A venture round in crypto is private financing for blockchain-native companies where returns may flow through equity, tokens, or a combination — with legal structures that differ from standard SaaS rounds.

How it works

Most institutional crypto venture deals invest in a legal entity (often a US C-corp) that builds protocol or product. Investors receive:

• Equity — preferred shares like traditional VC
• Token rights — warrants or side letters granting a share of token supply at launch, subject to vesting, lockups, and network milestones
• SAFTs (Simple Agreement for Future Tokens) — less common post-regulatory scrutiny; still appear in some offshore structures

Term sheets address: token cap table vs equity cap table, founder and team vesting on tokens, lockup schedules, governance of treasury, and what happens if the token never launches. Diligence covers smart contract audits, regulatory classification, and whether value accrues to the entity investors own.

Round sizes and valuations track venture norms at the equity layer, but fully diluted token supply often drives investor return models. Liquidity can arrive via token listings years before an M&A exit — or never, if projects stall.

Why it matters

• Founders: Align incentives early — double cap tables confuse hiring and follow-on investors. Legal counsel with crypto experience is not optional.
• Investors: Separate hype from ownership of cash flows and tokens. Regulatory changes can strand token upside while equity remains illiquid.

Common mistake

Promising token allocations without clear vesting, lockups, and entity-level IP ownership — leading to re-trades, employee lawsuits, or securities violations.

Related ideas

See also warrants, venture capital, and token warrant structures.