Crypto Venture Capital Fundraising: SAFE vs SAFT Guide

The crypto venture capital market is experiencing renewed momentum in 2025, with quarterly funding reaching significant levels not seen since the 2021-2022 peak. According to CryptoRank data, crypto companies raised over $10 billion in Q2 2025, marking the strongest funding quarter in three years. June 2025 alone saw $5.14 billion in venture investments—the highest monthly figure since January 2022.

For crypto founders navigating this resurgent funding environment, choosing the right financing instrument is critical. Unlike traditional startups that typically rely on Simple Agreements for Future Equity (SAFEs), crypto and web3 companies face a more complex decision: whether to use traditional equity instruments, token-specific agreements like Simple Agreements for Future Tokens (SAFTs), or hybrid structures combining equity with token rights.

This guide provides comprehensive analysis of crypto fundraising instruments, securities law compliance requirements, and practical deal structuring guidance for pre-Series A crypto companies.

The 2025 Crypto Fundraising Landscape

The current funding environment reflects several key trends:

Market Recovery: After the 2022-2023 downturn, institutional investors have returned to crypto with renewed conviction. Major deals in Q2 2025 included Strive Funds' $750 million raise and Securitize's $400 million round, demonstrating continued appetite for digital asset infrastructure investments.

Investor Sophistication: Today's crypto investors—led by firms like Coinbase Ventures, Andreessen Horowitz, and Pantera Capital—demand sophisticated deal structures that balance equity upside with token exposure while managing regulatory risk.

Regulatory Clarity (and Continued Uncertainty): While the SEC has maintained its enforcement-focused approach to crypto, market participants have developed more conservative financing structures designed to withstand regulatory scrutiny. The days of aggressive SAFT-only fundraises have largely passed, replaced by more traditional equity instruments with token side arrangements.

Pre-Series A Focus: Most early-stage crypto fundraising occurs at the seed and pre-seed stages, with typical rounds ranging from $1 million to $10 million. These rounds increasingly use SAFE instruments with token warrants rather than standalone SAFTs.

Understanding SAFEs: The Traditional Startup Instrument

What Is a SAFE?

A Simple Agreement for Future Equity (SAFE) is an investment contract developed by Y Combinator that provides investors with the right to receive equity in a future priced round. Unlike convertible notes, SAFEs have no maturity date, no interest rate, and typically convert automatically upon a qualified financing event.

Key SAFE Terms

Valuation Cap: The maximum company valuation at which the SAFE converts to equity. For example, a $10 million cap means that regardless of the Series A valuation, SAFE investors convert as if the company were valued at $10 million, giving them enhanced ownership for their early risk.

Discount Rate: A percentage discount (typically 10-25%) applied to the Series A price per share when the SAFE converts. A 20% discount means SAFE investors pay only 80% of what Series A investors pay per share.

Post-Money vs. Pre-Money SAFEs: Post-money SAFEs (now standard) define the valuation cap on a post-money basis, meaning the cap includes the SAFE investment pool. This provides founders with clearer dilution expectations compared to older pre-money SAFEs.

Pro Rata Rights: Many SAFEs include the right for investors to participate in future rounds to maintain their ownership percentage.

Why Crypto Companies Use SAFEs

Despite being designed for traditional tech startups, SAFEs have become the dominant instrument in crypto fundraising for several reasons:

Regulatory Safety: SAFEs represent clear equity interests, avoiding the murky securities law analysis that plagues token-only fundraising structures. The SEC's aggressive enforcement against crypto tokens has made pure-token fundraising extremely risky.

Investor Familiarity: Mainstream VCs understand SAFEs and have standardized processes for due diligence, documentation, and internal approvals. Using SAFEs reduces friction with institutional investors.

Corporate Governance: SAFEs convert to traditional equity, providing a clear path to board representation, information rights, and standard investor protections that don't exist in token-only structures.

Bridge to Future Financing: SAFEs defer valuation discussions until a priced round, allowing early-stage companies to raise quickly without extensive negotiation over company worth.

SAFE Limitations for Crypto Companies

SAFEs alone don't capture the full value proposition of crypto companies:

No Token Exposure: Traditional SAFEs only provide equity upside, missing potential token appreciation that may exceed equity value in successful crypto protocols.

Misaligned Incentives: Crypto companies often prioritize network decentralization and token distribution over corporate profits, creating tension with pure-equity investors focused on exit liquidity.

Limited Utility: Many crypto protocols eventually operate as non-profit foundations or DAOs, making traditional equity less valuable than token ownership.

Understanding SAFTs: The Crypto-Specific Instrument

What Is a SAFT?

A Simple Agreement for Future Tokens (SAFT) is a financing instrument developed specifically for blockchain projects. Investors provide capital to fund network development in exchange for the right to receive tokens once the network launches.

The SAFT Framework: Theory vs. Reality

The SAFT framework, introduced in 2017 by Protocol Labs and outlined in a whitepaper by legal scholars, proposed a two-stage structure:

Stage 1 - The SAFT (Security): Accredited investors purchase SAFTs under Regulation D exemptions. The SAFT itself is explicitly treated as a security subject to SEC regulation.

Stage 2 - Token Delivery (Non-Security): When the network launches with functional utility, tokens are delivered to SAFT holders. The theory held that these tokens, having genuine utility on a decentralized network, would no longer be securities.

Why SAFTs Have Fallen Out of Favor

Despite initial enthusiasm, pure SAFT fundraising has declined dramatically since 2018-2019:

SEC Enforcement: The SEC's 2019 emergency action against Telegram's $1.7 billion SAFT offering sent shockwaves through the industry. The SEC argued that even after network launch, the tokens remained securities because investors' expectations of profit derived primarily from Telegram's development efforts.

Howey Test Application: Courts have consistently applied the Howey test's "economic reality" analysis to token offerings, finding that promises of future utility don't automatically transform investment contracts into non-securities.

No Safe Harbor: Unlike SAFEs which have clear conversion mechanics and extensive legal precedent, SAFTs operate in regulatory gray zones. The SEC has provided no guidance confirming that tokens delivered pursuant to SAFTs ever stop being securities.

Ongoing Compliance Burden: If tokens remain securities indefinitely, projects face massive compliance obligations including registration requirements, secondary trading restrictions, and potential liability for unregistered securities offerings.

Limited Investor Protections: SAFTs typically provide fewer investor rights than equity instruments—no board representation, limited information rights, and unclear remedies if tokens are never delivered or prove worthless.

When SAFTs Might Still Be Appropriate

Despite these challenges, some projects may still consider SAFTs in limited circumstances:

Non-U.S. Projects: Projects without U.S. operations or investors may structure SAFT-equivalent offerings under more favorable foreign securities regimes.

Utility-Only Tokens: Projects issuing pure utility tokens with no investment characteristics (rare in practice) might use SAFTs, though most sophisticated legal counsel would recommend alternative structures.

DAO-Native Projects: Certain DAO-first projects with no corporate equity structure might use token-based fundraising by necessity, though hybrid entity structures are generally preferable.

SAFE vs SAFT: Comprehensive Comparison

The Hybrid Model: SAFE + Token Warrants

Why Hybrid Structures Dominate

The current industry standard for crypto fundraising combines the legal clarity of SAFEs with token exposure through separate warrant agreements or side letters. This "SAFE + Token" or "SAFE+T" structure has emerged as the preferred approach for several reasons:

Risk Compartmentalization: By separating equity from token rights, companies isolate potential token-related securities law issues from their core corporate structure.

Investor Alignment: VCs receive both equity (capturing enterprise value from the company) and token upside (capturing network value from decentralization), aligning incentives across different value creation mechanisms.

Flexibility: Companies retain optionality about whether to launch tokens, when to launch, and how to structure token economics without affecting their equity capitalization table.

Regulatory Defensibility: The SAFE portion follows established securities law exemptions, while token warrants can be structured to minimize regulatory risk through careful drafting and compliance.

Token Warrant Structures

Token warrants or side letters typically provide one of three rights:

Right to Receive Tokens (Grant): Investors receive a specified percentage or quantity of tokens automatically upon launch, typically subject to vesting. This functions like a token option pool allocation.

Right to Purchase Tokens: Investors have the option (not obligation) to purchase tokens at a predetermined price or discount, similar to traditional equity warrants.

Proportional Allocation: Token allocation is calculated based on equity ownership percentage, with the warrant specifying the conversion formula (e.g., 10% equity = 2.5% of token supply, implying a 4:1 conversion ratio).

Token Allocation Formulas

Determining how much equity converts to how many tokens requires careful negotiation:

Pro-Rata Based on Founder Pool: If founders allocate 20% of tokens to themselves and investors have 25% of equity, investors might receive 25% of the remaining 80% token supply (20% of total tokens).

Fixed Conversion Ratio: A contractually agreed ratio such as 4:1, meaning 10% equity ownership converts to 2.5% of fully diluted token supply.

Fully Diluted Token Supply Basis: Calculate investor token percentage using fully diluted capitalization, including all SAFEs, options, and future equity reserved pools.

Example Scenario:

• Investors purchase SAFE with $8M post-money valuation cap
• Series A occurs at $32M valuation
• SAFE investors own 25% of equity post-conversion
• Token warrant specifies 4:1 conversion ratio
• Result: Investors receive 6.25% of fully diluted token supply

Token Warrant Terms to Negotiate

Vesting Schedule: Many token warrants include vesting (e.g., 4-year vest with 1-year cliff) aligned with equity vesting or independent schedules.

Trigger Events: Define what events enable token distribution—network launch, mainnet deployment, token generation event (TGE), or specific technical milestones.

Transfer Restrictions: Address whether token rights can be transferred separately from equity, and any lock-up periods post-launch.

Information Rights: Require regular updates on token launch timeline, tokenomics development, and regulatory strategy.

Adjustment Provisions: Include anti-dilution protection if the company issues additional tokens before warrant exercise.

Regulatory Contingencies: Specify what happens if token launch becomes legally impracticable or if regulatory guidance makes token distribution impossible.

Securities Law Compliance for Crypto Fundraising

Regulation D: The Primary Exemption

Most crypto seed and Series A fundraising relies on Regulation D exemptions from SEC registration requirements. Understanding Rule 506(b) versus 506(c) is essential:

Rule 506(b): No General Solicitation

Key Features:

• Unlimited fundraising amount
• Up to 35 non-accredited investors (but most crypto raises are accredited-only)
• Cannot use general solicitation or public advertising
• Investors self-certify accredited status (no verification required)
• Must have pre-existing relationship with non-accredited investors

Practical Implications:

• Fundraising through existing investor networks, warm introductions, and direct outreach
• Cannot announce fundraise on Twitter, company website, or demo days
• More flexible investor base but rarely used for non-accredited investors due to disclosure burden

When to Use: Raising from existing angel investors, VC relationships, and warm network introductions where the company has not publicly announced the fundraise.

Rule 506(c): General Solicitation Allowed

Key Features:

• Unlimited fundraising amount
• Only accredited investors permitted (no non-accredited investors)
• General solicitation and advertising allowed (can publicly announce fundraise)
• Must verify accredited investor status (cannot rely on self-certification)
• More common in crypto due to public nature of many projects

Verification Requirements:

• Review tax returns, W-2s, 1099s, or other IRS documentation
• Obtain written confirmation from attorney, CPA, or broker-dealer
• Use third-party verification services (AngelList, Carta, others)

When to Use: Companies that want to publicly announce fundraising, use demo days, post on social media, or appear at pitch competitions. Most crypto companies raising in 2025 use 506(c).

Choosing Between 506(b) and 506(c)

The key decision factor is whether you want to publicly announce your fundraise:

Use 506(b) if:

• Quietly raising from existing investors and warm introductions
• Want flexibility to include sophisticated non-accredited investors
• Don't want verification burden

Use 506(c) if:

• Want to publicly announce fundraising on Twitter, website, or media
• Participating in demo days or pitch competitions
• Only targeting accredited investors anyway (typical for crypto)
• Willing to implement verification processes

Critical Note: You can convert a 506(b) offering to 506(c) if you decide to advertise, but you cannot convert 506(c) to 506(b) after any general solicitation has occurred.

Form D Filing Requirements

Regardless of whether using Rule 506(b) or 506(c), companies must file Form D with the SEC:

Timing: Within 15 days after the first sale of securities

Information Required:

• Company identifying information and structure
• Names of executives, directors, and promoters
• Names and addresses of investors (aggregated, not individual)
• Type and amount of securities sold
• Use of proceeds
• Which exemption claimed (506(b) vs. 506(c))

State Filings: Most states require separate notice filings (Blue Sky filings) with state securities regulators, typically using Form D as the base document but requiring additional state fees and forms.

Amendments: File amended Form D annually and when material changes occur (new investors, significant amount increases).

Accredited Investor Definition

Understanding who qualifies as accredited is critical for Regulation D compliance:

Income Test: Individual income exceeding $200,000 ($300,000 joint) in each of the past two years with reasonable expectation of same for current year.

Net Worth Test: Net worth exceeding $1 million (excluding primary residence).

Professional Certification: Series 7, 65, or 82 license holders.

Entity Tests: LLCs, partnerships, or corporations with $5 million+ in assets; entities where all equity owners are themselves accredited.

Knowledgeable Employees: Employees of the fund making the investment who are knowledgeable about the fund's investments.

SEC Expanded Definition (2020): Added spousal equivalents, family offices, and expanded professional certifications.

International Investors

Many crypto projects raise from international VCs and high-net-worth individuals:

Regulation S: Provides exemption for offerings outside the U.S. to non-U.S. persons.

Combined Offerings: Can simultaneously conduct Regulation D offering (U.S. investors) and Regulation S offering (non-U.S. investors).

Restrictions: Regulation S securities cannot be resold to U.S. persons for specified time periods (typically 1 year).

Documentation: Maintain evidence of offshore status and compliance with Regulation S requirements.

Valuation and Deal Terms

Typical Valuation Ranges (2025 Market)

Crypto startup valuations vary significantly based on stage, traction, and team:

Pre-Seed / Idea Stage:

• Valuation cap: $3M - $8M
• Typical raise: $500K - $2M
• Investors: Angels, pre-seed funds, crypto-native angels

Seed Stage (Product in Development):

• Valuation cap: $8M - $25M
• Typical raise: $2M - $5M
• Investors: Seed funds, strategic crypto VCs

Post-Seed / Pre-Series A (Testnet/Mainnet Launching):

• Valuation cap: $20M - $75M
• Typical raise: $5M - $15M
• Investors: Established crypto VCs, multi-stage funds

Series A (Live Network, Traction):

• Valuation: $50M - $300M+
• Typical raise: $10M - $50M+
• Investors: Top-tier VCs, crypto funds, strategic investors

SAFE Terms to Negotiate

Beyond valuation cap, several other terms significantly impact founder dilution and investor rights:

Discount Rate: Typically 10-20%. Higher discounts (20-25%) compensate for higher risk or lower valuations.

Most Favored Nation (MFN): Clause ensuring if the company offers better terms to later investors, early investors get those terms too. Common in pre-seed rounds.

Pro Rata Rights: Right to invest in future rounds to maintain ownership percentage. Strong investors often negotiate pro rata plus an additional allocation.

Information Rights: Quarterly or annual financial statements, budgets, and business updates. Standard for significant investors ($250K+).

Side Letters: Additional agreements addressing specific investor concerns—advisory roles, marketing support, token allocations, board observation rights.

Token Allocation Benchmarks

When negotiating token warrants, typical allocations follow these patterns:

Equity-to-Token Ratios:

• Conservative: 5:1 to 6:1 (10% equity = 1.67-2% tokens)
• Market Standard: 3:1 to 4:1 (10% equity = 2.5-3.3% tokens)
• Aggressive: 2:1 to 3:1 (10% equity = 3.3-5% tokens)

Total Investor Token Pool:

• Most projects allocate 15-30% of total token supply to investors across all rounds
• Early investors receive proportionally more tokens per dollar invested
• Late-stage investors receive proportionally more equity relative to tokens

Vesting Considerations:

• Tokens often vest over 2-4 years with 0-12 month cliffs
• Vesting may start at TGE or begin immediately
• Some structures use different vesting schedules for equity vs. tokens

Cap Table Management

Crypto companies must maintain two cap tables:

Equity Cap Table:

• Traditional corporate capitalization table
• Tracks SAFEs, converted equity, options, and warrants
• Managed through Carta, Pulley, or similar equity management platforms

Token Cap Table:

• Tracks token allocation across all stakeholders
• Includes team, investors, community, foundation, protocol treasury
• Requires careful planning to ensure sufficient tokens for ecosystem growth

Key Consideration: Ensure token allocations don't over-commit. If you promise 25% of tokens to early investors, 20% to team, 10% to advisors, and 15% to community incentives, you've allocated 70% before considering future fundraising, partnerships, or protocol reserves.

Investor Rights and Protections

Standard SAFE Investor Rights

While basic Y Combinator SAFEs are intentionally minimal, crypto SAFE rounds typically include additional investor protections through side letters:

Information Rights:

• Quarterly unaudited financial statements
• Annual audited financials (for larger investors)
• Budget and business plan updates
• Cap table access and updates
• Token development and launch timeline updates

Pro Rata Rights:

• Right to participate in future financing rounds
• Maintains ownership percentage or provides allocation opportunity
• Often includes "super pro rata" for major investors (e.g., pro rata + 50% more)

Board Observation Rights:

• Major investors ($1M+) often negotiate board observation rights
• Observer attends board meetings without voting power
• Receives board materials and information

Advisory Roles:

• Some investors provide strategic value through formal advisor arrangements
• May include advisory token allocation separate from investor allocation
• Typically involves 0.25-1% equity or token allocation with 2-year vesting

Token-Specific Investor Rights

Token warrants often include additional provisions specific to crypto projects:

Governance Rights:

• Participation in on-chain governance after token distribution
• Input on tokenomics design and allocation decisions
• Consultation rights before major protocol changes

Token Launch Consultation:

• Right to review and comment on token white paper
• Consultation on token generation event structure
• Input on listing strategy and market-making arrangements

Regulatory Updates:

• Regular updates on regulatory developments affecting token status
• Notification of SEC inquiries or enforcement actions
• Consultation on regulatory strategy decisions

Liquidity Provisions:

• Some term sheets address token liquidity planning
• Commitments regarding exchange listings or market-making
• Lock-up periods to prevent early investor dumping

Founder-Friendly Terms

Founders should negotiate protective provisions:

No Automatic Board Seats: Avoid giving board seats to early SAFE investors; preserve board control until priced round.

Limited Information Rights: Tier information rights based on investment size (e.g., full rights only for $500K+ investors).

No Blocking Rights: Prevent investors from having veto power over corporate decisions at SAFE stage.

Flexible Token Launch Timeline: Avoid contractual commitments to launch tokens by specific dates; maintain flexibility to adjust based on technical readiness and regulatory environment.

Conversion Cap: In situations with multiple SAFE rounds, ensure later SAFEs don't make earlier SAFEs convert into tiny equity positions by negotiating conversion mechanics carefully.

Legal Documentation Checklist

Core Documents for SAFE + Token Warrant Round

Properly documenting a crypto fundraise requires several interconnected agreements:

1. Simple Agreement for Future Equity (SAFE)

• 5-10 pages
• Specifies valuation cap, discount, conversion mechanics
• Post-money SAFE is standard (Y Combinator template)
• Customize conversion triggers for crypto-specific scenarios

2. Token Warrant or Side Letter

• 5-15 pages
• Defines token allocation formula
• Specifies vesting schedule and trigger events
• Addresses regulatory contingencies and termination provisions
• May be integrated into SAFE or separate document

3. Subscription Agreement

• Investor representations and warranties
• Accredited investor certification (506(b)) or verification (506(c))
• Anti-money laundering compliance
• Jurisdiction and dispute resolution provisions

4. Disclosure Schedules

• Company background and history
• Risk factors (extensive for crypto projects)
• Management and advisors
• Existing cap table and outstanding securities
• Pending or threatened litigation
• Intellectual property
• Material contracts and partnerships
• Regulatory compliance status

5. Investor Questionnaire

• Collect investor accreditation documentation
• Tax identification information
• Beneficial ownership information
• OFAC and sanctions screening

6. Side Letters (as applicable)

• Information rights for major investors
• Pro rata rights agreements
• Advisory arrangements
• Most Favored Nation provisions
• Board observation rights

Risk Factor Disclosures

Crypto companies must provide comprehensive risk disclosures to investors:

Regulatory Risk:

• Uncertain application of securities laws to tokens
• Potential SEC or CFTC enforcement action
• State money transmitter licensing requirements
• International regulatory restrictions
• Risk that token launch may be impossible or delayed due to regulation

Technology Risk:

• Smart contract bugs and exploits
• Blockchain security and consensus risks
• Scalability and performance limitations
• Dependence on third-party protocols and infrastructure

Market Risk:

• Extreme volatility in crypto markets
• Limited or no liquidity for tokens
• Competition from established protocols
• Risk of technological obsolescence

Business Risk:

• Early-stage company with limited operating history
• Dependence on key personnel
• Ability to attract and retain developers
• Uncertain path to profitability or network sustainability

Token-Specific Risk:

• Tokens may have no value or use
• Token economics may change materially
• Potential for regulatory classification as securities
• Holding restrictions and transfer limitations

Timeline and Legal Costs

Understanding the fundraising timeline helps founders plan effectively:

Week 1-2: Term Sheet Negotiation

• Investor discussions and term sheet drafting
• Negotiation of valuation, discount, and key terms
• Token allocation discussions
• Costs: Typically no legal fees (non-binding term sheet)

Week 3-4: Due Diligence

• Investor review of company materials
• Legal, technical, and business due diligence
• Preparation of disclosure schedules
• Costs: $5K-$15K for legal support

Week 5-6: Document Preparation

• Draft and negotiate definitive documents
• SAFE, token warrant, subscription agreement, side letters
• Investor questionnaires and accreditation verification
• Costs: $10K-$30K for document preparation

Week 7-8: Closing

• Signature collection (typically electronic via DocuSign)
• Wire transfers and payment processing
• Form D filing with SEC and states
• Cap table updates
• Costs: $2K-$10K for closing and filings

Total Timeline: 4-8 weeks from term sheet to funding Total Legal Costs: $15K-$75K depending on round complexity

Larger rounds with more investors, complex token structures, or significant negotiation can extend timelines to 10-12 weeks and increase legal costs to $50K-$100K+.

Choosing Legal Counsel

Not all startup attorneys understand crypto-specific issues. Seek counsel with:

Crypto Securities Expertise: Experience with SAFTs, token warrants, and SEC enforcement in crypto context.

Blockchain Technical Knowledge: Understanding of smart contracts, DAOs, DeFi protocols, and technical architecture.

Multi-Jurisdictional Experience: Familiarity with international securities laws for global investor bases.

Regulatory Relationships: Established relationships with SEC, CFTC, and other regulatory bodies.

Transaction Volume: Track record closing crypto financings of similar size and stage.

Post-Closing Compliance Requirements

Raising capital is only the beginning—founders must maintain ongoing compliance:

Form D Filing and Amendments

Initial Filing: File Form D within 15 days of first sale. Failure to timely file can result in loss of exemption and potential SEC enforcement.

State Blue Sky Filings: File required state notices in each state where investors reside, typically within 15 days. Fees range from $0 (some states) to $1,000+ per state.

Amendments: File amended Form D:

• Annually while offering remains open
• When material changes occur (e.g., increased offering amount by 10%+)
• When adding new investor jurisdictions

Record Retention: Maintain all investor documentation for at least 6 years after final sale.

Investor Reporting

Maintain good investor relations through regular updates:

Quarterly Updates:

• Financial performance and runway
• Product development milestones
• Key hires and team updates
• Fundraising status and plans
• Token development progress (if applicable)

Annual Reporting:

• Audited or reviewed financial statements for significant investors
• Cap table updates showing current ownership
• Strategic priorities and roadmap for coming year

Ad Hoc Communication:

• Material events (acquisitions, pivots, regulatory inquiries)
• Token launch announcements and timeline updates
• Subsequent fundraising opportunities (pro rata rights)

Token Launch Compliance

If your company eventually launches tokens, additional compliance is required:

Token Generation Event (TGE) Preparation:

• Legal opinion on token securities status
• Updated risk disclosures for token recipients
• Transfer restrictions and lock-up implementation
• Exchange listing compliance (if applicable)

Distribution to Investors:

• Execute token warrants according to vesting schedules
• Ensure proper wallet addresses and security
• Document distributions for tax reporting

Ongoing Token Compliance:

• Monitor secondary trading and potential securities law implications
• If tokens remain securities, consider registration or additional exemptions
• Engage with exchanges on listing requirements
• Maintain communication with counsel on regulatory developments

Tax Considerations

Crypto fundraising creates tax complexity:

For Companies:

• Consult tax advisors on SAFE and token warrant tax treatment
• Understand potential tax implications of token distributions
• Plan for state nexus and tax filing obligations
• Consider entity structure (C-corp, Delaware, tax treatment)

For Investors:

• Investors must report investments and track basis
• Token distributions may be taxable events
• Exit events (acquisition, IPO) trigger capital gains
• Provide investors with tax reporting information (Schedule K-1, 1099s as applicable)

Conclusion: Choosing the Right Structure

For most crypto startups in 2025, the optimal fundraising structure is:

Early Stage (Pre-Seed, Seed): SAFE + Token Warrant

• Equity-focused with token upside
• Regulatory clarity through established SAFE framework
• Flexibility on token launch timeline
• Investor alignment through dual upside

Growth Stage (Series A+): Priced Equity + Token Pool

• Traditional Series A preferred stock with full governance rights
• Separate token pool with allocations to investors
• More sophisticated investor protections
• Clear board structure and control mechanisms

Avoid: Pure SAFT offerings absent compelling unique circumstances

• Too much regulatory risk
• Limited investor protections
• Ongoing compliance uncertainty
• Difficult to raise from mainstream VCs

The key to successful crypto fundraising in 2025 is balancing innovation with regulatory prudence. By using established equity structures enhanced with thoughtful token provisions, crypto founders can raise capital efficiently while managing legal risk and aligning investors around both equity and network value creation.

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About the Author

Chanté Eliaszadeh represents crypto, AI, and fintech startups on fundraising, corporate transactions, securities law compliance, and regulatory matters. She advises founders on venture capital financings, token launches, DAO structures, and strategic transactions. Chanté helps emerging technology companies navigate complex regulatory frameworks while scaling their businesses.

Need help structuring your crypto fundraise? Contact Astraea Counsel for a consultation on SAFEs, SAFTs, token warrants, and securities law compliance.

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Disclaimer: This article provides general information only and does not constitute legal advice. Securities laws are complex and fact-specific. Consult qualified legal counsel for advice on your specific fundraising situation. Nothing in this article creates an attorney-client relationship.

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Related Resources:

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• SEC Crypto Enforcement Defense - Responding to SEC investigations and Wells notices
• Crypto Startup Legal Checklist - Essential legal requirements for crypto companies
• Corporate & Transactions Practice - Venture capital, M&A, and corporate governance
• Digital Assets & Blockchain Practice - Crypto regulatory compliance and token offerings