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 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: bit.ly/2ThsHen

[@brrruski8436]

Amazing foundation tutorials of crypto fundraising! Much appreciated to Jesse

[@Mozayzay]

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

[@trenholmelodge1820]

this is where it starts and this explanation is necessary to understand the whole cryptocurrency 't hing". Now it will begin to make some sense though the whole matrix is difficult to understand and p robably requires a few phds to understand the whole thing with any degree of confidence. It seems that the original token value is a residual from splitting the orig equity into token equity and tokens. The tokens from mining are then distributed in the agreed original ration between token equity holders and the token holders, I think. thank you for this great explanation.

[@joaoavf]

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

[@8radr]

Nicely presented Mr. Walden

[@dekhaninsaliwa8498]

Great information. Thanks Jesse

[@guangyecao2092]

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?

[@enricobottazzi8350]

Did you find an answer to this question ?

[@guangyecao2092]

@@enricobottazzi8350 No, I did not. If you find an answer, I would really appreciate if you could share it here.

[@magedradhwan4342]

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

[@luxieai5100]

I've been looking into the same issue.

[@zedrockiby]

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…

[@danieldil6198]

for a token raise is there liquidity in the token?

[@tcrlrunner1128]

Im New to all this, so my question is, how will crypto help me with the problem im facing. so in uk so far looking into how to structure a company, my plan was to get company's on board to share in the profits , ie giving away 80% to my investors, now in the reg of a company , sole , limited and pvt, you are restricted to how many share holders. how dose this work round this using a token.?

[@skellep]

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

[@bikesbeersbeats]

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

[@aveldinodencrypto8597]

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[@conspiracytheorist5408]

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[@Anupghimire]

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.

[@martinpretto6365]

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?