July 19, 2021: Discount Sushi 🍣🤢

The $SUSHI community debates selling out

VC deals used to be shadowy and opaque. Thanks to the magic of DAOs, we’re getting a peek into how the 粗挽き gets made.

In case you like your sushi hot, check out the heated discussion on the Sushi governance forum. Users are actively debating a deal to allow a group of VCs known as 幻影旅団 (“Phantom Troupe”) to purchase discount $SUSHI.

The initial deal offered up to $60MM worth of SUSHI for up to 30% discount with a 6 month cliff and an 18 month vesting schedule. The deal would be co-led by Lightspeed, Pantera, and Spartan, with up to 18 other firms listed as potential participants (min $250K).

Reflecting the madness of an actual VC deal, the events are quickly turning into a circus. Another firm Arca jumped in to trash the proposal and provide a counter-offer.

Although Alameda is not tossing in any money, its founder Sam Bankman-Fried added his two cents. One concern commonly raised by the community was the possibility of VCs dumping the SUSHI token, so how convenient to receive the unsolicited blessing of a dumping expert.

Why might we suspect VCs would dump? Well, some were already starting the process.

Much of the debate focused on the wisdom of offering VCs a discount when the underlying token is already deeply discounted. A variety of DeFi tokens, including SUSHI, are trading at a stupidly low valuation amidst the sustained crypto market nuke.

If the VCs want more exposure, why not buy the token at a discount on the open market? Especially when some already own the token?

Of course, the real answer is simply because it’s not how business is traditionally done in the Bay Area, where extra emphasis is placed on conformity and in-group signalling.

Much of the discussion therefore shifted to trying to characterize and quantify the value-add VC firms would provide for their discount:

After over a week of discussion, the community sentiment came down nearly 60-40 opposed, with members preferring more favorable terms across the board.

A separate poll by Darren Lau yielded useful quantitative data on the reputation of various VC firms within the community:

Unless we see some creative Uniswap style rigging, we may assume this proposal DOA. Amidst the backlash, Lightspeed declared a strategic retreat to regroup.

As somebody who has neutral/messy experience with two of the three firms co-leading the round, I’m somewhat qualified to comment, at least on the broader strokes of the negotiation.

In about 99% of cases, VCs are quite accustomed to having the upper hand and exploiting cash-poor founders. In about 1% of cases, the founder has the upper hand and dozens of VC firms play the role of dumb money as they fight to ape in. It vaguely resembles those Black Friday videos of consumers beating each other to get the hit holiday toy.

This clearly smells like the latter. I escaped the Bay Area a while ago, so I can’t comment on exactly how desperate the industry has become. From the looks of it though, VCs can’t find any good options to park their cash. The already successful SUSHI would be a steal. This thread appears correct:

During my time in the Bay, nobody ever refuted my frequent assertion that VC funding was the leading predictor of startup death. If I were a $SUSHI holder, I’d realize my transparent negotiation leverage and simply walk away. If VC firms are actually the value-add they claim, then keep growing and just acquire these firms directly.


For more info, check our live market data at https://curvemarketcap.com/ or our subscribe to our daily newsletter at https://curve.substack.com/. Nothing in our newsletter can be construed as financial advice. Author is a $CRV maximalist, has no stake in $SUSHI.