Fractionalizing VitaDAO’s first IP-NFT to enable community governance over the IP and involvement directly into the R&D decision-making and capital allocation processes.
This proposal aims to assess community interest in fractionalizing the “Discovering Novel Autophagy Activators’’ IP-NFT, funding the Viktor Korolchuk Lab at Newcastle University. Although the original fractionalization proposal (VDP-73) was to fractionalize the ApoptoSENS IP-NFT, given recent data readouts from several of the ongoing projects, we have conviction that the Korolchuk IP-NFT has the greatest probability of resulting in a longevity therapeutic of any of the projects in VitaDAO’s portfolio. As such, the Korolchuk Lab’s work is most deserving of further funding and governance directly by the community via fractionalization. Doing so will create direct greater capital and incentive for the VitaDAO community to contribute to the project and move it into overdrive.
We believe that validating fractionalization as a funding and incentive mechanism could shape the future of VitaDAO, and may provide necessary capital and attention of the community to optimally guide projects toward success. Fractionalization would allow individual members to personally hold ownership in the governance of the Newcastle-Korolchuk project, rather than indirectly through the VITA token. This proposal is specific to the Newcastle-Korolchuk IP-NFT, but hopes to lay the groundwork for how to effectuate fractionalization of all IP-NFTs in a way that is most accretive to individual members and the DAO, how to maximize research funded, how to preserve the DAO treasury, how to ensure compliance with relevant regulations, and how to provide VitaDAO members agency and incentive to contribute directly to the research. There has been justified skepticism within the VitaDAO on the utility of IP-NFTs over equity as the optimal funding vehicle for a DAO, and we hope that this proposal specifically and fractionalization generally will convince the community.
To address these challenges, we propose the fractionalization of the Newcastle IP-NFT with the following high-level protocol and rationale below:
We feel that it is imperative to advocate for the most promising project in VitaDAO’s IP-NFT portfolio given the high risk associated with early stage biotech research, if we’re going to propose the community take on the risk of the project directly. As such, we commissioned several advisors to Molecule to perform analysis of the data generated to date by all of the VitaDAO projects under NDA. These advisors have asked to remain anonymous, though we can say that they combined have 50 years of academic biomedical research, pharma, biotech, and venture capital experience. They scored each of the VitaDAO projects along several axes, including favorability of licensing terms, quality of experimental planning, commercial viability, clinical strategy, expertise of the research team, and probability of success given the data generated to date. Their feedback was independent and unanimous: Korolchuk’s project is the most promising of all VitaDAO IP-NFTs to generate valuable IP.
1,000,000 VITA-0001 tokens (IP-NFT fraction tokens) will be minted. 10% of the VITA-0001 tokens will be sold to members of VitaDAO in a fixed-price sale. Participants who receive an allocation of VITA-0001 tokens will be subject to a two month lockup period. The purpose of this lockup period is to avoid “pump-and-dump” behavior once VITA-0001 tokens have liquidity. However, this lockup period is relatively short to ensure that new data can be published without significant delay, while ensuring data release can be embargoed during the lockup period. If the lockup period were longer, this would delay the ability of the token holders to see data being generated.
VitaDAO will retain 69% of the VITA-0001 tokens.
Researchers will receive 5%, vested over 4 years, with a 1 year cliff. This vesting period is to incentivize long-term success of the project and discourage falsification of data. This must first be approved by Newcastle.
Newcastle University will receive 1%, vested over 4 years, 1 year cliff. Though this is not required in the contract, it may be a strong signal to other University TTOs, incentivizing them to speed up the licensing process if completed by a deadline. This must first be approved by Newcastle.
VitaDAO Dealflow WG will receive 5%, vested over 4 years, 1 year cliff. Vesting period to incentivize long-term success of the project. This must first be approved by Newcastle.
The liquidity pool will receive 10%. A liquidity pool on UniswapV3 will be created upon claiming the sale proceeds, matching 10% of the fractions with 100% of the funds raised from the sale.
All of these numbers can be subject to change once token holders begin governance, as more VITA-0001 tokens can be minted and distributed pursuant to token holder vote.
The genesis sale will be a fixed-price sale with overflow rebates and vesting.
10% of the tokens will be sold to VITA holders at a fixed price. Importantly, this price should not factor in any appreciation or depreciation in the value of the project based on the emergent data as VITA holders should have the power to make that determination once liquidity has been established at the conclusion of the sale.
The pricing is determined by a cost-based valuation, factoring in committed research costs of 220,358 CHF (245,557 USD), legal and operational costs of 38,563 CHF (43,295 USD), inflation of 23,865 USD (VitaDAO holds USDC so it makes sense to calculate inflation with regard to USDC - calculated with the US Bureau of Statistics Inflation Calculator), for a total total cost-based valuation of 312,717 USD.
Note: All mentions of USD are to denote value, not stable coins
Given the final valuation, 10% of the VITA-0001 tokens would be valued at 31,271 USD and a price of 0.31271 USD per token. We propose that these funds are raised in WETH, resulting in a price of 0.00018 WETH per token, for a total fundraising amount of 17.63 WETH (at current prices).
The sale of tokens will occur over a 2-day period during which members of VitaDAO may bid as much money as they are willing to contribute and lock in VITA tokens. The value of each buyer’s bid can be up to the maximum of their VITA holdings locked in the sale contract. The more VITA a buyer locks for a 2-month vesting period, the more that buyer may bid during the sales period. This VITA locking mechanism is to prioritize allocation of VITA-0001 to the members of VitaDAO who have supported the original fundraising for the project.
If the sales goal of 31,271 USD is not met, then all funds will be returned to funders. If the sales goal is met or exceeded, then the final allocation of fraction tokens will be proportional to each bidder’s fraction of the total bids.
For example, if Alice bids 40,000 USD and Bob bids 20,000 USD, and Alice and Bob are the only funders, then Alice will receive twice the allocation as Bob (this also means that Alice locked twice as much VITA as Bob).
Any overflow is returned to bidders. For example, Alice and Bob together bid 60,000 USD, but the sale sought to raise 31,271 USD, so there is 28,279 USD in surplus. That surplus overflows and gets returned pro rata, so Alice gets back 19,153 USD and Bob gets back 9,576 USD. At the conclusion of the sale, participants will immediately be able to claim the surplus that overflows.
Sale participants receive vested VITA (vVITA) and vested VITA-0001 tokens (vVITA-0001), to ensure they can participate in governance while locked. After the two-month vesting period is over, sales participants will begin to be able to swap their vVITA for VITA and vVITA-0001 for VITA-0001 tokens, with the total amount locked for the full 2-month period.
When VitaDAO claims the proceeds from the sale, a Uniswap liquidity pool will be created using the full sales proceeds and 10% of the VITA-0001 tokens at the same price as the sale.
After the sale is completed, a liquidity pool will be created with another 10% of the total fraction tokens combined with 100% of the funds raised. The starting token price will be equal to the final price of the auction.
Therefore, if the 31,271 USD goal is met then the VITA-0001/WETH pool will be seeded with 31,271 USD matched with 10% of the VITA-0001 tokens (100,000) at a starting price of 0.31271 per Molecule.
Though immediately all funds raised will be leveraged for establishing liquidity, the ultimate intent is for these funds to go toward research and IP development. However, we want the community to have governance here once democratized directly to the community. There is some optionality as to how funds can be leveraged to develop the Newcastle work.
First, the funds can be used for decentralizing structure-activity-relationship (SAR) analysis. The Korolchuk lab has a computational biologist in-house, but we believe we can bring the strongest SAR talent from around the world to help determine promising compound scaffolds and design optimal candidates to take into medicinal chemistry optimization. For example, LabDAO has offered to give access to its large network of computational chemists and develop hackathons around analysis of the data being generated from the Korolchuk lab. Given the importance of the decisions made from a hit-to-lead perspective being made in the next few months, having independent consensus by many highly-trained computational chemists would be high-leverage capital that could be deployed with the funds raised.
In addition, given the breadth of compounds emerging as hits from the screen, not only will SAR analyses be absolutely crucial to down-selecting lead compounds, but so will medicinal chemistry. Experienced and talented medicinal chemists typically cost ~1k USD/day, and capital could be leveraged for medchem as well.
Another potential use of funds is for filing intellectual property. With the quantity of potential novel compounds coming out of this research, foundational substance of matter patent protection around the best compounds will clearly be essential to increasing the IP value. Contracting patent attorneys to file strong substance of matter and method of use patent applications around each of the (hopefully) many compounds coming from the screen will be high-leverage deployment of the funds.
In summary, in the short term, the funds from the fundraise will be leveraged for liquidity; however, once governance has been established, there are many routes for reallocating this capital from liquidity to IP generation. This should be a community decision that future IP-NFT fraction holders can get more data and context to help drive efficient decision-making.
The VITA-0001 tokens represent membership in an IP pool containing the Korolchuk IP-NFT and its attached IP and R&D data. IP pool membership enables fraction token holders to govern the joint development and experimental use of the IP and R&D data in the pool.
Holders of VITA-0001 tokens have information rights including the right to receive regular, non-confidential updates from the researchers and ask questions to the researcher, as agreed upon with the researcher, as well as obtain confidential information about the research after following appropriate protocols such as KYC/NDA. Fraction holders will have access to data rooms containing the IP and R&D data. Holders of VITA-0001 tokens will have information rights to non-confidential data rooms with the results provided by the researcher to the community to help with the decision making process, with proprietary information will be redacted to protect the integrity of the IP. This data room will remain open continuously and be the mechanism of providing non-confidential updates to fraction holders. Holders of VITA-0001 tokens may also have the opportunity to gain access to confidential data. This data will be highly confidential, thus requiring users to sign confidentiality agreements to safeguard the IP, but allow people to access and contribute to the research or make funding decisions based on this information if they choose.
Holders of VITA-0001 tokens have rights to govern issuance of licenses to use the underlying IP and R&D data attached to the IP-NFT. Control over the licensing function of the IP and R&D data is decentralized through token holder governance.
Holders of VITA-0001 tokens can only distribute proceeds from licensing or sale of the IP and R&D if they exercise their rights to do so through governance. Token holders must make the judgment in the future whether and how to distribute licensing or sale proceeds, such as by forming a legal entity prior to making such distribution.
The rights of token holders are governed by the VITA-0001 IP-NFT Fractional Association of Molecules (FAM) Membership Agreement, an adhesion contract holders agree to at points of sale, claim, and voting.
Given the current regulatory uncertainty in the US with respect to crypto and the aggressive recent actions taken by the SEC, we sought advice from two US law firms and a Swiss law firm, who all recommended to geoblock any buyers from the USA.
This is a brief overview of a potential fractionalization protocol, likely with many open questions from the community. Ultimately, the goal is to get fractional IP-NFT tokens into the hands of the community to drive projects forward and only release a fraction of the governance ownership into the market that allows for price discovery and future, larger, fundraising should it be needed and justified. Our timeline is ASAP, and our entire team at Molecule is hustling to enable this by beginning-mid June if approved by the VitaDAO community.
- Revisions Requested (Detail in Comments)