Marketing support to help raise a new US$100 Million Polkadot Ecosystem Fund

This proposal aims to obtain a marketing budget of US$1 million to support Harbour Industrial Capital in raising a second Polkadot Ecosystem Fund, with a target size of US$100 million. The primary means of spending this marketing budget will be through sponsorship of approximately 20 Family Office summits/ traditional investment conferences, where we see the greatest opportunity for untapped capital.

THE BELOW IS JUST A SUMMARY.
TO READ THE FULL PROPOSAL, PLEASE CLICK HERE.

UPDATE 10 MAY: UPON REQUEST FROM SEVERAL REVIEWERS, WE HAVE ADDED A MORE DETAILED BUDGET IN THE TABLE BELOW. THERE HAVE BEEN NO CHANGES TO THE OVERALL BUDGET, IT JUST PROVIDES A MORE DETAILED BREAKDOWN OF COSTS.

 

Proof of Work: Who we are and what we have done so far

• As per Q1 2024, Harbour Industrial Capital has raised a Polkadot fund with AUM of US$10 million from around 40 LPs Exclusively deployed this in the Polkadot Ecosystems; Invested in over 20 parachains and other Polkadot-based projects
• Organisers of the Polkadot monthly meetup HK; speakers for Polkadot at many events including Sub0, ParisDOTcomm, Web3 Festival, WOW Summit, TeamZ and Polkadot PULSE
• TradFi background (Morgan Stanley, Deutsche Bank and Bank of China) and proven ability of bringing non-crypto native investors into Polkadot.

Why We Need a New Large Polkadot Fund

The unfortunate answer is: Because many traditional VCs still ignore projects building on Polkadot. Ask any team that recently tried to raise money from generic crypto VCs, a frequent reply is “You’ve got a good team and good idea, but why are you building on Polkadot?”. Sure, we believe this narrative will change over time as other capital allocators slowly begin to realise the potential of Polkadot. But in the meanwhile, we need a dedicated Polkadot-only VC, that helps all the exciting new projects building on Polkadot get off the ground.

It is a chicken-and-egg problem: If Polkadot based projects are starved of capital vis-a-vie those building in other ecosystems, Polkadot will never get the liquidity and “hype” that ultimately attracts more capital. Having worked in the ecosystem for many years, it’s sad to see quality Polkadot based projects migrate to other L1s/L2s, not because of the tech, but simply because they believe they have better opportunities to get VC funding there. We want to change that, and make Polkadot the place great builders go and access capital.

Why Harbour Industrial Capital?

Harbour Industrial Capital (HIC) is a private Polkadot VC fund, established by Max Rebol and Mario Altenburger in 2021. We are registered in the Cayman Islands and headquartered in HK. As of Q1 2024 we have an AUM of over US$10 million. We have raised this money from private investors such as Family Offices, and subsequently deployed it exclusively in the Polkadot ecosystem. Fund 1 held its final closing on 31 December 2023, and we are about three quarters deployed. The plan is to launch Fund 2 towards the end of 2024, with a target size of US$ 100 million.

Investment Strategy Harbour Industrial Capital aims to achieve the following four interrelated objectives:

• Attracting Old Money to Web3
  We currently have around 40 LPs, primarily family offices and HNWI in Asia and Europe. Our focus hereby lies on bringing in capital with limited exposure to the crypto space, and offer a one-stop-shop, for everything Polkadot. We observed that these investors like to place large bets on entire ecosystems, but then prefer to work with professional fund managers to pick individual projects within.

• Polkadot Education
  Over the past three years, we spent a lot of time educating investors about the benefits of Polkadot, hosting events and meetups, speaking at Web3 conferences around the world and engaging in countless one-on-one conversations. Polkadot is a complex project, and needs good communicators to articulate its message.

• Achieving Absolute Returns on Polkadot
  In Fund 1 our primary strategy was buying DOT, which we subsequently used in parachain auctions to support promising projects to win a parachain slot. We have so far successfully done this for over 20 parachains. For Fund 2, our primary deployment strategy will be classical token VC, meaning we will pay cash for tokens, typically in a seed round, but potentially also in a growth stage. In addition, we may run other strategies that benefit the Polkadot ecosystem, such as buying liquid parachain tokens which we consider undervalued, liquidity provision (on Polkadot-based DEXes) and coretime brokerage (on Lastic).

• Supporting our Portfolio Companies
  Once invested in a Polkadot-based project, we support them in every way we can. Traditionally a central value add was helping them secure a parachain slot, which with the transition to core time is however becoming less important. We now help them access blockspace and set up collators, and introduce them to market makers and exchanges for token listing. Another important aspect of supporting our portfolio companies is getting them in front of investors at the Family Office Summits which we plan to organise (see next section for details), actively supporting their subsequent fundraising rounds.

Family Offices as LPs

Target LPs will primarily be institutional investors such as Family Offices (FOs) But why promote a Polkadot Ecosystem Development Fund, when people can just invest directly into Polkadot? There are at least three good reasons:

• A familiar structure for FOs
  We will incorporate the fund in the Cayman Islands, as a standard GP/LP fund. This is the most common structure for VCs, and one that most FOs have probably used in the past for investment in VCs in different industries. They can wire cash to our bank account in the fund’s name, and get paid out the same way. No need to set up exchange accounts, or remember private keys. For crypto natives this may sound trivial, but for traditional FO who we target here this still constitutes a high barrier to entry.

• Entire Ecosystem
  A simple investment into Polkadot may involve the purchase (and possibly subsequent staking) of DOT. However, to identify promising startups building on Polkadot requires in depth knowledge of the ecosystem and extensive due diligence. It is also exactly these startups to which we want to funnel the capital that they will require in their growth journey. It is unrealistic to expect FOs who come from different industry backgrounds to do this on their own.

• Active follow-ups
  This may be the most subtle, but also the most important reason. Nobody “owns” Polkadot, hence nobody is incentivised to follow up with potential investors from the conference, arranging calls and continuing the conversation until the investment is made. Harbour Industrial Capital will charge a standard carry, hence it will be in our very own interest, to follow up on every lead, and get them to invest.

Budget

Please find our proposed budget in the table below. Kindly note that this is still a draft, as the cost of many items are yet to be confirmed. Most importantly, the exact sponsorship fee will vary from event to event, and has to be negotiated with each event organiser. The numbers below are averages based on initial discussions we have had with different organisers. We have applied a discount of 50% for sponsoring an entire events series (rather than a one-off event), as all organisers prefer long-term partnerships and encourage them with such discounts. It is also the primary reason why we have decided to do this treasury proposal rather than go through the Events Bounty, which only supports one-off events.

Please also note that the amount between line items in this table may shift, depending on actual costs, so long as the total of $1m is not exceeded. A key variable in this budget is the number of events we will organise. We propose 20 events throughout the fundraising period of two years. However, it may end up being 15 or 25, depending on the actual costs of the initial events.

This means, we will continue organising the fundraising events, until this budget is used up. We believe that this approach is well aligned with the interests of the treasury: The more events we are able to organise, the more commitments into the fund we are likely to get, and the more capital we will have available to invest back into the Polkadot ecosystem.

 

Continue Reading

The above is just the short summary. To read the proposal in full, including graphics and additional links please click here.