WebTHIS SIMPLE AGREEMENT FOR FUTURE TOKENS ( SAFT ) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT ), OR UNDER THE WebToken Warrants. Oxbridge Announces Filing of SPAC Business Combination Agreement. Token warrants are typically issued to equity investors in an overarching corporation (for example, popular DeFi protocol UniSwap was built by Uniswap Labs LLC). But in order for the tokens to maintain a relatively healthy and stable value, their developers must pay attention to tokenomics principles such as supply-and-demand and providing ongoing incentives to holders. When standing at the crossroads trying to choose the most suitable document for pre-seed Web3 fundraising, its important to consider any regulatory restrictions on token transactions that are imposed on the DevLab by a local regulator. Many web3 companies develop their own crypto tokens as part of a blockchain-based project, and these companies can theoretically mint as many tokens as they want. Investors not only want equity in the companies they invest in, but also the tokens that can be used to interact with these dApps because of their utility value. Investor Agreement In order to be deemed eligible for the purchase of the Companys Tokens, the Investors agrees to and warrants that: The investor is an accredited or authorized investor in their jurisdiction. You should not construe any such information as legal, tax, investment, trading, financial, or other advice. Any Tokens issued hereunder will be subject to such restrictions on transferability as required by applicable laws and regulations as determined by the Company's Board of Directors and as set forth in Section 3.3 hereto; provided, however, that such restrictions shall be no more stringent than those applicable to Tokens owned by or allocated to any Insider and shall be adjusted, as applicable, to accelerate or otherwise align with any such less stringent restrictions. Watch this clip from our "Fundraising for Web3 Projects" talk that covers token sale agreements and their use in more detail: If the Web3 founders of the project plan to decentralize its ownership and governance by launching a DAO in the future, it will be important for the investor to understand exactly how the members of the DAO will be selected, and how exactly the governance rights for these DAO members will be structured, as the investor is likely to apply to participate in the DAO themselves. WebAll Ember Tokens issued by the Company upon the proper exercise of an Ember Warrant in conformity with this Warrant Agreement shall be validly issued, fully paid and non SAFE as SAFT?: Understanding Simple Agreements for Future This is why its generally a smart idea for web3 startups to think twice before offering a massive token warrant to an early-stage investor.. In this case, the best option may be to sign a simple agreement for future tokens (SAFT).. www.sec.gov Token Warrants a clearly defined date for issuing tokens, or a specified event that will be a trigger in the SAFT for the issuance of tokens and their transfer to investors. Token District Metals Corp. ; has closed its previously announced brokered private placement financing pursuant to an agency agreement with PI Financial Corp. and Haywood Securities Inc. , raising | March 3, 2023 All Tokens distributed to or received by Holder pursuant hereto shall be subject to a mandatory Lockup Period. |, Title:(please print or type full title) | We also offer a number of tools and features with employees and other token holders in mind. When fundraising, you want to have a valuation benchmark by looking at the market of comparable companies in recent fundraising. Investors have one alternative that, as of May 2022, is growing in popularity amongst web3 venture funds the token warrant. Choosing a Web3 Fundraising Document in 2023: a Playbook for Usually, one to two years may pass between the initial fundraising to the time of issuing tokens. SEC.gov | HOME Disclaimer: the information in this guide is provided for informational purposes only. The use of Tokens in connection with the Platform may be governed by other "_ Affiliate _" means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer, director or trustee of such Person, or any venture capital fund or registered investment company now or hereafter existing that is controlled by one or more general partners, managing members or investment advisers of, or shares the same management company or investment adviser with, such Person, where "control" is defined as directly or indirectly possessing the power to direct or cause the direction of the management and policies of the Affiliate, whether through ownership of voting securities, by contract or otherwise. The Company have accounted for All Rights Reserved. Lets look into the key terms of these agreements and highlight the main points for negotiations. If Holder Transfers any Token in contravention of this Section 3.3 (such Tokens "Transferred Tokens"), as liquidated damages and not as a penalty, Holder shall promptly (and, in any event, within five (5) days thereof) deliver and surrender to the Company a number of Tokens equal to the number of Transferred Tokens. Our tools connect to third-party token custodians such as Coinbase to help you issue and track token liquidity from one simple interface.. Investors usually structure these rights in the form of a right of veto on certain decisions of the company or as a list of reserved matters for which the company requires investor consent. On February 28, 2023, the Company issued an unsecured promissory note (the "Note") in the amount of $875,000. The token side letter provides an additional advantage for investors, as no additional payments are required to receive tokens. One way a company can avoid this out-of-control minting of new tokens is by setting aside a certain percentage of its total token allocation for investors. Notwithstanding the foregoing, "Tokens" shall not include tokens created for testing purposes or any NFTs issued in the ordinary course of business in arms' length transactions. 3. during the twelve months following the end-date of the period described in the immediately preceding clause "(b)", 1/12th of 25% of the total number of the Tokens of Holder shall become unlocked on each monthly anniversary of such end-date; and Beowulf Mining signs agreement for graphite plant site in Finland: AN. If you and your investors have agreed to value the token warrant/side letter rights and equity together at some value, the formula for token allocation should reflect that. This, in turn, helps the DevLab (which may be registered in the US as an American company) to avoid any involvement with the process of selling and distributing tokens. At this stage, founders wont usually have a detailed White Paper with developed tokenomics, or any kind of token distribution plan, although these steps may have been preliminarily mapped out in the startup's Web3 roadmap. WebThis Token Purchase Agreement (this Agreement ) contains the terms and conditions that govern your purchase of the INX Tokens, an ERC20 blockchain asset that is programmed Transfer Restrictions; Lockup Period. The token purchase right is the right to buy tokens in the future. Supporting. On the terms and conditions set forth in the Warrant, the undersigned Holder hereby elects to purchase its Portion of the Total Network Tokens (the "Warrant Tokens"), pursuant to the terms of the attached Warrant, and tenders herewith payment of the Warrant Exercise Price in full. In the event that legal counsel to the Company advises the Company that it is necessary or advisable for regulatory reasons, Holder shall also be required to deliver, as a condition to exercise, an accredited investor verification letter from a qualified third party verifying that Holder is an "accredited investor" within the meaning of Rule 501 of the Securities Act (as defined above). Blockchain technology has enabled a number of new equity types that may change the future face of startup financing. These equity types generally allow investors in web3 startups to receive a certain number of tokens commensurate with the size of their investment.. Similar supply-demand issues may arise if a bunch of separate warrants are exercised at the same time. Historical precedents have been set in previous court cases involving SAFTs (Kik, Telegram). There are differences between token side letters and token warrants depending on the legalese. Web3 startups can use funds from the sale of SAFT to develop their project, mint their tokens, and issue their tokens to investors who have an expectation that there will be a secondary market to sell these tokens to. Decide which token pro-rata right method you want to use by comparing outcomes with your token allocation and the three types of token pro-rata right methods. This Warrant may be exercised any number of times by Holder, prior to the Expiration Date, to provide Holder the opportunity to purchase up to Holder's Portion at each applicable Token Launch, less any Tokens purchased by Holder pursuant to any prior exercise of this Warrant with respect to such Tokens. Check out sources like Dovemetrics and fundraising announcements on Crunchbase and Twitter to get this data. If the DevLab is registered in a non-US jurisdiction (in Hong Kong, the UK, and some European countries) and, in addition to using a standard SAFE, also plans to issue to its investors the rights to tokens, the DevLab will have more flexibility in choosing between the token warrant and a token side letter. As a founder, you want to communicate the nature of the business, and how value may accrue to either the tokens, equity, or both token and equity. Basically, its the token equivalent of a warrant for equity, or granting share options. These Public Warrants will be under lockup for 91 days starting from 29-NOV-2022 to 28-FEB-2023. To better understand token warrants, lets review them through the lenses of tokenomics and how they relate to another token equity mechanism called a SAFT (Simple Agreement for Future Tokens). Agreement In these cases, we can distinguish two general approaches. Oops! Token warrants bear some key similarities to traditional stock warrants. Because your token strategy and business models are subject to change, you want to have as much flexibility for your future token allocation and minimal token dilution. Chief among these mechanisms are ICOs (Initial Coin Offerings), SAFTs (Simple Agreements for Future Tokens) and token warrants, the last of which well explore in this guide. Drafting and negotiating on token side letters can take multiple days and weeks, which could delay closing a critical investment deal. Unlike SAFTs, these token warrants typically come in the form of an optional side letter and dont guarantee the deployment of tokens - therefore avoiding the legal complications faced by its predecessor. "Company" shall include, in addition to the Company identified in the opening paragraph of this Warrant, any corporation or other entity that succeeds to the Company's obligations under this Warrant, whether by permitted assignment, by merger or consolidation or otherwise. In addition, any such restrictive provisions shall provide that any discretionary waiver or termination of the restrictions of such agreements that are approved by the Company's Board of Directors with respect to any Insider shall apply to Holder, pro rata, based on the number of Tokens held by such parties. The transaction contemplates an enterprise value of approximately $45 million for Jet Token, and additional earnout warrants with a Black Scholes valuation of $60 million. First: A Digital Warrant Offering One increasingly popular way to do this is via the issuance of token warrants.. The total number of tokens received by an investor commensurate with the equity ownership percentage x the percentage of token allocation for investors. WebDuring this most recent bull market in 2021, the spirit of the SAFT has made a comeback in the form of token warrants or token rights agreements, but theyre now typically attached to either a SAFE or an equity investment. VLOs analyze all the legal tasks needed to structure the fundraising, prepare cost estimates and then select the best legal providers from the Legal Nodes Network for each task. Otherwise, the United States is likely to face a brain drain at a time when it can ill afford it. require an accommodating regulatory climate for their issuance and distribution, a DevLab may not always be the most suitable vehicle for token issuance. The involvement of the DevLab in token distribution often occurs after the Token SPV issues tokens, and reserves a part of the tokens for key contributors (founders, advisors, team) and investors, subsequently transferring this pool to the DevLab. Thank you! As of the Issue Date, the Holder shall deliver to the Company payment in cash equal to the Purchase Price. These Warrants will be under lockup for 181 days starting from 1-SEP-2022 to | Certain Warrants of bioAffinity Technologies, Inc. are subject to a Lock-Up Agreement Ending on 1-MAR-2023. Before we get started, wed like to remind you that everything in this article is for educational and informational purposes only, and is not legal advice. CENTUS issues WARRANT tokens with different terms: from 1 month to a year. This is speculative and due in part to 1) token warrants optionality, and 2) the fact that the SEC has specifically called out issues with SAFTs promise to deliver future tokens to investors. The Company will promptly respond in writing to an inquiry by Holder as to the then current fair market value of one Token. I co-authored this article with Joseph Perkins, Mark Janoff, and Robert Moore. Token Warrant Agreements Free Template and Guide "_ Business Day _" means a weekday on which banks are open for general banking business in San Francisco, California. Three main types of managing the pro-rata rights of the token supply: Each of the pro-rata right methods has its advantages and disadvantages for the company or the investors. Tokens represent a tradable asset or utility that holders can use for a wide range of functions (e.g., voting, access to content, unlocking feature benefits, purchasing items or other digital assets). The most important of them are as follows: As you can see from this list of key document details, the terms of the token purchase right sit at the very core of the token warrant. Let us look closely at each of the routes. * It may be hard to determine the future tokenomics or token utility model as an early-stage company without product-market fit or a large community of users. It then makes transfers to investors who hold token side letters, as well as other core contributors to the project ecosystem such as developers, advisors, etc. You signed in with another tab or window. Any attorney-client relations are between clients and legal providers only. Until a token launch, there is always some non-zero chance that tokens may never be issued. To read more about the differences between the token warrant and token side letter, and download a free token side letter template, visit this page.. In this regard, many Web3 founders register a separate company (Token SPV) in a crypto-friendly jurisdiction to issue and distribute their token and sign all token-related documents from this company. Learn more at our website at liquifi.finance. As the token warrant is signed together with the SAFE, the prices set out in the SAFE includes the value of the token warrant, which is also called a token purchase right. view example token side letters with LiquiFi here, Cooopahtroopas and Lauren Stephanians tokenomics analysis, Company allocation or insiders supply method, Simpler, no need to manage the equity stake and the conversion of equity into tokens, More straightforward valuations on just the tokens alone, and not have to mix in the equity value component, Similar to SAFTs, with the added benefit of providing investors the optionality of retaining equity. - 10X jurisdictions. Find him on Twitter at @steveglaveski., This site requires JavaScript to run correctly. The warrant, requested by state police criminal investigator Trooper Justin Bedford of the Schuylkill Haven station, outlined the events that occurred at 222 Second St. Comparatively, the current price is 215.40% higher than the all-time low price. The token side letter or warrant represents a right, but not the obligation, to receive or purchase future tokens. "_ Common Stock _" means the Company's Common Stock, par value [$0.00001] per share. Your existing traction, team, strategy, industry (DeFi, DAO tooling, NFT, P2E gaming) may all result in different valuations, and comparable companies in your specific industry can be used as a part of your negotiation. information about vesting, lock-ups and other encumbrances on the investor's tokens, which are important for the successful operation of the project's tokenomics. Thus, like a SAFT, or Simple Agreement for Future Tokens, a token-based award in any event may be deemed a security, and its issuance should be compliant with "_ Parent _" shall mean any entity (other than the Company) in an unbroken chain of entities ending with the Company, if each of the entities other than the Company owns securities possessing 50.1% or more of the total combined voting power of all classes of securities in one of the other entities in such chain. WebThis particular warrant agreement allows Hedge Fund Mast Hill to buy bulk shares at 0.175, which is well above the current stock price. Notice of Expiration. Net Exercise Election. Make sure to be clear with the investors on the value of the equity and the tokens together so that you dont end up with the wrong token side letter terms, or delay closing the deal because of misalignment on valuations. WebA general form of warrant to be used in connection with the financing of a private company, including in a private equity or venture capital transaction. A SAFT is a security issued for the eventual transfer of tokens from web3 startups to investors. Emerging Countries. Agreement Scenario 1: 20% allocation of tokens for the company and insiders (founders, employees, company treasury), Scenario 2: 60% allocation of tokens for the company and insiders (founders, employees, company treasury). The SAFT is a derivative of the SAFE and stands for the simple agreement for future tokens. For the avoidance of doubt, the Lockup Period and Transfer Restrictions shall not apply to any Tokens received by any Holder as a reward for staking Tokens on the Protocol or any network or protocol pursuant to the proof-of-stake protocol included in the Protocol. A SAFT (a simple agreement for future tokens) is a document that is usually signed with a startup that has already decided on the type of tokens it plans to issue, and already has detailed the tokenomics, and created a token distribution plan (including prices and stages of distribution) and a White Paper (which describes all of the above). WebCheck out the article below to learn 5 Things to Know About Token Warrants. Agreement Depending on the state of your tokenomics (is it ready or is it still in the works?) February 28 business combination with Jet Token Inc. (Jet), a Delaware based company. While some web3 startups have moved more aggressively into token-based equity, the fundraising ecosystem hasnt changed overnight. Oops! The idea of that assignment is that the Token SPV then sells the tokens to investors at the price that has already been fixed in the token warrant. A simple agreement for future tokens (SAFT) is an investment contract offered by cryptocurrency developers to accredited investors. Your token side letter should reflect the 2:1 rights on the equity, reflecting the valuations of the equity and tokens together. https://lnkd.in/gTadru7d For example, in the case of Maple, below, a seed investor who owns 10% of Maples equity would receive 2.6% of its tokens (10% x 26%). Generally, founders want to raise more capital and dilute less equity/tokens, while the incentive is reversed for investors. Depending on where the DevLab is incorporated, the following scenarios will unfold:. The Token SPV will be responsible for the distribution of tokens, meaning that the company will distribute the tokens once the token warrant is executed. The latest industry news, updates and info. You can speak to the team at Legal Nodes to find out more about how we can help you use these documents. This company is usually registered in a jurisdiction where the legislation permits token issuance and provides defined rules for taxation of token-sale transactions. Instead, it only confirms the right of investors to purchase tokens with a discount or at a predetermined price. "_ Total Network Tokens _" means the total number of Tokens ever to be issued on (i) the Protocol, or (ii) any Token Issuer's network or protocol. The tokens are not a replacement for receiving company shares as an investor its complementary and used alongside the traditional equity agreement and cap table. You should not construe any such information as legal, tax, investment, trading, financial, or other advice., If youre considering fundraising options for your Web3 projects, youll most likely find yourself in one of the three following, rather common, scenarios:, Scenario 1: Youre at the beginning of developing your project and havent yet registered a token company (i.e. SEFToken Inc., started the new year by announcing a new form of tokenized instrument a covered warrant. A covered warrant is an instrument, similar to an option, that gives the holder the right to buy or sell the underlying security at a certain price, up until a predetermined date. "_ Fully Diluted Percentage _" means, with respect to a Holder, the quotient obtained by dividing (a) the total number of Common Stock then issuable (directly or indirectly) upon the conversion of Preferred Stock of the Company, as if converted, by (b) the total Common Stock of the Company then outstanding (assuming (i) full conversion of all Preferred Stock then outstanding, and treating for this purpose all Common Stock issuable upon exercise of or conversion of outstanding options, warrants or convertible securities, as if exercised or converted and (ii) without duplication, issuance of all shares reserved but unissued under the Company's equity incentive plan(s)). Are you sure you want to create this branch? Automatic vesting ensures that tokens are seamlessly moved to connected wallet addresses upon vesting, and token holders can access advanced views that help them track the projected future value of their tokens. WebWe are engaging several investors who have asked for an offer and agreement for fundraising for our web3 product in development. This could be done as soon as the Token SPV is incorporated. Notwithstanding the foregoing, it shall not be deemed a " Transfer _" of Tokens for a Holder to stake Tokens for the Holder's own account pursuant to the proof-of-stake protocol included in the Protocol. Hence, this sale to the investor is also called a pre-sale. Equity term sheets are relatively standard, and today, when funds invest in an early-stage company, they typically use an instrument such as a convertible or a SAFE note (secure agreement for future equity) the latter popularized by Y-Combinator. A Token company (also referred to as a Token SPV) is a company within a project's legal wrapper that is responsible for the initial token release and distribution. 1 for the offer, 1 for the agreement outlining equity and token allocations. Ultimately, the decision will come down to a few factors, which we will explore further on in this guide., Scenario 2: You have finalized your White Paper, registered a Token SPV company, and know when you plan to issue tokens. The token warrant, however, requires a discount or a discounted price as one of its substantive terms to function. The terms and additional documents you require may depend on whether you plan to launch a DAO or not. WebWARRANT tokens can be issued in conjunction with any tokens, which in turn are called warrant-linked tokens. To learn more about how Pulley can help your startup usher in its Web3 future, schedule a call with us today. Mentioning any of the assets in this article is not an endorsement to purchase them. Similar to the SAFE, under the SAFT, an investor, upon occurrence of a Multi-Signature Support. The second important difference between the two documents is that the token side letter does not require any additional details of payments for tokens: the consideration is already included in the price of the convertible equity agreement. WebAs part of equity financing agreements that took place in 2018, the Company has obligated to issue to the investors a number of INX tokens that will be determined pursuant to the results of the Offering. WebWhat is a token side letter or warrant (with a SAFE)? Issued on ____________, 2022 (the " Issue Date"). LayerZero claims it is well-capitalized with approximately In summary, the choice of an investment document for Web3 projects is mostly influenced by the readiness of the tokenomic model. As a part of this process, investors are also pricing the equity valuation in a scenario where there is no token launch to make sure that their investment is protected. In exercising its Portion of the Warrant, the undersigned Holder hereby confirms and acknowledges that the representations and warranties set forth in Section 6 of the Warrant as they apply to the undersigned Holder are true and complete in all respects as of the date on which Holder exercises this instrument. Consequently, the DevLab is not involved in token sale (the paid token transfer) but instead it covers only the distribution of tokens previously received from Token SPV. A SAFE is a sort of investment contract that an early-stage startup makes with an investor, in which the investor agrees to pay money now and receive shares of company stock later. Token Warrants Investors have one alternative that, as of May 2022, is growing in popularity amongst web3 venture funds the token warrant. See photos and more auction details on AuctionZip.com Now. For the token side letters, the same company that signs it, the DevLab, is also responsible for converting the document into tokens. Please issue and deliver the Warrant Tokens to Holder at the network address set forth below. Understand how much negotiating leverage you have when fundraising, and whether you need founder-friendly terms or investor-preferred terms for the token side letter to close the deal. (please print or type complete name of entity) | There are a couple of reasons why a SAFT is usually not signed before these steps have taken place. Date of Issuance. You also dont have your tokenomics established yet either. What Is a Token Warrant? A Guide for Web3 Startups | Pulley Some investors prefer a guaranteed amount of tokens with the fully diluted supply or conversion rate method. The concept of the token purchase right in a token warrant can be roughly reduced into its three main features: Its important to note that these three circumstances apply to the signing of the token side letter too. Form of Payment. Jonathan Chan is a partner in the corporate practice at Wilson Sonsini Goodrich & Rosati. The type of agreement needs to be: Create Agreement - Equity Raise with Token Warrant for Web3 Investors, Fundraising I need 2 templates.