M&A for Arbitrum DAO

Overview

This proposal outlines the successful establishment of an M&A Unit within Arbitrum DAO, aimed at driving strategic growth through non-organic acquisitions.

One of the key objectives of the M&A Unit for Arbitrum was to act as a growth engine for the Arbitrum ecosystem, helping the DAO expand through strategic acquisition opportunities. This approach has cemented Arbitrum's position as the leading Layer 2 solution by utilizing its treasury in a highly productive manner. Establishing this M&A unit has set a precedent in the crypto space, serving as a model for other DAOs exploring similar growth strategies.

Following the conclusion of the Pilot Phase, we conducted a comprehensive evaluation over the past eight weeks, including in-depth analysis from the Areta team and consultations with key stakeholders across the DAO, the foundation, and OCL. The findings confirmed our initial thesis that M&A is a critical strategic lever for Arbitrum DAO's long-term success. However, the pilot also revealed that the DAO is not yet positioned to approve large capital outlays for an M&A fund.

The Pilot Phase has produced several key outcomes:

• M&A as a Growth Lever: M&A remains a key enabler for Arbitrum DAO’s growth, particularly in filling operational gaps and building out the tech roadmap. The exploration showed significant value upside through strategic acquisitions that align with the DAO's needs.
• Timing and Readiness: While the opportunity for M&A is evident, fundamental building blocks need to be addressed before large-scale M&A initiatives can proceed. The current state of the treasury and governance structures suggests that deferring large capital allocation is prudent.

In response to these insights, the path forward focuses on two key initiatives:

1. DAO Development Function (Short-term): This initiative will address operational gaps by providing recommendations on hiring, partnering, or acquiring key functions to build the DAO’s infrastructure.
2. Buy-Side M&A (Medium-term): Once the foundation is strengthened, the M&A unit will focus on acquiring strategic tech assets to advance Arbitrum's tech roadmap in collaboration with OCL and key stakeholders.

Our Work

Areta governance specializes in the development of capital allocation strategies, structuring and operating innovative grant programs, and the design of robust and effective contributor programs. Our exploration into M&A for Arbitrum DAO was a first-of-its-kind deep dive into the feasibility, considerations, and benefits of pursuing inorganic growth strategies commonplace in traditional contexts for DAOs.

About Arbitrum

Arbitrum is one of the leading venues of Ethereum's scalability, commanding a substantial 40% of the Layer 2 market share. With 1.13 million active wallets, $14.09 billion in total value locked (TVL), and over 1.25 billion total transactions, Arbitrum is one of the leading venues driving Ethereum's scalability. Built as an Optimistic Rollup, Arbitrum reduces gas fees and increases transaction speed while maintaining Ethereum's security and decentralization. Additionally, Arbitrum plays host to many top DeFi protocols and boasts an ecosystem of orbit chains, all building on top of the Arbitrum tech stack, further expanding its influence in the Layer 2 space.