Investment Update: Why We Invested in Fyde
(originally posted on 15 Sep, 2022)
Table of Contents
The Importance of Treasury Management
A Case for Diversification
Fyde
A Fundamentally Strong Team in Both TradFi and Web3
OP Crypto’s Strong Commitment
Engage With Us
The Importance of Treasury Management
A DAO treasury exists to ensure that the DAO is well capitalized to operate into perpetuity, much like the treasury of a traditional company. Treasury assets should be put to work with the financial objective of ensuring the business has the cash to manage its day-to-day obligations whilst still developing its long-term business strategy. Given these requirements, it is clear that a treasury must mirror that of an institutional-level investment portfolio with evident diversification, liquidity, and a stellar risk management process to meet the desired risk return profile.
It is easy to overlook the importance of treasury management in Web 3, especially in a bull market where tokens are only going up. However, the recent bear market has very clearly demonstrated that, while this may not be a concern during market euphoria, it should be top of mind for founders and builders across all parts of the market cycle. Thousands of DAOs and, more generally, Web 3 projects are suffering from cashflow issues with treasury values dropping by 80–90% since late 2021.
A Case for Diversification
Problem: There is a significant issue with meaningful diversification of DAO treasuries.
Currently, treasuries are mainly composed of their own governance token. This makes sense given that (1) the community naturally has a conviction that their native token will appreciate in value and (2) they want to retain voting power. Yet, this creates 2 underlying issues:
- Volatility: Treasury size is directly correlated with the price action of its own token.
- Liquidity: Treasury size is an inflated abstraction of real purchasing power since a sale of a DAOs treasury leads to a decline in token price (so the remaining treasury size shrinks).
This poor risk management for downside protection is not only a problem for smaller DAOs but impacts blue chip protocols just as much:
These numbers should serve as blaring red warning lights for all DAO members and protocol investors — an organization cannot sustainably survive this way. Yet another indicator of how nascent the Web 3 space really is.
Fyde
Today, we are delighted to announce our role as lead investor in Fyde. Fyde provides the Web 3 ecosystem with the institutional treasury management it requires. Fyde is a systematically managed treasury management solution built on the pillars of diversification, liquidity, cash flow, and retaining governance, with a target beta of 0.5–0.7 to the broader crypto market.
Protocols deposit their native tokens into the permissioned Fyde pool to gain exposure to a wider basket of tokens and to unlock immediate liquidity through Fyde’s $TRSY token while retaining the governance rights over their deposited token.
This innovative solution is being built around 4 core pillars:
Beyond the protocol mechanics, Fyde is building up a pipeline of treasuries of various sizes and stages (Tier 1 DAOs, DeFi protocols, Guilds, Foundations, etc.) with overwhelmingly positive feedback and commitments to use their solution upon launch.
A Fundamentally Strong Team in Both TradFi and Web3
After sitting down with a few of the Fyde members who flew from London to meet us in NYC, it was clear that we needed to be a part of their journey. We shared a very similar vision for the potential of their solution and were extremely impressed by the combination of experience in traditional finance, research, and Web 3. Combined, the team has over 30 years of experience in portfolio management and investments at top-tier institutions like JP Morgan and Deutsche Bank, coupled with ML research at Stanford, supercomputing at NASA, and a very extensive and native Web 3 background. This amalgam of talent is the perfect ingredient for the successful development of this protocol.
OP Crypto’s Strong Commitment
At OP Crypto, we are committed to backing and closely working with innovative founders to maximize the scale and success of their projects. We could not be more excited about the future that the Fyde team is enabling for Web3, and how they are redefining treasury management. Going forward, we’ll be working closely with the Fyde team and helping with the go-to-market strategies for the APAC region. Stay tuned!
Engage With Us
Fyde is the perfect example of our thesis in DeFi and DAO tooling — an innovative solution that disrupts the status quo with immense product-market fit to serve as the key financial infrastructure for Web 3’s open financial ecosystem. If you are a passionate founder building in Web3 or know someone that is building, we want to hear from you!
Don’t forget to follow Fyde and OP Crypto on Twitter (@FydeTreasury, @OPCryptoVC & @OPCryptoDegen) for more updates and community engagement from OP Crypto!
ABOUT OP CRYPTO
OP Crypto is a leading high conviction, early-stage venture capital firm in the crypto and blockchain industry, specializing in pre-seed and seed stage investments. The fund successfully raised $50M in September 2021 and has since invested in over 30 projects, including companies such as Scroll Tech, Snackclub, Merit Circle, Omni, and Fyde.
With the support of prominent investors like Bill Ackman and Alan Howard, as well as institutions like Galaxy Digital, Huobi, and DCG, OP Crypto has access to a global network of venture funds, scouts, and ecosystem partners to source the most competitive deals in the market.
With a core team based in the United States and strong ties to the APAC region, the fund serves as a bridge between East and West. Additionally, a dedicated portfolio team provides post-investment support to founders in areas such as marketing, tokenomics, and networking.
Learn more about OP Crypto at: Website
Follow us on Twitter: OPCryptoVC | OPCryptoDegen
