NEM Foundation update – a response to questions and anticipated questions
Dear community,
To ensure that we continue to promote transparency; below is an update on questions and anticipated question from the media that we would like to publish to provide clarity to the community.
First appeared on the NEM forums, join the discussion!
Reference: https://forum.nem.io/t/nem-foundation-message-to-the-community
Response to CoinDesk article:
Could you clarify on the submission of the funding request to the NEM community fund for 160 million tokens (worth roughly $7.5 million) which were to be ‘money used to rescue foundation’?
First, the request is not to the NEM community fund, there are dedicated NEM funds to support the contributors to the NEM ecosystem. This request will be made as a proposal to the community soon. It’s important to remember that the NEM Foundation operates as a separate entity and is one of many ecosystem contributors to the NEM open-source project. Therefore the NEM Foundation is not NEM. The NEM open source project remains strong and thriving and Catapult development is unaffected by the financial situation of the NEM Foundation.
Is it noted that layoffs are planned across its entire 150-person staff? Could you comment further on that?
The exact amount is not finalised but NEM Foundation is doing its best to ensure that existing team members transition to the new structure that is proposed. It is noted that there will be a significant majority of the staff that will have to be made redundant due to the budget cuts and change of focus to a product-based organization. Our HR team is working with the leadership teams to speak to all team members affected. Words cannot describe the difficult decisions we had to make to come to this point. We are only one month old as the new council, and to face the facts of where we stand is painful. We cannot apologize for the past decisions before we came into leadership, but we want to let you know that there is hope for the future.
How many people are you letting go?
We would like to emphasize that the NEM Foundation is not firing any staff. Due to budget constraints, there are layoffs. In addition, there is a complete structure reorganization underway. Those that have been laid off will be given consideration for current openings under the new structure if funding is awarded.
Could you elaborate further on the quote, “basically we realized we had a month to operate, due to the mismanagement of the previous governance council.”
During the transition from the 2018 Council to the 2019 Council, operating funds were temporarily inaccessible until the new leadership took office on January 1, 2019. This was due to transition registration problems with our bank. All operational funds were safe and untouched during this transition. When the 2019 Council took office, a financial audit was done and showed the new leadership had low operational funds and therefore could not sustain the burn rate of the previous 2018 operations. Therefore, a new Foundation restructure proposal was created and operations and staff were suspended until additional funding was secured.
It was mentioned in the article that the foundation’s 202 registered members will be asked to vote on the funding request in February, could you elaborate more on this?
This information is not correct. The registered members may not be voting on the funding request. The decision, process and voting on the approval of the funding request will be disclosed in due time as details are still being finalised.
Is it true that the number of layoffs will be determined by how much funding the community approves as quoted?
No. Layoffs are being made regardless of the funding approval due to the budget restrictions at the present moment and also the proposal to restructure the Foundation to be product-focused. The funding request is still subject to multiple factors and the council has made the decision to conduct the layoffs regardless if the funding has been approved or not.
If the funding request is approved, will there be the hiring of new team members?
Yes, priority will be given to past existing team member who had been laid off according to skillsets available and required first.
Is NEM Foundation really bankrupt?
No, the current Foundation is not bankrupt. We are running low on XEM and FIAT funds. The 2019 Foundation is currently preparing a plan to achieve funding for the rest of the fiscal year and the restructure was place as a cost-saving measure.
Have you told your staff?
Yes, communications have been to team members for NEM Foundation. Our HR team is also working the leadership to speak to all team members. There has been a community update here – https://forum.nem.io/t/nem-foundation-message-to-the-community/
What if you don’t get the funding?
NEM Foundation will have to stretch its budget and will look for other sources of funding to remain sustainable. We believe that NEM is owned by the community and we support the community’s decision regarding how future funds are spent.
What is Catapult?
Catapult is the NEM blockchain technology update that is slated to launch in 2019 and it is being developer by the core developers of NEM. The development of Catapult is not affected by the financial situation of the NEM Foundation.
Why do you think you can do this differently?
A lot of thought and reflection was put forth reviewing the 2018 Foundation’s failures and successes as well as understanding the general landscape of how other similar successful organizations are structured. We also concluded an audit of 2018 and based our findings, we made the decision not to move forward with the same organizational structure as 2018. We believe that the new foundation structure will be smaller but more effective and community-focused.
How can people interested in being part of the new structure do so?
There will be due process through the Foundation official communications channels on opportunities but this will be contingent on approval for funding.
80 million XEM was spent between Dec 2017 and Jan 2019, primarily on marketing – especially when Catapult was yet to launch, can you comment further on that? Why did the past management adopt this strategy?
The foundation’s original charter was to be the trustee of and make decisions for the public chain and spread its adoption. Awareness was a secondary goal of the foundation because it should increase naturally as a result of (successful) adoption. Therefore, in 2018 funds were primarily spent on marketing activities and training.
Since the new leadership came on 1 January 2019, the new strategic focus is to be product-focused and revenue-driven, changing the way NEM.io Foundation operates in its entirety. Decisions made by the past management had brought in value in different ways and the new structure would have to result lays offs and a focus on priority areas, one being the launch and commercialization of Catapult.
Is it true on claims by the anonymous developer that the past President ‘faltered when he used his visibility at the foundation to promote “sketchy” initial coin offerings such as Ecobit and ProximaX?
We can’t speak on behalf of the anonymous source but we can say that Lon Wong was a co-founder and the first president of the NEM Foundation which started in early 2017, two years after the launch of NEM. Lon left the NEM Foundation in April of 2018. Since that time he has been focusing on a project called ProximaX, in which is he the President. The NEM Foundation wishes Lon and ProximaX success in the future.
There was a comment that “there is still a great deal of work to be done in order to encourage developers to use the blockchain”. Can you comment on that?
Yes, a great deal of work will be required as NEM Foundation has a focus on the launch of Catapult. The new structure includes the creation of positions like a Chief Technology Officer and Chief Product Officer to ensure that developers are attracted to use the NEM blockchain. These roles are by other C-level positions like business development and revenue. Further updates can be found here – https://forum.nem.io/t/nem-foundation-message-to-the-community
There was a comment that there will be a “much more disciplined roadmap for 2019 and that teams are given specific budgets and required to perform more open-source documentation of their progress making tools for the NEM ecosystem”, can you comment further on that?
Yes, this is in line with the structural changes which will be implemented should the funding request be approved.
There was a comment on plans to “monetize the foundation’s activities in 2019, including enterprise training and affiliate marketing”, how do you plan to operationalise this?
The new structure will have a Chief Revenue Office who will be tasked to focus on monetization activities for NEM Foundation. In the meantime, we have been researching sustainability models and also pivoted all resources and teams to be revenue driven and product focused.
Other questions or anticipated questions (some questions may be similar to the above questions)
What happened to the former leader?
Lon Wong was a co-founder and the first president of the NEM Foundation which started in early 2017, two years after the launch of NEM. Lon left the NEM Foundation in April of 2018. Since that time he has been focusing on a project called ProximaX, in which is he the President. The NEM Foundation wishes Lon and ProximaX success in the future.
Is this simply a matter of philosophy? Reading this, it seems like self-promotion was the focus for the former team
The 2017-18 NEM Foundation was originally created to help promote and educate the community about the NEM technology and be the trustee to help make decisions for the public chain. The 2019 Foundation after consideration from the community and ecosystem partners has decided to move from an organization model where regional heads market NEM, to a more traditional centralized business model that focuses around the product development and service. We want to be clear that the NEM Foundation operates as a separate entity and is one of many ecosystem contributors to the NEM open-source project. Therefore the NEM Foundation is not NEM. The NEM open source project remains strong and thriving.
The newly elected 2019 leadership team is optimistic about the future of the NEM Foundation and it’s why the restructure was important.
Are there any changes in alliances?
The newly elected 2019 leadership team is optimistic about the future of the NEM Foundation and it is why the 2019 restructure was important. Support for partnerships is temporarily suspended until additional funding is secured but there has not been any specific changes to in alliances.
Is there any change in markets you’re approaching?
The previous strategy for marketing was a mixed bag approach with different regional leaders choosing different methods for adoption and awareness of the NEM blockchain technology. This naturally led to different marketing visions, execution, and policies. Upon securing additional funding, the 2019 Foundation plans to hire an experienced Chief Marketing Officer that will design and implement a unified global strategy for marketing. As result, we expect to see stronger alignment and support globally for the future NEM public chain marketing.
When you say XEM was frozen, what does that mean?
During the transition from the 2018 Council to the 2019 Council, operating funds were temporarily inaccessible until the new leadership took office on January 1, 2019. This was due to transition registration problems with our bank. All operational funds were safe and untouched during this transition. When the 2019 Council took office, a financial audit was done and showed the new leadership had low operational funds and therefore could not sustain the burn rate of the previous 2018 operations. Therefore, a new Foundation restructure proposal was created and operations and staff were suspended until additional funding was secured.
Can you clarify what you mean by “the new council discovered many XEM funds were frozen.” How much was frozen and is this now spendable? How long would that last with a 60% reduced burn rate.
During the transition from the 2018 Council to the 2019 Council, operating funds were temporarily inaccessible until the new leadership took office on January 1, 2019. This was due to transition registration problems with our bank. All operational funds were safe and untouched during this transition. When the 2019 Council took office, a financial audit was done and showed the new leadership had low operational funds and therefore could not sustain the burn rate of the previous 2018 operations. Therefore, a new Foundation restructure proposal was created and operations and staff were suspended until additional funding was secured.
What has been the community response to helping with the restructuring funding?
The full report of the restructure and funds being requested hasn’t been given to the community yet, but is in its final stages of preparation and will be shared soon. Up until this point, the community’s response has been generally positive. A new Council was elected on the promise of change and so the community is welcoming the restructure.
Were people pinpointed and fired?
Nobody was fired, there are layoffs due to budget constraints. A cheaper, leaner and completely new organizational structure was created that moved the NEM Foundation away from a model with regional heads that were making decisions and programs on a regional level, to a global product oriented model with a CTO, CFO, CMO, CPO, COO, ect., making decisions for each area of competency. Those employees that were laid off are being reviewed to see how they can fit into the new product-focused foundation.
On the positive side, could you discuss the next milestone? Catapult?
We want to be clear that the NEM Foundation operates as a separate entity and is one of many ecosystem contributors to the NEM open-source project. Therefore the NEM Foundation is not NEM. The NEM open source project remains strong and thriving.
The newly elected 2019 leadership team is optimistic about the future of the NEM Foundation and it’s why the restructure was important. There is a new laser-focus on our mission-critical goals and as a result we are positioned to remain an industry leader and support through this ‘Crypto Winter.’
The upcoming launch of Catapult on the public chain will revolutionize blockchain’s future, and we are grateful for the community’s support in the next steps of this journey as the NEM Foundation pivots to better support the commercialization of Catapult.
Three things we expect to see in 2019:
1.) Expect to see more enterprise adoption utilizing Catapult.
2.) Expect to see more public and private chain transactions when Catapult launches.
3.) Expect to see stronger leadership, solid governance and more service to the community, partners and the world as we hope for a brighter future.
