Science & Technology

Jesse Walden: Fundraising and Deal Structure

Published

6 years ago

June 24, 2020

former a16z partner and Mediachain cofounder Jesse Walden discusses “Fundraising and Deal Structure” for crypto startups. During early product development, crypto startups can raise traditional venture capital through equity, which allows for the most alignment between founders and investors. Then, unlike a traditional startup, a crypto startup can invite its user base to participate in ownership and operation via the disbursement of tokens, once the core founding team has found product-market fit and established a viable network. This aligns incentives among the network, its users, the core team, and venture investors. Issuing tokens dilutes the stakes of the core team and early investors, but this is a desirable outcome because incentivizing more participants increases the chances that a network will grow. This leads to a larger pie overall for investors to share.

Walden also discusses Network Monetary Policy, citing Bitcoin, with its guaranteed limit of 21 million tokens, as having a fixed, deflationary supply policy. Other networks may be inflationary, with no ceiling on token amount, thereby perpetually diluting founders and early investors. A perpetually dilutive system can nonetheless be productive for token holders due to staking, or the process of holders contributing to the operation of the network, which pays off in newly minted tokens for stakers and the retention of their ownership stakes.

Andreessen Horowitz’s Crypto Startup School brought together 45 participants from around the U.S. and overseas in a seven-week course to learn how to build crypto companies. Andreessen Horowitz is partnering with TechCrunch to release the online version of the course over the next few weeks.

Find more Crypto Startup School videos plus additional reading and info:

Up Next

New Apple Watch features coming in WatchOS 7

Don't Miss

Brian Brooks: Token Securities Framework and Launching a Network

13 Comments

Dekhani Nsaliwa

June 27, 2020 at 3:09 am

Great information. Thanks Jesse

Reply
Guangye Cao

September 3, 2020 at 2:42 am

If a VC invests in equity, which also gives it right to tokens, does its holding of equity disappear after it receives the tokens? That is, does the equity convert into tokens, or would the VC be holding both equity and tokens? If its the latter, what would the VC get from keep holding equity after receiving tokens? If the startup eventually decentralizes fully and becomes community run and owned, can it still have a IPO or M&A exit? If not, would the equity be meaningless once tokens are issued?

Reply
- Guangye Cao
  
  May 4, 2021 at 7:18 pm
  
  @Enrico Bottazzi No, I did not. If you find an answer, I would really appreciate if you could share it here.
  
  Reply
- Maged Radhwan
  
  May 16, 2021 at 5:17 am
  
  U mean also how can ordinary person provides equity for startup project?
  
  Reply
- Luxie AI
  
  June 25, 2021 at 7:43 pm
  
  I’ve been looking into the same issue.
  
  Reply
- Leany
  
  August 18, 2021 at 5:20 am
  
  Anyone found an answer for this yet?
  
  I agree, I’m still entirely unsure about what purpose/value the equity of any blockchain/cryptocurrency holds?
  
  Surely it’s all based around the tokens/coins? These tokens/coins are publicly available right from whenever the project ICOs, so why would a VC ever but equity and not just buy the publicly available tokens/coins?
  
  Weird one…
  
  Reply
- Arun
  
  November 25, 2021 at 7:19 am
  
  I’m pretty sure there would be a conversion from equity to Tokens- Else it would
  lead to the double valuation of the network (i.e; Equity + Token). ( I think the process would be similar to Angel investors financing Start-ups using debt with a right to convert to equity down the line.) Hope this helps.
  
  Reply
bikesbeersnbeats!

September 16, 2020 at 2:37 am

Lets just say that 99% of ICO’s were scams.

Reply
João Ferreira

March 26, 2021 at 12:10 am

I am incredibly grateful for this series of videos! Thank you from Brazil 🙂

Reply
Martin Pretto

June 1, 2021 at 9:32 pm

Hey guys, we’re looking to launch an ICO soon and I’m looking for someone who could guide us through process. How can I contact you?

Reply
Anup ghimire

July 18, 2021 at 3:36 am

Thank you so much form Nepal for this amazing content. I have became a big fan of u Jesse. I have added you in LinkedIn.

Reply
mohamed zayana

October 13, 2021 at 3:29 pm

Fantastic series! I have one question, How would you approach the financial projection spreadsheet to show potential investors for a social platform decentralised app ?

Reply
programmedtorun

November 21, 2021 at 11:06 pm

VCs need to realize that decentralized apps should not support network ownership allocations proportional to equity in a crypto startup. You are centralizing decentralization

Reply

Science & Technology

Don’t Give VCs More Leverage Than You Have To

Investors know when a founder is desperate. Sasha Orloff has raised a collective $1 billion in his career and he shares his advice for staying on top of your financial situation. Listen to the full episode of Build Mode with Puzzle’s founder and CEO:

Published

18 hours ago

August 21, 2026

CYBER TECH TV

Investors know when a founder is desperate. Sasha Orloff has raised a collective $1 billion in his career and he shares his advice for staying on top of your financial situation.

Listen to the full episode of Build Mode with Puzzle’s founder and CEO:

Science & Technology

The Singularity Isn’t the Real Reason Stripe Paid $7.5B for OpenRouter

Stripe claims “the singularity” is here, and justifies its $7.5B acquisition of OpenRouter. The truth, as the Equity podcast crew highlights, is much more practical, as unglamorous as token expense management may seem:

Published

20 hours ago

August 21, 2026

CYBER TECH TV

Stripe claims “the singularity” is here, and justifies its $7.5B acquisition of OpenRouter.

The truth, as the Equity podcast crew highlights, is much more practical, as unglamorous as token expense management may seem:

Science & Technology

Why is the DOJ investigating Andreessen Horowitz over board seats? | Equity Podcast

Andreessen Horowitz has two partners sitting on the boards of companies that now compete with each other: Ben Horowitz at Databricks and Martin Casado at Fivetran. Nothing too scandalous on the surface, except ⁠the Department of Justice has reportedly been investigating the arrangement ⁠for almost a year, dusting off a 112-year-old antitrust law that’s rarely…

Published

22 hours ago

August 21, 2026

CYBER TECH TV

Board conflicts aren’t exactly new, and these companies weren’t necessarily direct competitors when a16z first invested in them. But as portfolio companies expand into each other’s markets, the DOJ’s scrutiny raises a much bigger question for venture firms: How do you manage board seats when the boundaries between your portfolio companies keep moving?

On this episode of TechCrunch’s⁠ Equity⁠ podcast, Kirsten Korosec, Anthony Ha, and Sean O’Kane dig into the a16z probe, what it could mean for VCs, and more of the week’s headlines.

Subscribe to Equity on ⁠YouTube⁠,⁠ Apple Podcasts⁠,⁠ Overcast⁠,⁠ Spotify⁠ and all the casts. You also can follow Equity on⁠ X⁠ and⁠ Threads⁠, at @EquityPod.

Chapters:

00:00 Intro
1:02 TechCrunch Disrupt and the Startup Battlefield 200
3:17 The DOJ is investigating a16z over board seats
14:47 Why Stripe just paid $7.5B for “the Stripe for AI”
18:18 The mid-tier AI scramble: gateways, pivots, and acquihires
23:17 Anthropic’s revenue surges while OpenAI’s losses deepen
27:08 Also raises $150M and drops the “micro mobility” label
32:30 Uber teams up with Zipline for drone delivery
37:19 Wispr hits a $2B valuation
38:26 Outro