The scenario. A founding team of three is building a decentralized data-storage protocol. The plan is to launch a native token at some point in the next 12–18 months. In the meantime, they need to raise $3 million to ship the product. Investors want equity exposure now AND token exposure later. How do you paper that?
Why the operating company is still a Delaware C-corp
Even for web3 startups, the entity that develops the protocol and signs the SAFEs is almost always a Delaware C-corp. Investors are comfortable with it, equity comp is straightforward, and the corporate structure separates “the company” from “the protocol” in a way that helps the securities analysis of the eventual token. The team files Delaware incorporation papers and adopts bylaws like any other startup.
Some teams later layer in a non-U.S. foundation to issue and govern the token itself, with the U.S. C-corp providing development services. That decision is fact-specific and best made closer to the token-generation event.
The SAFE for current equity
For the $3 million, the team uses the standard Post-Money SAFE, identical in form to a non-crypto SAFE round. Two pages, a valuation cap, no interest, no maturity. Investors buy the SAFE and receive the right to convert into preferred stock at the next priced equity round.
The token warrant for future tokens
To give investors economic exposure to the eventual token without selling them tokens today (selling tokens today triggers a securities analysis under the Howey test), the team issues a Token Warrant alongside the SAFE. The Token Warrant is a contractual right to purchase tokens at a future token-generation event, in an amount tied to the investor’s SAFE investment, at a discounted or capped price.
Key drafting points: the warrant ties to a defined “Network Launch” or “Token Generation Event,” the investor’s allocation is proportional to their dollar investment, and the warrant includes lockup/vesting that aligns with the protocol’s overall tokenomics (often 12–24 month linear release post-launch). The warrant also includes Howey-test-aware securities representations and explicit no-assurance language about regulatory treatment.
The investor side letter
Larger SAFE investors receive an Investor Side Letter with pro rata participation rights for the next equity round, MFN protection on the SAFE’s commercial terms, periodic information rights, and observer status at board meetings. Small-check investors get the form SAFE and Token Warrant only.
Securities analysis
The SAFE and Token Warrant are both unregistered securities sold to accredited investors under Rule 506(b) or 506(c) of Regulation D. The team files Form D within 15 days of the first sale and files a Florida OFR notice (because the company is operating from Florida). The token, when it eventually launches, will need its own securities analysis under the framework that is still developing — the CLARITY Act § 4(a)(8) framework is the most likely federal landing spot if the token meets the “ancillary asset” tests.
What this structure achieves
- Investors get current equity exposure (the SAFE) plus the right to future tokens (the Warrant).
- The company avoids selling tokens today, sidestepping the most aggressive securities-law interpretations.
- The cap table is clean and matches what any subsequent VC or M&A buyer expects to see.
- The token launch, when it happens, has been pre-papered — investors know what they are entitled to and on what schedule.
Talk to a Florida Business Lawyer
If you are navigating a scenario like this one, schedule a consultation with Montague Law at 904-234-5653 or use the contact form. The firm represents founders, investors, and business owners statewide and nationally from offices in Fernandina Beach and Coral Gables (Miami).
Templates and resources referenced
- Delaware Certificate of Incorporation
- Post-Money SAFE
- Investor Side Letter
- CLARITY Act § 4(a)(8) Offering Playbook
This case study is a composite illustration drawn from common founder scenarios. It does not describe any specific client or matter and is provided for general informational purposes only. It is not legal, tax, or financial advice and does not create an attorney-client relationship. Consult counsel for guidance tailored to your specific facts.
