO Treasury 2 weeks ago, and that @AboveAverageJoe bridged them to polygon, but I don’t really know how to find where they went from there.

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These are all great questions that should be answered. In the post, I encouraged each guild role holder to take a look and identify discrepancies. A few have, so maybe the next step is to reach out to each guild directly and follow up on that request. I agree those who have said the hard date cut off has scewed the data. A version 2 of the report can remedy that once the guild leaders provide the needed context

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I’m glad you and Links extracted the most relevant parts of my reply. :pray: I went a little off topic there in following my rule to always offer solutions when I bring attention to an unanswered question.

Those sound like appropriate next steps to get a better picture of:

  1. what are the project/guild treasury management strategies, if any?
  2. whether they followed their plan & spent according to it,
  3. did the plan deliver on expected ROI & KPI goals
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Being too free-flowing with our funds has been a repeated concern expressed in community calls and forum posts. I’m looking for the exact post from Frogmonkee, but it’s the one that started the idea that we need to slow down and “work on the DAO”. The point he made was that in the first few seasons we were in build build build mode and funding all projects that asked. He then challenged us to slow down, make it more difficult to get funding, and introduce things like KPIs which the GC has been experimenting with. I’ll link the exact quote from the post when I find it.

Funding all projects/guilds that ask, while not 100% true, is true enough to have sparked debate over how we decide what we prioritize — revenue-generating projects/guilds over cost centers for example. How many times was a guild denied their funding request? I cant think of an example. If there is one and someone call call it out that would be great. These were all some of the things that sparked the GSE. Hopefully these jog your memory. Here’s one link although not exactly the one I’m looking for

When I’m saying overspending, it’s from the GC. Over allocating may be better. I should have also said overestimating to cover the guild/project perspective. If a guild/project has funds left over for 1 season or 2 seasons, that’s not a trend. However, what I see in this report is that the vast majority of all guilds and projects overestimate their needed funds every season. Combine that with the fact that many of us are on multiple projects, and multiple guilds voting on these budget proposals, we are not learning. Our carryover from season to season should be getting closer to 0 as we learn what resources we actually need to fulfill our goals.

I do recognize the extremely valid point of the issue with the hard dates. Once the guild leaders help correct the data based on the true timelines and when the seasonal funds were dispersed, we will take another look at the data. Maybe it will reveal something totally different

Yes they are still overfunded. From looking at the numbers, when guilds/projects reduce the amount of funds because of carryover, the new total that is in their multisig is still too high because every season there is carryover. If season over season, the carryover was getting closer to 0, then I would say they are not overfunded. But the carryover is consistently high season over season. But again, let’s get the version 2 of this report with the trued-up dates from guild leaders.

The point of this post was to present people with the data and start the discussion. I didn’t intend to provide crystal clear solutions. But the clear next step that I do point out is that we need this set of detailed financial information available on a recurring basis. New guild leaders are brought in all the time with limited context from the past. We need to provide them that context through historical data like this report.

Another next step is to take more time when forming a budget proposal. If after the version 2 of this report comes out and it still shows consistently high carryover, then we aren’t learning. Or maybe just not taking enough time to budget properly.

Finally, we can use this information to experiment with future improvement proposals. For example, assume this data is accurate ignoring the hard date issue just for a moment. We could say that an improvement proposal is to put a cap on initial guild funding that is based on your historical average. You can ask for more later, but it has to be justified. Another could be to say, guilds should not be automatically funded every season because we haven’t been able to accurately budget or justify our requested resources.

There’s a lot left over in the budget…like almost all of the workgroup budget. We also haven’t paid ourselves yet, and most have agreed to keep working past the end of the season to make sure we deliver a final package of recommendations. We will be giving out 1,000 BANK per meeting for note taking (Joe will have that total amount), 35k for this report plus extra for version 2 will be distributed soon, and Justice can give the amount he will distribute for help with the constitution which is going to people who helped create it and designers for creating the cover design.

You’re right that the GSE should have been a line item. Oversight on my end. It would have said “100% overestimated” because how workgroups would be formed did not end up working the way we initially planned. For the same reason I put little weight on the Season 1 overspending in the report, I also put little weight on small workgroup dispursements from the GSE. It’s been a process trying to figure out how to solve this problem and how to integrate workgroups. Now… in 4 seasons from now, if there is a GSE still and the carryover is consistently high, then there’s a problem. This report is all about identifying trends and learning from the data to make more informed decisions.

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