Due-Diligence
Objective and Approach:
Due diligence goals include a) selecting high-quality projects, b) excluding unethical or illegitimate projects, and c) affirming that tokenomics are solid, sustainable, fair, and non-predatory. Eclipse has a comprehensive process to ensure projects align with these standards. Looking ahead, plans are underway to move towards community-led due diligence, starting internally, followed by community voting, which may take time to fully implement.
What Does Due Diligence Consider?
Below are the main considerations of our due diligence process:
Go-To-Market (GTM) Strategy: Ensuring a clear marketing and user acquisition strategy with real substance and thought behind it. The GTM strategy should be much more comprehensive than mere KOLs or Twitter spaces.
Market Research and USPs: Evaluation of market position and competitor profiles, unique selling propositions (USPs), project advantages and disadvantages, potential risks, and narrative positioning.
Business Model and Tokenomics: Assessment of the soundness of the business model, token utility, and tokenomics, including the necessity and functionality of a token. This includes the token's emissions schedule, vesting terms, liquidity allocations, and so forth. The token should have a purpose behind it and be considered sustainable (i.e. not a short-term pump).
MVP: Verification that a minimum viable product (MVP) has already been built.
Strategic Partnerships: Applicant's support from major strategic partners such as ecosystem projects, institutional backers, foundations, accelerators, grants, and so forth.
Roadmap: Evaluation of clear milestones and goal-setting practices, scalability ambitions, and realism.
Legal Structure and Focus: Scrutiny of legal entity structures, legal processes, and the presence of a legal opinion letter.
Launch Valuation and Float Analysis: This involves assessing launch economics, ensuring alignment with valuation, comparing multiples from prior rounds, and strategically mapping the float range to meet market supply needs. The float refers to the number of tokens available for trading post-launch.
Stages of Due Diligence:
In the initial process for vetting, projects will undergo multiple stages of internal due diligence by the core team before being approved to launch their token through Eclipse Fi. Public research, reports and details will be posted about the projects so the community can research and look at specific metrics and details regarding the project. In our second stage, we will move towards a hybrid model where the vetting will begin internally, followed by a community governance stage voting on whether the specific project should be whitelisted to launch. This hybrid process will look something like this:
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Community Due Diligence:
In the future, Eclipse Fi is looking to transition to a community-based vetting model. This shift, though challenging to execute, is currently in the proposal stage, with ongoing exploration of the most effective strategies. One proposed idea involves splitting the launch platform into two distinct sections: 'Flagship' and 'Frontier,' each tailored to accommodate different launch sizes and due-diligence requirements.
The 'Flagship' section would be geared towards a select number of larger launches, subject to rigorous vetting procedures. Meanwhile, the 'Frontier' section would be designed to handle a higher volume of smaller projects, employing a community-based approach to vetting. Even within the 'Frontier,' there would still be minimum thresholds in place to safeguard against fraudulent activities and maintain project quality standards.
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