Thanks for putting this together @Derek - prioritization and investments have been on my mind quite a bit recently and I’ve been ruminating on how to best discuss this with the community. I think Maker desperately needs a unified vision that we can all align on and then strategize on how we achieve that.
Setting that aside for a minute, there are some base financial metrics that apply to any start-up trying to achieve their vision and topping that list is free cash flow. As most people know, FCF is a start-up’s lifeblood. At this stage, our FCF is largely a function of our revenue which is made up of Stability Fee Income, Liquidation, and PSM Fees. Stability Fees are the most reliable form of revenue, being more recurring and predictable in nature.
Today, 81% of that source of revenue is Ethereum vaults, that goes up to 93% if we include WBTC. This is the DAO’s core ‘business’ and it’s survival is dependent on providing the best customer experience possible (based on price, ease of use, features, etc.). How do we measure success?
Most important IMO are:
- Market Share of ETH and BTC deposits - growing Dai and even total risk assets outstanding is not enough. If we are losing market share in a growing market, we are falling behind competitors and will not survive when the market slows/significantly stops growing
(a). Real World Asset Growth (measured in onboarded RWAs and Dai drawn) & Other Strategic Long Term growth Initiatives that drive revenue outside of the DAO’s core products
- Vault User Growth (measured in each respective collateral). Are we taking share from growth of existing vaults or are we attracting new users to open vaults as well? (breadth vs depth)
- DAI Market Share (measured in integrations and on chain transaction volumes)
There are dozens of KPIs that roll up to and support these metrics - identifying them, allocating resources, and holding ourselves accountable against them will be critical in order for us to be successful.
The traditional way to prioritize strategic investments is to do what is called an NPV analysis (net present value). For those unfamiliar, a NPV analysis calculates the present value of cash inflows and outflows over a period for a project and if the inflows are greater than the outflows, you would accept the project. If you have a multiple projects and cannot fund them all, you would invest in the highest NPV projects.
My view is that any investment the DAO makes should support one of the three KPIs mentioned above. This is not an exhaustive list but the further an investment proposal deviates from supporting the aforementioned KPIs, the more it would need to be justified, IMO. Regarding the bullets you mentioned, all would be taken into consideration in this type of analysis.
User type - KPIs 1 - 3
Resources - cost calculated as hourly rate * hours required to complete
Complexity - mostly relates to time but if there are outside legal/technical (external) expenses these would be estimated as well
Duration - all else equal the longer a project takes to implement, the higher its risk due to future year cash flows being discounted at a higher rate