Venture Fund Framework

Fund Mechanics

Funds of different types, theses, sizes, and strategies require custom rules, and to generate trust between a distributed group of participants, the most important of these rules should be hard coded into smart contracts that govern the funds.

Stacker Ventures is building flexible framework for funds that allow customization and experimentation through a variety of fund governance rules and incentivization methods. Fund parameters include, but are not limited to: fund lifespan, fund management structures, hard cap, reward structure, early redemption mechanisms, and so on.

While each fund has its own focus and will be regulated by a unique set of rules, the community of STACK token holders is incentivized to source projects, participate in governance of select funds (parameter-dependent), and help incubate or even develop projects in which the Stacker Ventures funds have invested.

Fund 1, currently open for contributions, exemplifies how Stacker Ventures protocol provides checks and balances through the use of preset fund parameters. See more on Fund 1.

The following section provides an overview of the participants involved in a Stacker Ventures fund.

Fund Management

Fund Contract

Each fund’s capital is locked in a “Fund Contract” and subject to fund parameters and capital controls. A council for each fund facilitates investments and exits through built-in escrow functions that permit ongoing management of assets while keeping all assets secure within the contract. Additional parameters and capital controls include the possibility of limiting the percent of a fund’s total starting capital that can be invested every 30 days, allowing for the early dissolution of the fund by investors if desired, and the ability for investors to veto the exchange of assets. In this case, the total “mismanagement risk” to investors is significantly limited and investors have the ultimate say in the continued deployment of their assets.

Investments are made by the fund itself through its various inputs from: the community (sourcing and pre-vetting projects), a Due Diligence Committee (that conducts final due diligence and negotiations), and input from the fund’s investors (who can veto investment exits) or dissolve the fund at any time.

Fund 1 has chosen to appoint the Stacker Ventures DAO as its Fund Council, effectively granting STACK holders the responsibility of conducting due diligence on and approving investments.

Fund Management

A Fund Manager can be a single individual, a group of managers, or even a DAO (as in the case of Fund 1). We foresee different configurations working well for different types of funds.

The Fund Manager will be responsible for:

  • Vetting projects upvoted by STACK holders and completing rigorous due diligence of the investment opportunity and parties involved

  • Negotiating deals and guiding startups through funding process

  • Initiating investments through the fund contract

STACK Token Holders

STACK Holders provide the Stacker Ventures fund ecosystem with a strong advantage. Whereas traditional venture capital funds do not have their own community of users to support the projects they invest in, Stacker Ventures funds have access to a unique community of early adopters, testers, ethical hackers, marketers, and amplifiers – all with expert knowledge of digital assets and experience with web3 products and services.

With future funds, STACK holders may participate in the success of investments based on their involvement, contributions, and reputation within the Stacker Ventures ecosystem.

Exits

Depending on fund lifespans, the ability to partially or fully exit investments may be desired. Depending on fund parameters, a Fund Council will be able to fully or partially exit investments by activating swaps directly through the Fund Contract, ensuring that investments and returns remain locked in the Fund Contract.

Early Fund Dissolution

In case of the need to dissolve funds early, a percentage of fund ownership tokens required to activate an early fund dissolution is specified in the Fund Contract of each fund. If the threshold percentage in favor of early dissolution is reached, then no more investments can be initiated and all funds in the Fund Contract will be claimable by investors.