Alastor Weekly: Episode 4

A spin and a swap

1. Safe raises $100MM, token launch next?

We don’t normally focus on fundraises here, but we think this is an important one. Safe is one of the most critical products in the DAO ecosystem (stores ~$40Bn in digital assets). It is the standard for secure on-chain storage for both organizations individuals, and a layer of applications is being built on top of it.

The DAO token spin is an interesting way to unlock value. It is actually the second spin that Gnosis has done, but has still been a rare event to date.

So why would you do a token spin?

1. Increase focus by team on development of product

2. Easier to incentivize core team and contributors because token price will now track the performance of this specific product (not to mention their token allocation has now doubled them down on this specific product)

3. Belief that when separated, the two new tokens would be valued by the market higher than the single token is today (this is generally the rationale for spins in public markets and feels especially likely to be true in DeFi)

Ok so how did they structure this one?

In the forum proposal, they set aside 8% of the SAFE token supply for a “strategic raise”

Those tokens unlock over an 8 year period

Now what about the strategic raise they just announced:

• Investors purchased the tokens set aside for the raise. Given that Safe raised $100MM and 8% of the token supply was reserved for a strategic raise, that would imply an FDV of $1.25Bn.

• The 8-year vest on the tokens is interesting. Even pre-market downturn, that would have been high, and post-market downturn, investors are only going to be more sensitive about long-term lock-ups. It’s certainly not a seller’s market in tokens/equity these days…

Next up for Safe: launching their token.

2. Aave / Balancer token swap

Voting is live for Aave’s proposed token swap with BalancerDAO, and has received enough votes to pass. For token swaps to make sense, they need to have more than just treasury diversification as rationale. There should be a reason why a tighter integration between two protocols is synergistic. Here’s a couple of reasons why this swap makes sense:

• Aave's veBAL can be used to vote BAL rewards to the new AAVE/ETH balancer v2 pool

• More boosted pools will use aTokens in the future and veBAL can bootstrap them

While spins have been rare in crypto, swaps have not. In Web2, partnerships are a natural precursor to M&A, and token swaps are one of the most common flavors of partnership in Web3. We think that over the next 1-2 years, a number of these projects that have conducted a token swap should consider doing a full-scale merge to fully-integrate their products and consolidate resources during the bear market.

Investment Highlights

What bear market? It was a relatively active week for funding announcements

Multicoin raised $430MM, Magic Eden launched a venture fund for Web3 games,

Morpho raised $18MM, Saber raised $7.7MM, Quadrata raised $7.5MM

M&A Roundup

Not much