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Jesse Walden: Fundraising and Deal Structure

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…

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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:

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13 Comments

13 Comments

  1. Dekhani Nsaliwa

    June 27, 2020 at 3:09 am

    Great information. Thanks Jesse

  2. 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?

    • 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.

    • Maged Radhwan

      May 16, 2021 at 5:17 am

      U mean also how can ordinary person provides equity for startup project?

    • Luxie AI

      June 25, 2021 at 7:43 pm

      I’ve been looking into the same issue.

    • 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…

    • 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.

  3. bikesbeersnbeats!

    September 16, 2020 at 2:37 am

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

  4. João Ferreira

    March 26, 2021 at 12:10 am

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

  5. 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?

  6. 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.

  7. 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 ?

  8. 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

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