[DRAFT] Allo - investment memo

Research & Strategic Intelligence
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Here is a draft of an investment memo of what we think Allo.capital might evolve into. This is a draft document and is subject to change as we get feedback from the community + possible investors. Do NOT make any financial decisions based on this document, do your own research, etc. This document is provided as-as in DRTAFT status and does not guarantee any specific design

Executive Summary

Allo.Capital, an independent venture launched from Gitcoin, is poised to become the capital allocation layer of the tokenized internet.

By leveraging advanced software, intelligence, and comprehensive funding via the Allo Studio and the venture fund, Allo.Capital addresses inefficiencies in traditional capital allocation systems while supporting capital allocation passionate builders and funders. A first-mover in on-chain resource distribution, Allo.Capital’s mission is to fund transformative projects and foster systemic innovation in decentralized finance.

Current Raise

We are entering the seed round to expand operations, scale our product ecosystem, and solidify our leadership in Web3 funding mechanisms. While the operational company (Venture Studio) is currently being formed, the fund is still in the planning stage. This memo outlines our strategy, opportunities, and roadmap.

Investment Opportunities

Allo offers two distinct investment vehicles, each catering to different investor profiles:

    1. Venture Studio (Allo Capital):
    • The operational backbone of Allo, focused on building tools, protocols, and infrastructure for decentralized funding. Investors in this vehicle receive:
      • Equity in the operational company.
      • Potential future alignment with DAO upon its launch.
      • Exposure to scalable software products and partnerships.

  • Evergreen Fund (Allo.vc):

    • A venture capital fund focused on strategic investments in high-potential Web3 projects. While we have not yet finalized whether the fund will be open or closed-ended, both options offer distinct advantages. An open-ended (evergreen) fund allows for reinvestment and long-term growth, fostering innovation across cycles. A closed-ended fund provides clear horizons and targeted returns for specific strategic objectives. Investors in this vehicle receive:This vehicle focuses on:
      • LP positions with direct exposure to fund performance.
      • Returns reinvested for long-term growth, driving innovation in decentralized finance.
      • % of fund returns as carried interest for LPs.

Investors can choose to participate in either or both vehicles.

Investment Thesis

  • High Growth Potential: Positioned at the forefront of a multi-trillion-dollar market opportunity.
  • Strong Leadership: Proven track record of innovation in Web3 funding.
  • First-Mover Advantage: Well-positioned to define and dominate the on-chain capital allocation category.
  • Established Path to Monetization: Gitcoin has proven that 5-10% take rates are possible, these revenue streams ensure financial sustainability.
  • Revenue Pathways: Protocol fees, service integrations, and fund performance drive financial sustainability.

Why Invest in Allo.capital (the Studio)?

Investing in the Studio offers:

  • Ecosystem Leadership: Ownership in the Studio aligns you with Allo’s mission to innovate in capital allocation and drive the ecosystem forward.
  • Broader Impact: The Studio’s tools, protocol, and partnerships create value beyond the fund, with scalable products serving diverse industries and geographies.
  • Flexible Revenue Streams: The Studio’s success is not solely tied to fund performance, leveraging revenue from software tools, partnerships, and potential token-based models.
  • Future DAO Upside: As part of the Studio, you may gain access to DAOs in future launches, aligning your investment with the protocol’s long-term growth.

Why Invest in the Allo Fund?

Investing in the Allo fund offers:

  • Direct Financial Exposure: As an LP, you gain direct exposure to the performance of high-potential investments selected and supported by the fund.
  • Targeted Risk and Return: The fund focuses on strategic, high-impact projects that align with Web3 innovation, offering the potential for measurable ROI within a defined investment horizon.
  • Ecosystem Synergy: The fund benefits from the Studio’s tools and research but allows LPs to focus solely on financial returns rather than operational risk or product development cycles.
  • Diversified Portfolio: Through the fund, you gain access to a curated portfolio of projects vetted for alignment, scalability, and impact.

Key Highlights

  • Origins and Mission: Founded by Kevin Owocki, co-founder of Gitcoin, and Rena O’Brien, ED at Gitcoin, Allo.Capital seeks to redefine capital allocation through transparency, efficiency, and inclusivity. Its three pillars—Intelligence, Software, and Fund—form the foundation of its strategy.
  • Strategic Positioning: Allo.Capital is targeting the intersection of tokenization (expected to encompass 10% of global GDP by 2030), Innovations like AI Agents, and onchain funding infrastructure.
  • Value Proposition:
    • For builders: Direct funding, access to advanced tools, and distribution networks.
    • For funders: Exposure to innovative capital allocation mechanisms with potential high returns.

Market Opportunity

  • The tokenized economy is projected to grow exponentially, with tens of trillions in assets flowing on-chain by 2035.
  • Capital allocation inefficiencies, such as opacity and exclusion, present a massive market gap for Allo.Capital to address.
  • Comparable to the “AWS layer” for capital allocation, Allo.Capital’s solutions aim to standardize and scale decentralized funding mechanisms.

Business Model

  • Revenue Streams:
    • Protocol Fees: A TBD% fee on capital flows.
    • Service Fees: 4-5% fees for custom integrations and builds.
    • Fund Performance: Equity and DAOs upside from portfolio investments.
  • 2025 Milestones [TBD]:
    • $TBDM in capital flow generating $TBDM ARR.
    • 15-20 active DAOs leveraging Allo.Capital’s infrastructure.

Strategic Goals

  1. Developer Focus:
  • Deploy forkable, open-source tools to accelerate innovation in onchain capital allocation protocols.
  • Provide an offering that accelerates developers building in the space through a combination of research/intelligence/education, technology, funding, and distribution.
  1. Category Creation:
  • Define and lead the “capital allocation” category through innovative mechanisms such as retroactive funding and streaming quadratic funding.
  • Build a recognizable brand synonymous with excellence and leadership in Web3 funding.
  1. Network Effects:
  • Leverage existing partner distribution network to onboard DAOs, builders, and funders building on the relationship with Gitcoin and beyond.
  • Foster community engagement through quarterly airdrops and viral campaigns.

Core Pillars

  • Intelligence

    • Lead with research and thought leadership to guide capital allocation decisions and uncover opportunities.
    • Produce books, podcasts, and data-driven reports to drive awareness and credibility in funding mechanisms and emerging trends.
    • Build partnerships, identify grants, and generate momentum (‘LFG energy’) for high-potential investment opportunities.
    • Establish a robust framework for exploring and defining innovative capital allocation models.

  • Software

    • Empower communities and organizations with tools to fund and allocate capital effectively.
    • Rapidly prototype, develop, and iterate a suite of modular, open-source capital allocation tools.
    • Create software like SimpleGrants and InfiniteRegen.AI to simplify and democratize funding distribution.
    • Focus on transparency, ease of use, and scalability for builders, organizations, and ecosystem partners.

  • Fund

    • Invest strategically to support growth and alignment in the ecosystem.
    • Deploy financial and ecosystem resources to back high-potential projects with measurable impact.
    • Create value by integrating portfolio projects with core software and community initiatives.
    • Act as a catalytic fund that incentivizes innovation and collaboration.

DAO Economics (Future Vision)

  • TBD Tokens: Central to Allo.Capital’s ecosystem, enabling staking, rewards, and governance.
  • Staking Mechanism: Tokenholders can stake tokens on projects such as retro funding and quadratic funding, earning inflationary rewards and a share of project fee revenues.
  • Incentives:
    • Builders: Access funding and distribution by registering projects and attracting stakers.
    • Community: Engage in staking activities via gamified experiences like the Proof of Flow Game, promoting collective intelligence and alignment with Allo.Capital’s mission.

Leadership and Team

  • Kevin Owocki (Founder): Proven expertise as Gitcoin co-founder and leader in public goods funding. TED speaker, author.
  • Rena O’Brien (Founder): Executional layer of Allo, Executive Director of Gitcoin
  • Team: Minimal with a core team of seasoned developers, and researchers with deep Web3 experience.
  • Supported by our collaborative ecosystem of builders and funders.

Traction and Roadmap

  • 2024:
    • Grow Gitcoin to $10.6m/yr in funding distributed and $1m in revenue.
    • Successful spin-out from Gitcoin, with foundational projects like DeepFunding and InfiniteRegen.AI gaining traction.
  • 2025 Goals:
    • Achieve $TBDm in annualized capital flow.
    • Launch 2-3 successful projects, including deepfunding.org, a decentralized venture software with Tachyon, and AI-driven treasury management systems.
    • Secure $TBDM in additional funding at a $TBDM post-money valuation.
  • 2026 and Beyond: Expand to multi-chain ecosystems and establish Allo.Capital as a category leader.

Risks and Mitigation

  1. Market Adoption: The tokenized economy’s growth trajectory is uncertain.
  • Mitigation: Focus on partnerships with established ecosystems (e.g., Ethereum, Gitcoin).
  1. Competition: Emerging players in decentralized funding infrastructure may challenge Allo.Capital’s dominance.
  • Mitigation: Leverage first-mover advantage and Gitcoin’s reputation to secure market leadership. Turn competitors into friends by investing in up and coming teams.
  1. Regulatory Uncertainty: Global regulations on tokenized assets and DAOs remain in flux.
  • Mitigation: Establish compliance frameworks and engage proactively with policymakers.

Competitive Analysis

Allo.Capital operates uniquely at the intersection of venture capital investment and the development of funding infrastructure within the Web3 ecosystem. This double sided market positions Allo.Capital distinctively among its peers, offering a strategic advantage in the rapidly evolving decentralized finance landscape.

Competitors Investing in Funding Infrastructure (VCs):

  1. HashKey Capital: As the corporate venture capital arm of HashKey Digital Asset Group, HashKey Capital focuses on fintech-related investments, including blockchain development platforms and Web3 infrastructure projects.

  2. LD Capital: Based in Beijing, LD Capital actively invests in blockchain and cryptocurrency ventures, supporting the growth of decentralized technologies.

  3. Binance Labs: The venture capital arm of Binance, Binance Labs invests in projects advancing blockchain and decentralized technologies, providing funding, mentorship, and access to Binance’s extensive ecosystem.

Competitors Building Funding Infrastructure:

  1. Gitcoin: A platform that empowers digitally native communities to fund, build, and protect open-source projects, having distributed over $60 million to early-stage builders across various sectors, including DeFi and climate initiatives. (note - Gitcoin retains a stake in Allo and we work with them closely and in a positive sum way!)

  2. NEAR Ecosystem: Offers multiple funding options to support initiatives aimed at decentralizing, growing, and innovating on the NEAR blockchain, including ecosystem grants and community-led DAOs.

  3. Crust Network: A decentralized cloud storage provider designed to realize core values of decentralization, privacy, and assurance, supporting multiple storage-layer protocols and offering on-chain storage functions.

Allo.Capital’s Strategic Advantage:

Unlike competitors that either invest in funding infrastructure or build it, Allo.Capital uniquely integrates both functions. This dual approach enables Allo.Capital to:

  • Directly Influence and Support Builders: By developing tools like Allokit and InfiniteRegen.AI, DeepFunding.org, Allo.Capital provides builders with easy-to-deploy funding infrastructure, fostering innovation and efficiency.

  • Strategically Invest in High-Potential Projects: Through its venture fund, Allo.Capital offers financial support and ecosystem integration to promising projects, ensuring alignment with its mission to redefine capital allocation.

  • Leverage Synergies Between Investment and Development: The combination of investing in and building funding infrastructure allows Allo.Capital to create a cohesive ecosystem, enhancing scalability and adoption of decentralized funding mechanisms.

This integrated model positions Allo.Capital to effectively address inefficiencies in traditional capital allocation systems, offering a comprehensive solution that spans both investment and infrastructure development within the Web3 space.

Projects by Allo.Capital

  1. AlloKit: A streamlined platform for deploying grants in hours rather than weeks. Learn more
  2. InfiniteRegen.AI: AI-driven swarms that identify opportunities in on-chain funding and public goods. Learn more
  3. DeepFunding: An experimental initiative exploring retroactive and dependency-based funding models. Learn more
  4. Proof of Flow: A gamified staking platform for DAO tokens to signal support for emerging projects. Learn more
  5. Cookie Jar: A simple, easy, and elegant way to incentivize DAO contributors. Learn more
  6. Allo IRL: A mobile participatory budgeting tool. [releasing Feb 2024)
  7. Allo Yeeter: an easy way of “yeeting” capital to many people at once.

More listed here.

Next Steps

  • Complete DAO design competition and finalize governance/incentive structures.
    • Define token allocation for early contributors and investors.
  • Build Momentum
    • Launch Allo IRL (Q1-Q2 2024) and ramp up traction
    • Use traction data to validate product-market fit ahead of DAO launch (Q2 2025).
  • Expand Community and Ecosystem
    • Onboard 5–10 new DAOs to Allo products by mid-2024.
    • Foster partnerships with ecosystem players.
  • Plan for Milestones (Roadmap TBD)

Investors

  1. Seed Round Details:
  • Target raise: $TBD
  • Equity offered: TBD.
  1. Participation Options:
  • Studio: Equity in operational growth.
  • Fund: LP positions for financial performance exposure.
  1. DAO Timeline:
  • DAO planned for Q2-Q4 2025.
  • Governance, staking, and ecosystem incentives integrated post-launch.