Developing a long-range financial forecast for Aragon

Dear Community,

As Aragon moves into S2 and pulls together a list of tasks for the finance-squad, I wanted to take a temperature check of developing a long-range financial forecast.

In terms of having historical financials and a short-term budget, Aragon is ahead of most other DAOs in terms of reporting and sophistication. The piece that I believe is missing is a long-range financial forecast that the community and core team could reference when making key operating decisions. In my previous career in investment banking, the long-range financial forecast is what tradfi execs would reference when making more operating decisions.

An example of some of these operating decisions include:
-Projecting the impact of a price change for ANT or ETH on the implied cash runway for the DAO
-Analyzing the impact of a pricing change on future revenue based upon historical KPI metrics around retention / churn
-Creating different hiring / spend scenarios and forecasting the impact of these decisions on the DAO’s treasury
-Analyzing the impact of various operational changes on future potential ANT price ranges

These are just a few examples of where a long-range forecast can be helpful, but the list goes on and on.

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Resounding yes from me because this can guide a longer-term strategic funding allocations. i.e the % pa of treasury allocated to public goods funding This is something spoken with @fartunov and @daniel-ospina about.

I am for grants funding such as the proposals here here here and would like to see this allocated in a more transparent and accessible way.

My non-profit experience is that grants rounds are typically competitive, available during limted time-windows throughout the year, open for all eligible applicants and assessed based on specific, published criteria.

Be great to formalise and promote a grants funding process. A long-range financial forecast could inform when we do and when we do not provide grant funding.

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Hi friend,

Congrats on your first post! Welcome!

  • Can you point me in the direction of this historical financial data?

In regards to creating this strategy, I always envision that down the road we will be buttoned up in these regards! I am skeptical if this were created right now on what value it would provide with the below:

  1. The DAOs history is very short.
  2. The AA/AL histories are longer and have massive churn.
  3. They haven’t been very well connected until recently. Awesome this is changing. :slight_smile:
  4. We do not know what the DAO will look like come Feb 23 when the funds will be transferred from the AA, along with some, none, or all of the core teams.
  5. Attempting to guess where ANT would be isn’t possible.

Do you think setting up the accounting strategy now would be more prudent in preparation for post Feb23, when we have a clearer picture of costs and potential revenue? I think when Feb 23 hits we will have a lot more clarity. Until then this could be created and need massive changes on that date.

Thanks!
Anthony

Do you think the DAO should be required to continue to operate without this guidance while the AA AL organise themselves? Because thats the current status quo and it’s not effective, fair or sustainable

The manifesto talks to long term value vs short-term profit.

We are committed to: The creation of long-term value versus short-term profit — which in turn, advances sustainability

Yet lacking long term strategic direction - such as the proposed forecast - the DAO is forced to operate on 4 month seasonal budgets. That lack of security of income undermines our ability to attract and retain long term contributors to operate the DAO

If this was in place now it would be easier to update than create come Feb and we may avoid finding ourselves in the position of trying to re-secure contributors and operational funding in the middle of a merge.

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I think we have to be realistic of the current situation to make the best decision.

For me, it’s simple (and I really want to hear back from Sam on his thoughts and i’d like him to share the sophisticated reportage). You cannot create a viable “long-term financial forecast” without 2 things: historical or research backed financial data. Please also note there is a difference between budgeting and financial forecasting whereas the former is the plan and financial forecasting the prediction (not saying you don’t know this).

Thus the decision to fund creating a long-term financial forecast without said data, or based on guessing the value of ANT is moot and a waste of resources. What I recommended above is the most proactive way to prepare to create a long-term financial forecast and that’s to create (if it doesn’t exist) an excellent accounting strategy. Which I think I saw @AlexClay proposing in a discord channel recently? Once we get clarity on the exact financial situation of the organisation (as a whole), then it makes more sense.

Again, looking forward to hearing back from Sam.

Thanks!

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Hi all! Thank you so much for the feedback. I’m typing up detailed responses / questions to all of the thoughts and will post it over the weekend

There is a lot of granularity of information that is pretty dispersed. At the same time, I second @Anthony.Leuts - where is this reporting? Can someone outside ESD and Finance Guild understand what is going on is quite doubtful.

There are two relevant data points:

  • About $200M will be transferred to an Aragon DAO governed by ANT tokenholders in November 2022.
  • There is a 10% of the treasury spending cap per year

It is a bit difficult to imagine how a long-term financial forecast built out of these two data points can dictate the granular decisions you are outlining.
Things like a network-level strategy and potentially a value capture mechanism are prerequisites.

+1 once again on Anthony - modeling for ETH and ANT price feels pretty futile at this point

That being said, there is probably something that can be done in this direction. It just has to be more narrowly defined.

On the donations angle, ideally, the granular aspects of grant distribution unless directly related to the Aragon’s stack can be outsourced to more competent operators (e.g. GitCoin)

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@Anthony.Leuts here is the current financial model that I referenced:

It has a breakdown of the financial position of the DAO and the ESD groups, for April + May historically, and June + July on a forecasted basis. Relative to other DAOs, this is in a pretty good spot.

All of the color above on the relationship between the DAO and AL is very helpful, and I tend to agree that a longer-term financial forecast isn’t as helpful until the funds have been transferred and the organization is fully decentralized. That being said, having a more streamlined accounting process with monthly reports + a touch more granularity on contributor payouts would be helpful and put the DAO in a better / more organized position come Nov’ 22.

As a next step, it would be great to set up a quick call and chat with someone on the team and get a little bit more live color on the state of play. Would love to get involved and start contributing, but want to make sure we’re in alignment that it would be a value-add use of time for the DAO. I can send out some discord DMs to get scheduled.

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Thanks for the response. It seems we are on the same page. @Ricktik6 & @AlexClay are probably the right people to engage with in relation to building an accounting strategy that adds value in the DAOs current state and in the state it will be after the transfer of funds. Once that system is in place and we have a clearer picture, I would then support more financial reporting with a longer-term horizon.

I know you are already in touch with them in discord so maybe worth moving there now! Thanks Sam!

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Thanks Anthony! We’re in alignment here. Will connect with @Ricktik6 and @AlexClay offline

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