[DAO: QmUrSmT] Preparing detailed financial statements, budget, and long-range forecast

Following grant approval, we have spent the last month digging through Decentraland’s treasury and financial history and produced this report. We encourage members of the DAO to go through it, but a few TL;DR takeaways below:

  • Decentraland Operations
    • The October 2021 Facebook rebrand to Meta fundamentally changed the operations and financial profile of the DAO. As such, every metric we viewed and projected was analyzed through a pre- and post-Facebook rebrand lens.
    • In general, revenue has descended back towards pre-rebrand levels while grant and other expense costs have remained materially higher, creating a negative cash-flow dynamic that is likely to continue into the near-to-medium future.
    • Expense increases have been driven primarily by a moderate increase in total grants and a material increase in average grant size.
  • Decentraland Treasury
    • Perhaps the most significant issue Decentraland currently faces is the lack of stable tokens in treasury, leaving the DAO undercapitalized and with virtually uncapped downside exposure.
    • At current prices (~$1.00 MANA) and current operating rates we would anticipate Decentraland has ~15 years of operating runway with a downside but less than a month of that runway is currently denominated in stables.
    • An illustrative $20M block sale of MANA at a ~20% discount would secure more than a year of operating runway, even if the price of MANA went to $0.

Based on the analysis and time spent with the Decentraland’s public-facing data we would recommend the following:

1. Treasury Diversification – Decentraland should begin exploring a treasury diversification strategy today. Ordinarily we would recommend 2-3 years of stable runway in an extreme bear scenario, though given the slow vesting drip it may make sense to start with 1+ year and reevaluate down the road. There are also a few interesting sales of unvested MANA that the DAO could explore if it wanted to raise more funds while preserving its current MANA balance.

2. MANA Valuation Analysis – In order to make informed decisions about MANA usage in the context of rewards, grant compensation, treasury diversification, or future potential buybacks Decentraland would benefit tremendously from conducting an analysis on the historical and current valuation of the token.

3. Data Transparency & Projection Refinement – These projections are far from perfect, in large part due to the lack of public-facing data currently available outside of the transparency report. Spending time putting together a public-facing analytics web page would go a long way to driving additional platform engagement and more sophisticated MANA token purchasers, in addition to creating a more informed and longer term set of projections (with proper revenue drivers and assumptions) and driving additional strategic insights to inform the operating direction of the DAO.

4. Targeted Committee Creation – to improve efficiency and grow Decentraland, we would recommend that Decentraland consider establishing committees with key growth objectives and defined monthly budgets. The two that strike us as the most pressing are:

A. Strategy & Finance Committee – to manage and monitor protocol spend, treasury assets, data analysis, and broad DAO strategy; including taking the lead on each of the first three recommendations.

B. Growth & Marketing Committee – to head up growth initiatives, specifically around driving user acquisition and engagement.

We recorded a brief video walking through these slides that was presented in today’s town hall. You can find a link to that video here.

We appreciate the opportunity to work with and present to the Decentraland community, please do not hesitate to reach out to us or comment with any questions!

Sam & Jordan @ Alastor