ghothique

How did we decide to build it?

The Angel Investing and fundraising process is one of the startup tasks that always lays on the founders’ shoulders and there’s rarely a dedicated person to maintain the Finances tasks.

We got inspired with the concept of Mirror tables described by Balaji – https://balajis.com/p/mirrortable.

This market niche is shared with the centralized tools like Carta, Clerky, AngelList but also with newly emerged web3 competitors (none in production).

Problem

Angel investing has changed. Tools have not.

The landscape is:

10X investors. There’s a surge in the number of investors per round. Party rounds are now standard. 10X startups. There’s a rise in the number of high quality startups. We see amazing people every week. 10X Increased complexity. Existing tools like Carta do not meet the standards of crypto – do not support SAFT agreements or token investments. 10X jurisdictions. And there’s a huge expansion in the number of jurisdictions, now that places like India, Nigeria, and Latin America are coming up in a big way.

Solution

Mirror on-chain cap tables that allow to track the cap table on-chain, issue equity in a form of RWA digital assets and invest with stablecoins.

Cap tables that are mirrored on-chain allow for easy and transparent reporting and funds management. This does not necessarily exclude usage of the off-chain tools like Carta, AngelList, or Clerky – but opens a new simple way for the founders to keep everyone on the same page.

The flow is streamlines via web3:

Send GHO from investor’s ENS -> to project’s ENS - > receive digital assets representing a share to the investor’s ENS -> pull the data from on-chain to display in a user-friendly manner for both the founder and the investor.

The tool that we built is an on-chain cap table management system that includes the following components:

GHO ERC-4626 Vaults to create an on-chain cap table and accept investments On-chain equity issuance through making a funds deposit and transferring the RWA digital assets representing a share Multisig for the funds withdrawal for project needs (arbitrary transactions) Ability to exit for the investors through burning owned shares and receiving the funds (and profits according to the vault treasury) amount

Why GHO?

Stablecoins is the most popular investment currency type as they do not have the level of volatility associated with other coins like Ethereum or Bitcoin.

We do not insist on the point that there should be only one stablecoin that is acceptable for the investments. However, for the sake of our PoC we use GHO and Vaults as a perfect example for Fundraising the system.

Also, issuing digital assets that represent shares and gathering everything into 1 vault where we have actors with different roles perfectly fits into the GHO Vaults concept.

While Aave opens great yield opportunities for unutilized assets in the vault through swap/stake.

Opportunity

From Balaji's article: “Why is it important to scale the backend of angel investing?

Because it’s important for the decentralization of wealth creation. Why do people do $100M rounds in US-backed tech companies? Part of the reason is that it’s operationally hard to do 10,000 $10k investments in founders around the world while remaining legally compliant. 500 Startups and YC and AngelList have helped with this, but we can do far more if we go on-chain. The seeming unsexiness of automating the backend via mirrortables is key to helping the ascending world rise.”

By building a tool that creates a mirror cap table on-chain we proceed with the first step of the industry disruption and transformation: get acquainted with a new technology and incorporate it as a secondary one. Therefore, this will open an opportunity to shift the perception of mirror tables as secondary – to primary.

Our PoC

Our PoC available at https://ghothique.xyz right now includes all the 4 main components described above.

By implementing our GhoFactory.sol and GhoVault.sol we cover all the main Jobs-To-Be-Done. 2 parties – founders and investors are participating in the fundraising process facilitated by the smart contracts.

Next Steps

We see a lot of great features that would improve the mirror table concept implementation and onboard more different users (early and later stage startups, individual and institutional investments, etc).

Of course, one of the main next steps that we see is marketing promotion and shifting the perception of cap tables. Still a lot of founders use Excel spreadsheets to manage the equity, so educating the target audience and propagating a new approach would be a crucial step.

Therefore

Educating the users about new approach of mirror tables Earning yield on the projects unutilized funds via staking on Aave Integrating the ENS KYC management Developing an opportunity of fiat investments mirroring and cap table update Developing a complete Investor’s Portal to manage the funds, invite admins and sell shares

Would be some of the numerous improvements that fit into the project’s idea.

The project has 2 main contracts:

GHOtiqueFactory.sol creates minimal, configurable clones of the Ghotique vaults. This Factory lets us choose the name and symbol of the ERC4626 shares token, as well as the initial set of authorized vault signers, minimum number of confirmations and minimum initial investment. To avoid inflation attacks on recently created and empty Vaults, the original Founder needs to transfer GHO to the Vault upon creation

Ghotique.sol is an ERC4626 vault and a Multisig wallet that serves as both the cap table registry (through the emission of Vaut shares) and as Company Treasury with its Multisig Functionality. These can be considered private Vaults, as only allowed-listed Investors can use either the deposit() or mint() functions. Any of the signers can include or excuse investors from the list, without passing through the Multisig process, for agility.

Users (whitelisted investors) can invest using the deposit() function. They will get shares (another ERC20 token) back in an exchange rate of 1-1 to their original investment. The value of those shares fluctuate according to the amount of GHO tokens inside the vault.

Users can get their investment and profits back with the redeem() function. They will burn their Vault shares and get back their corresponding value in GHO according to the amount of GHO in the vault.

Eventually, if an investor wants to take profits, his share of investment will decrease if he redeems shares. This is one use case in the traditional finance world. However, there is another use case where the payments of dividends do not dilute any of the existing investors. Given that these Vault also include a Multisig, a potential solution is to deploy a Payment Splitter contract and send the assets to be distributed among the investors there (work for the future).

Only the whitelisted investors can invest in the project. Investors are whitelisted through the smart contract – when creating a form for the equity issuance, a founder adds a specific wallet address of the investor that is eligible to invest the funds.

Only the Founders or other authorized signers can execute transactions over the vault's assets, after getting past the minimum threshold of approvals. The value of the shares decrease as the resources are utilized so even if they are immediately redeemable it is not advisable to do so until the company returns the generated profits or cashflow to the vault.

Arbitrary transaction execution has its risks by definition. However, we consider that this is no different than what happens in traditional Angel investing, with the difference that in this case, all transactions are transparent and the responsible signers are identified.

What is the workflow?

The Original Founder calls approve() on the GHO token to authorize the GHOtiqueFactory.sol to move minimalInvestmentAmount of assets on its behalf.

The Original Founder creates the Ghothique Vault through the factory. The founder will need to provide details to configure the Vault:

Name of the company Ticker Initial multisig signers Initial number of multisig confirmations Initial investment

Initial investment will be transferred to the newly created vault in the same transaction. This is in order to avoid inflation attacks so the Founder wallet will need to hold the needed amount of GHO tokens.

The other founders need to use approve() on the Ghothique vault (NOT the GHOtiqueFactory.sol)

The founders can issue a link for the equity form where they state the amount, round, investor’s name, shares amount and agreement type. The form information is stored in the link besides the investor’s wallet. To ensure that the form is secure and no malicious actors can substitute the data and receive the shares, only the vault can receive the investment and only the investor’s wallet address (whitelisted in the smart contract) is able to send funds.

The founders use deposit() to transfer assets to the vault and get shares back.

Whenever an investor wants to burn his shares and get GHO back, they can use the redeem() function.

To get full examples on how to use these functions and their parameters, please look into test/Ghotique.t.sol.