Serious Crypto investing: gathering tickets and investing in SAFE + warrants.
Investing with Odin
In the last 4 quarters almost 10 billion was invested in over 1200 rounds in the crypto space according to Rootdata. Although since the bull market the total amount has been in decline, investors are still willing to invest in this growing market. Luckily in Q1 2024 we see a glimpse of a recovery in number of rounds.
The crypto space offers various investment vehicles that cater to both early-stage startups and seasoned investors. In this article, we will delve into the intricacies of SAFEs, token warrants and SAFTs, and explore the significance of Special Purpose Vehicles (SPVs) for DAOs and angel syndicates.
How Crypto Raises Money
Crypto fundraising encompasses a multitude of investment vehicles, each with its own unique features. One common method involves issuing equity in exchange for investment, which is often done through a SAFE (Simple Agreement for Future Equity). However, the crypto world has also introduced instruments like SAFTs (Simple Agreement for Future Tokens), which allow investors to purchase tokens at a specified price or discount rate in the future. While SAFTs are widely used, they may be less favorable in certain cases due to regulatory concerns. Luckily SAFEs can be issued with a token warrant. This approach provides investors with both equity and the option to acquire future tokens. It's a flexible strategy that aligns the interests of early-stage crypto companies and investors, especially since crypto companies might not directly want to design a token and its tokenomics. Luckily we see more companies raise through equity and often with a token warrant. The data on the investment vehicle for crypto raises is scarce, but a quick glimpse on OTC markets we can see SAFE and SAFE + token warrant deals found their place.
Crypto investing through DAOs and Angel Syndicates
Decentralized Autonomous Organizations (DAOs) and angel syndicates have embraced crypto investments as a means to pool funds and expertise to amplify their impact in the crypto space. Through their pooled knowledge they can make well informed decisions while often providing support for the companies through their shared skills and network. Despite the advantages, these crypto investment groups face several common challenges. The costs associated with legal services need to be shared among participants. Additionally, most lawyers lack specialized knowledge in crypto investments, which complicates finding the required expertise while costs can turn out higher. From the viewpoint of the company founders, often the legal work and communication responsibilities for all investors can be a time-consuming task if they would want to take on single tickets. DAOs often solve this by appointing a single member or entity with the task to close the deal, which means individuals in the DAO aren’t legally entitled to the equity. These handshake agreements still happen and can lead to awkward moments when DAOs split up or can’t come to an agreement.
The Role of Special Purpose Vehicles (SPVs)
Special Purpose Vehicles (SPVs) are a fitting solution for these group investments. In the context of angel investing and venture capital, SPVs offer simplicity, governance efficiency, and potentially tax benefits. These legal entities can be structured as limited partnerships, nominees, or limited liability partnerships, depending on the specific needs of the investment.
In crypto, the nominee/Bare Trust structure is gaining traction. It allows investors to purchase a portion of the underlying asset, such as startup shares, and nominate a non-trading limited company to hold these assets on their behalf. This approach simplifies the process, reduces complexity, and can minimize tax implications for investors.
Odin: Simplifying Crypto Investments
To navigate the complexities of SPVs, Odin provides a platform that caters to both investors and startups. With Odin, you can run angel syndicates, join forces with other investors, roll up your investors as a founder, or even invest in venture capital funds. The platform offers an easy way to spin up SPVs for a low cost which removes the need for finding and hiring expensive legal advisors, while individual members of the SPV are entitled to their share of the investment.
To get started with Odin, investors can contact their Sales team. Deus Ex DAO has experience investing through SPVs and through Odin. Investment DAOs, angel syndicates and founders are all invited to reach out to us for further assistance. Several Deus Ex DAO members are investors in Odin.
In conclusion, the world of crypto fundraising offers a plethora of opportunities, from SAFTs to DAOs and angel syndicates. However, the challenges of legal complexity and communication persist. Special Purpose Vehicles like those offered by Odin have emerged as a perfect solution, simplifying the investment process while ensuring a seamless experience for all participants. Discover Odin today to streamline your investment process and ensure legal compliance.