Contractor Leverage
Have to note here, “rushing” a transition isn’t a justification for doubling a fee. It simply suggests the prior arrangement was inappropriately structured and failed to account for “sad path” scenarios and protect TrueFi/ the funder. It is all worth nothing Wallfacer authored the proposal which presently places us in the unfortunate leverage situation. To simply proceed in the same manner seems folly?
I did note this multiple times, for example, in November 2023, here and here and others here. The point was disregarded, around both headcount, unwind planning, and operational risk calibration. Unfortunately, we now see why this matters.
I think generally the issue is if the DAO denies your funding, when does it expire? There needs to be a long enough window to ensure continuity of your operations, otherwise it turns into a weird leverage challenge. Happy to provide feedback and get something structured a bit better.
Compensation Calibration
As for the budget, let’s look at prior budgets:
- Previous engagement: At the time of voting, $1,354,000 over 6 months, or $226k/month.
- Rejected continuation: At the time of voting, $3,168,000 over 6 months, or $528k/month.
- This proposal: As of right now, $1,496,000 over 3 months, or $499k/month.
The compensation prior was disproportionate to the market rate for the services rendered and has simply scaled further with the bull market. There have been no disclosures on team size despite multiple requests, and absent this disclosure, the rate still continued to climb and more than doubled.
At the rate proposed, with an assumed team size of 6, the total comp per head count is is excess of 1 million dollars. We expect the team may actually be smaller. Regardless, since this is a somewhat opaque workforce, calibrating by headcount makes less sense, it matters based on the SOW, and what it is worth to the project. Then, what the project can get the work completed for on the open market. A premium for those with prior knowledge and a known quantity is reasonable. A premium of 300% seems to be less so.
One solution could be to disclose the team and their CV’s or an equivalent to understand what compensation is fair. The standard practice we have seen in DAOs is that contractors simply inflate headcount as we see above and claim they are full time (1.0 FTE ) to justify the spend. As we have already established, Wallfacer has used its funding to engage in independent initiatives they own, such a vaults.fyi, so any claim around FTE figures would need to disclose their other obligations and commitments to demonstrate their figures provably. This seems like something they would be unwilling to do, and hence, we return back to a defined statement of work.
A statement of work should be defined enough to enable agreement upon performance, and flexible enough to be dynamic as @ryan.rodenbaugh notes.
Current Ask
Monthly Comp: $499,583.24/month
Annual Comp: $5,994,998/year
Assumed Team Size: 6 FTE
Annual Comp / FTE: $999,000.00+
The proposal asks to pay 1mm a year per headcount, which is a principal L7 FAANG rate for 6 people. The most recent public disclosure listed 5 individual names as team members. Is the team at the level of 6 Google Directors or Principal Engineers? I have not yet seen evidence of this, and the structure (and absence of substance of the funding proposal) could suggest otherwise. Even at 10 FTE as claimed, $600,000.00 USD / FTE is frankly, absurd.
Wallfacer would do best to consider that when discussing with a legitimate counterparty who possess fiduciary duties, such a proposal( large sums of money, opaque SOW, no operational or counteparty risk calibration) is in effect, dead on arrival.
Moving Ahead.
If Wallfacer is retained for another engagement, the objective should be to de-leverage the current power imbalance. The easy means is to pay a majority of the fee post-perfomance (ie. only after successful hand-off of the promised transition tasks). Wallfacer is now sufficiently capitalized to float this reasonable risk.
References