Importance Of Creating Impact
Overview of the importance of funding initiatives creating impact for treasury systems
For treasury systems to become sustainable over the long term the outcomes generated by any funded initiatives will need to create enough impact. Creating enough impact will mean creating a positive feedback loop for growing an ecosystem if funding initiatives collectively create a positive return on investment.
Example areas that could create impact
Creating impact could come in many forms for web 3 ecosystems. Initiatives could include:
- Increasing the number of community members, awareness or usage of the blockchain or applications through outreach and events.
- Developing applications that enable new use cases and bring new users to the ecosystem.
- Open source software that is adopted by other projects which improves the developer ecosystem by saving projects time and effort.
- Resources and education that increases the amount of understanding or trust in different processes and solutions across an ecosystem.
- Research and analysis that identifies opportunities for improvement in the blockchain, applications or processes currently being used.
- And numerous others!
Potential outcomes from funded initiatives
The following are the different potential outcomes that could occur after funding an initiative. These are ranked based on outcome preference for the ecosystem:
- 1.Completed as planned + creates impact🟢
- 2.Completed but pivoted + creates impact🟢
- 3.Uncompleted + funding returned to treasury🔵
- 4.Completed as planned + creates limited or no impact🔴
- 5.Completed but pivoted + created limited or no impact🔴
- 6.Uncompleted or abandoned proposal🔴
- Positive outcome🟢
- Neutral outcome🔵
- Negative outcome🔴
The main outcomes which are desirable to achieve are when initiatives generate an impactful outcome. Whether the initiative needs to pivot what they execute or not is not the important factor. Instead it is whether impact is created from that initiative that results in a positive return on investment for the ecosystem.
The next potential outcomes that are worth some consideration is the comparison between the uncompleted initiatives where the funding is returned against completed initiatives that generate limited to no impact. The benefit of the uncompleted outcome is that no funding is being wasted on the initiative. That funding can then be reused in a subsequent treasury distribution process meaning that same capital has a chance to be distributed towards an impactful initiative. On the other hand this also creates stagnation in funding allocation so this outcome is not desirable and should be avoided where possible. Whether an initiative creates an impactful outcome or not is also not a simple yes or no answer. Instead the amount of impact generated will sit somewhere along a range of outcomes. At some point along that range an initiative will have produced enough impact for it to have been a better outcome for that proposal to be completed over the other option of the funding not being used by the initiative and it being returned to the treasury. A key point from this is that uncompleted initiatives are not a main problem of concern for the sustainability of a treasury. Instead it is the whether the capital for that initiative was actually used or not and if it has been used whether it actually created any impact.
Importance of creating impact
If funded initiatives do not make enough impact then the investment into these initiatives is not producing an effective enough return on investment for the treasury. Not spending sufficient time on trying to increase the overall impact of the funded initiatives could lead to a stagnation in growth and adoption of an ecosystem. Other ecosystems that are more effective at selecting and supporting impactful initiatives with there own treasuries capital will create an opportunity to grow and improve their ecosystems at a faster rate than other ecosystems. For web 3 ecosystems to reach global adoption and be a preferred alternative to the existing governing structures used in nation states today there will be a need to demonstrate that these new approaches to treasury management are more effective than what is currently used and widely adopted. The better that different treasury systems can create impact in these ecosystem the more they will be able to compete with any existing approaches.
Measuring funding initiative impact
Understanding the aggregated amount of impact created by the completed funding initiatives is important for determining whether a treasury system is performing effectively or not. Due to this it will be important to try and establish how the impact of each funded initiative can be measured. Finding ways to better measure the impact of different initiatives will help with increasing the feedback loop of determining where funding should be allocated in the future to create more impact. The better an ecosystem is able to determine whether funding initiatives have created a positive impact or not the more they will be able to easily direct funding to areas that are more effective than others.
Allowing funding initiatives to pivot deliverables or to return funds
The importance of creating impact results in treasury systems benefiting from considering how funding initiatives are able to pivot what they are executing when an opportunity to create more impact presents itself or when an initiative wants to prevent outcomes where they make little to no impact. Treasury systems also benefit from determining how to allow funding initiatives to return their funds when those initiatives determine that the outcomes from execution would likely not create sufficient impact.