Vote on Treasury Withdrawal - Pogun - Capital Without Compromise
Vote on Treasury Withdrawal - Pogun - Capital Without Compromise
I am voting YES on the governance action with hash 73e171a4c0730b4b59ecae271ab89f12a9d56360b02920e1f95107dbdc1d6762#8.
The metadata for my vote is located here, and this blog serves as a more human-readable form of that justification.
Justification
I am voting yes on this primarily because of the opportunity to generate perpetual returns for the Cardano treasury.
The 5% perpetual return is equivalent to a 5% unvoiced equity deal at ~60m valuation. Competitors in the space have raised at higher valuations, and I believe the technology described, the chance of success, and the benefit to Cardano to all be pulling in this proposals favor.
However, my Yes vote comes with Caveats after discussion with Omer Husain, the lead on this project.
I expressed concerns that the 20% post-EBITDA terms are highly manipulable by the team, and could be extended indefinitely with little return for the treasury. Omer’s response was that there is little incentive to manipulate the EBITDA in that way. He argues that the 20% is high enough that the incentive is to pay back the loan as fast as possible; increasing OpEx to defer repayment would simply be burning their own cash rather than growing the business.
He suggested a structural backstop: if full repayment hasn’t been reached within x years of first positive EBITDA, the repayment basis switches to 10% of net revenue, rather than post EBITDA. I also suggested a flat maximum term on this phase.
I expect the final contract drafted with Intersect to include such a term, or any revised proposal to explicitly state this.
My other concern is on liquidation terms. If the company is liquidated, I expect the Cardano treasury to have preferred repayment rights for any assets, ahead of, or at least pro-rata preferental compared to, any other investors or equity holders.
I think it is fair to demand that, if you’re receiving public funds from the treasury, the treasury have first repayment rights.
I expect the final contract drafted with Intersect to reflect this as such, or any revised proposal the explicitly state this.
