The Alchemist project is an incubator. Projects that are incubated by Alchemist are run by separate teams, enabling greater mobility, efficient processes, entrepreneurial innovation, and many other benefits. In recent times individual project teams have had to traverse challenging market conditions threatening their survival. During this period of time Alchemist has not been able to provide the support some developed projects require. In order to protect the long term viability of the Alchemist experiment, the Alchemist Council has agreed to a revenue and equity deal with the Copper team that provides a clear understanding of the relationship between Alchemist and Copper. This deal provides the Copper team the ability to build a sustainable treasury for future development and to enable them greater flexibility when seeking collaborative relationships moving forward. The Council, excluding Ri (Copper product lead) and Joeh (whom had resigned prior to the vote), unanimously agreed to this deal on Tuesday August 30th, 2022 and informed the Copper team of their decision shortly after it was agreed upon. The deal is as follows:
- Revenue Share: Alchemist receives 25% of Copper ERC-20 LBP launches revenue.
- If Copper is required to enter into additional temporary revenue share agreements with strategic partners (i.e. Balancer), Alchemist’s revenue share will be diluted proportionally to Copper’s (Note: Copper currently has a 30% revenue share with Balancer since February 2022 and through February 2023)
- For example, If Copper’s gross monthly revenue is $1m:
- Balancer receives $300k, Copper receives $525k, Alchemist receives $175k (of which $105k will be allocated to the reward programs and $70k will go to the Alchemist multi-sig).
- Equity: Alchemist receives 25% equity in Copper
- Alchemist does not receive revenue share from new products in order to reinvest into Copper’s growth.
- Value from new Copper products is directed back to Alchemist as a result of the 25% equity.
- Terms of equity will be, at a minimum, equal to the most favorable terms given to other investors, if any. (E.g. cliffs and vesting)
- All IP is owned by Copper and entities created by Copper
Alchemist will no longer be giving Copper MIST outright via inflation but will instead shift to a milestone based reward approach. This approach helps further align the Copper team and Alchemist by rewarding Copper for when they help Alchemist. An example of what this could look like would be if Copper was able to successfully convince ERC-20 LBP creators to raise their funds solely in MIST. This would increase the utility of MIST which would hopefully help it accrue more value over time.
The Council serves as the democratically delegated authority of the Alchemist ecosystem. As such, the Council strives to help the ecosystem not only grow but most importantly survive.
Copper has been, by far, the most successful project that has been incubated by Alchemist. Alchemist has provided Copper with approximately $960k in MIST since Copper’s inception. To be clear, the value of the MIST Copper received has been calculated such that it reflects the value of MIST in dollars at the time of receipt by Copper. While Alchemist has provided support to Copper, Copper has more than made up for it by returning $1.3 million to the Alchemist community. Additionally, since February of this year, the Copper team has been self-sufficient and holistically has not been using the MIST they were receiving to pay for their operation.
The revenue returned to Alchemist has been vital for its survival. Not to mention the intangible benefits that the Copper team has provided for Alchemist, such as brand recognition, introductions to other projects/founders, and most importantly, demonstrating that Alchemist is home to top-notch builders.
The subsection in crypto that Copper dominates is extremely challenging to manage and legal clarity is needed to help the Copper team continue to innovate in the space. However, Alchemist is struggling to support Copper as we do not have the capital to support the team in navigating these challenges without adding significant selling pressure to the MIST token. This fact coupled with the reality that Copper is currently our only reliable source of revenue puts Alchemist in a very difficult position. If Alchemist cannot help Copper and Copper is forever bound by Alchemist then Copper will perish. This would be a devastating blow to Alchemist and result in the demise of the Alchemist experiment. That is why the Council agreed to a deal that gives Copper the flexibility it needs to be able to survive and thrive. In return, Alchemist will be able to keep the experiment alive.
The agreement is structured in such a way that allows Alchemist to be heavily exposed to the upside potential of the Copper team and for Alchemist to continue receiving a large proportion of Copper’s most successful product: ERC20 LBP launches, which has generated $1.3m in revenue since a fee structure was implemented. This agreement also incentivizes the Copper team to continue to innovate by building new products that increase the value of Copper. Moreover, this deal gives Copper the ability to recruit new team members and/or raise outside investment, via their equity.
With this being said, the Alchemist Council is currently reviewing the incubation model hoping to build in more flexibility while attracting more teams and projects to be incubated by Alchemist, with the end goal of increasing our sustainability as a project.
The search for the Philosopher’s stone is not an easy task, we should always retain an open mind, be prepared for what may appear beyond the horizon, and be willing to evolve in order to survive in the ever changing and highly competitive environment within the crypto space.
