Valuing your Squad
Members can give a value to the squad that reflects the assets the squad holds. Prior to an “equity changing” action, such as opening a funding round or paying out a member, it is highly recommended that squad valuations are up-to-date.
Squad valuations are a summation of the following: the total value of Ethereum and ERC20 tokens plus the manual valuation of NFTs. By default, these valuations are measured against ETH.
While ERC20 tokens and Ethereum are easier to estimate market value, NFTs will have to be manually valued by the squad. Typically, a squad will need to update their NFT valuations prior to each “equity changing” action.
Valuing your NFTs that are held in your portfolio accurately is important for many reasons:
- Squads may want to understand their NFT portfolio over time.
- In the case of raising new funds in a funding round, the Squad (and prospective new members) need to understand at which valuation the Squad is raising at (think of a venture capital model here)
- In the case of a payout, members need to understand how much ETH (or other tokens) they should be paid out in exchange for the equity % that they hold.
As a comparison, think of valuing compared a publicly traded stock (or liquid ERC-20 token like ETH) vs. valuing a Picasso painting. The publicly traded stock/token is continuously traded multiple thousands of times per minute, which makes understanding the real-time market price fairly easy. However, the Picasso painting will only have very few sale events where the market price is determined. Market prices between sale events are therefore much more likely to be outdated, and estimates may be inaccurate compared to what current sale prices are.
Individual NFTs, even within a specific collection, are typically more unique and less liquid than ERC-20s and therefore require a more nuanced valuation process. They may have specific traits, some of which could be rare traits in that specific collection. Rarity always coincides with fewer items on the market, which will mean that there will generally be fewer sale processes. Determining a continuously updating, near-real-time market price is not always possible.
While Prysm suggest market prices for each NFTs based on floor prices, last purchase price, latest valuation (and more), we strongly recommend to manually value each NFT, particularly grails. As the owner(s) of the NFT, your Squad will likely have the best understand of what this NFT is currently worth today.
Your NFT portfolio will always be the sum of the value of all individual NFTs in your portfolio.
Prysm requires a review of the NFT valuation upon every event that coincides with changes in absolute equity in the Squad. In practice, this means when you want to raise new funds through a new funding round, or want to pay out a member in exchange for their equity %.
You can also re-value your NFT portfolio in a separate proposal:
- 1.From the Squad dashboard, go to the “Proposals” tab
- 2.Press the “Add proposal” button
- 3.Press the “Update NFT valuation” button
- 4.The NFT(s) will be pre-populated by latest collection floor price. If that is not available, it will fall back to the latest valuation price, followed by the purchase price. Values can be modified to reflect the squad’s perceived value of the NFT
- 5.Once valuations are complete press “Next,” verify the updated values, then press “Update NFT valuation” button