Web3 introduces tokens into the startup world.

Tokens bring a new layer of incentives and must be accounted for in the cap table.

This shows up in the form of community and treasury entries.

It’s not uncommon for the community to be the majority of the cap table.

The tokens provide incentive and must be kept as a separate component of the cap table until issued to the holder.

In the Web3 world, the treasury is another newcomer to the cap table.

In the Web2 world, the treasury value was spread across all investors as a component of their equity stake.

The treasury must be set aside to compensate the token holders.

The token can be treated as a warrant.

Warrants give the holder the right to exercise an option to convert the warrant into cash.

The holder may or may not convert the token.

Tokens bring new value but require additional support structures for maintaining a pool of tokens, distributing the tokens, and redeeming them.

This brings new entries to the cap table.  

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.