The Future of Finance is Real-Time Reporting

Today, we’re excited to announce that Multicoin Capital invested in Dune Analytics’ $8M Series A led by our friends at Union Square Ventures. Redpoint Ventures and Dragonfly Capital also participated.

As avid users of Dune, we revel in the opportunity to double down in this fundraise after participating in Dune’s seed round last year. It’s not often that we have the opportunity to invest in something that we use everyday.

The Power of Dune

Dune is an all-in-one destination to query, visualize, share, and explore smart contract data from public blockchains. They have decoded Ethereum smart contract data in such a way that makes it possible to do powerful visualizations of real time data with simple SQL queries. Users can visualize query results in dynamic charts that update in real time and create comprehensive dashboards that showcase KPIs for any crypto protocol. All charts are configurable, modular, and can be embedded in 3rd party services around the web.

Dune is the de facto place for everyone in the crypto community—hedge funds, venture funds, developers, researchers, protocol teams, and CeFi businesses—to create and share usage charts and dashboards (primarily for DeFi and NFT smart contract systems). There are now over 40,000 analyses published on Dune that anyone can view, remix, and fork (will discuss more on remixing and forking below).

We read third-party research generated by sell-side analysts, news organizations, developers, venture funds, and other market participants on a daily basis. If the research is about DeFi or NFTs and includes charts, there’s a greater than 50% probability that Dune is either the data source or a Dune chart is directly embedded in the research. The product is universally beloved in the crypto space.

It is so widely used that it is now becoming part of the fabric of open source collaboration. It's also the gold standard data tool for treasury reporting. Here is an excellent example courtesy of the Llama team who created a Dune dashboard to monitor Aave treasury activity:

Source: Aave Treasury Analytics by Llama - Dune Analytics

Since our initial investment in September 2020, the Dune team has shipped new products at a rapid pace. In just the last 12 months they’ve launched:

1. Address Labels — e.g. Address A may be tagged as “large DEX trader, Compound core dev team, and a Uniswap whale”
2. Project Dashboards — a curated list of dashboards for specific projects
3. Several Chain Integrations — xDai, Polygon, and Optimism are now live
4. Dune V2 — completely upgraded the query editor and execution engine with more performant and usable versions. This ensures 1) reliable query execution and scalable setup (the previous app simply couldn’t handle the demand), 2) a unified nice UI across the whole Dune experience, and 3) an improved setup/stack for rapid iteration going forward

Additionally, the company has grown from just 2 cofounders to a team of 15, and they are still actively hiring.

Remixable, Composable Analytics

The traditional financial market data provider industry is a well-established sector: it generated $33B of revenue in 2019. As a result, a surge of teams have rushed to build out crypto data platforms aimed at various segments of the market, including but not limited to: 1) compliance teams at CeFi exchanges, 2) institutional investors, 3) retail traders, 4) developers.

Many of the major crypto data providers share the same commonality: they are closed platforms. Namely, they generate preconfigured metrics and data packages that they then sell to investors. In doing so, they are implicitly telling investors and researchers which metrics are the most important. This data often sits behind extremely costly paywalls, and is reserved for more sophisticated market participants who have large amounts of capital and can afford to pay for it.

Dune takes the opposite approach: it’s a user-driven community. The magic of Dune is that the product itself abstracts all the underlying technical complexity to make it trivial for anyone—even people just starting to learn SQL—to configure complex visualizations. It also enables other users to build on those visualizations and remix them. The Dune team doesn’t tell investors or developers which metrics they should care about. Rather, they provide those researchers the tools they need to build the visualizations and queries they want.

Dune benefits from a self-reinforcing network effect built on community engagement: 1) the community creates queries; 2) from there, there is a rich library of queries to fork; 3) the community gets larger through attention from sharing embedded graphs; and 4) new users discover Dune.

The Future of Financial Reporting & Market-Driven Insights

We believe that one of the most powerful applications of crypto is DeFi. The foundation of all finance is liquidity and trading. By making financial contracts non-custodial, permissionless, and censorship resistant on blockchains for billions of people, DeFi can provide the financial rails to dramatically improve financial inclusion around the world, while at the same time reducing administrative costs and fees for existing market participants. This is the premise behind our Open Finance mega thesis.

Gary Gensler, Chairman of the SEC, recently gave a talk in which he discussed investor protection and transparency and how it applies to crypto and DeFi. One of the foundational pillars of being a public company is providing transparency about the nature of the business and its financials. The costs associated with this transparency and reporting are burdensome (hence why companies are staying private longer). The SEC estimates that public companies average $1.5M per year of spend on compliance costs.

Furthermore, transparency in financial markets generally happens once every 90 days at a time, with a 2-3 week lag. There is an entire industry of sell-side analysts from different organizations who tweak highly detailed financial models in an attempt to better forecast future earnings. These models underpin their buy and sell recommendations, which in turn influence where investors allocate capital.

Large funds have since turned to alternative data sources to get more insight into companies over that 90-day period. This spans satellite data of parking lots, in-store visits / channel checks, web traffic, credit card data, and more. Access to that information is limited to those who can find and afford it. Lots can happen over a 90-day span, both good and bad, but there is limited visibility into the company over that time period.

What if instead of having to wait three months to understand how a company is performing, analysts could follow along in real time? Instead of looking for alternative data sources, analysts can have free, real-time access to management dashboards that track revenue, users, and other KPIs.

Let’s use MakerDAO as an example. MakerDAO is a decentralized credit facility built on Ethereum that enables users to 1) trustlessly take out loans using crypto as collateral, 2) instantly add leverage to their portfolios, and 3) produce a stable cryptoasset called Dai. Using Dune, anyone with an internet connection can track MakerDAO user activity, revenues, loans outstanding, the facility’s balance sheet, how Dai is being used, and the system’s global collateralization ratio in real time, 24/7. This is the future.

Source: @SebVentures / MakerDAO - Dashboard on Dune Analytics

The Road Ahead

As Dune first wrote, “The Revolution Will Not Be Reported Quarterly.” Open finance and blockchain technology will undoubtedly leave an enduring impact on the way financial reporting happens. Once users and analysts get a taste of 24/7 real-time financial statements, they will never go back.

Dune is the only crypto-native data company. They build everything in an open, composable, accessible, social, and community-centric way. They are the dominant data visualization tool for both DeFi and NFT analytics, and have a tremendous head start on the market as they rapidly adopt new chains and build more powerful analytics products.

We believe the future of finance will be driven by transparent, real-time insights, and Dune is leading that movement.

If you’re interested in building this future, the Dune team is aggressively hiring. You can apply here.