Token Pre-Sale and Issuance: Why Your Equity and Your Token Should Never Share an Entity

Episode 1 of the Otonomos Podcast: Han Verstraete walks Anton Kouprianov through structuring a raise that combines equity and tokens — and the two reasons those two things must never live in the same legal wrapper.

Here's the premise most founders arrive with: they're going to give away equity and their investors want tokens. Before accepting that as a given — some projects fund entirely through a token pre-sale, no equity at all, and keep a lot more control of their own destiny by doing so. But if equity is coming into the picture, there's a template worth following, because equity investors and token holders bring genuinely different, sometimes conflicting agendas to the table.

Split the entity, not just the paperwork

Equity goes into an entity investors already trust by habit: Delaware C-Corp first, UK limited a distant second, Singapore further behind still. VCs will not take equity in a Dubai company — not because there's anything wrong with Dubai, but because there's no precedent for it, and precedent is most of what a term sheet lawyer is pricing in.

The token side needs its own special-purpose vehicle, issuing pre-sale commitments as a token warrant (for US investors) or, for non-US-only rounds, a combined SAFT-style instrument. BVI remains the default jurisdiction for these token issuance vehicles; Panama is a credible second, mainly because it doesn't carry the Virtual Asset Service Provider licensing regime that now catches Cayman and the Marshall Islands — regimes that can require even a project's own token issuance to be separately licensed.

Why does this split matter so much? Two reasons. First, regulatory: issuing a token out of the same entity that's writing your code and paying your AWS bill invites exactly the scrutiny a securities regulator is built to apply. Second, litigation: if the equity company and the token vehicle are legally entangled, a bad outcome on one side drags the other down with it.

Team allocation: generous is fine, unlocked is not

Team token allocations don't need formal warrants — they're a matter of clear disclosure to investors up front. What they absolutely need is lockups and vesting, ideally mirroring the one-year-cliff, four-year-vest convention Web3 too often skips in favour of Web2. Skip vesting and you get the pattern this industry knows too well: a token pops, the team has a one-day payday, and — human nature being what it is — some of the best people quietly move on because there's no remaining incentive to stay. A small carve-out for liquidity on the token's trading debut (around 10% of team holdings) is standard and reasonable; the rest stays locked on a schedule longer than investors typically accept for themselves.

Price it in the warrant, not on a promise

Token warrant pricing usually gets fixed at issuance — a stated per-token price investors will pay once tokens are created — rather than calculated later against a priced equity round. Investors will push for a straight percentage-of-total-supply conversion; be precise about which supply that percentage applies to, current mint or all future mint, or you can end up handing over far more of the token than intended.

Do you need a foundation before the token exists?

Not necessarily on day one, but sooner than most bootstrapped teams want to hear. The orthodox path is: foundation first, token issuance vehicle second, hung underneath it — because without that foundation, you personally are the visible issuer of the token the moment anything goes wrong, and litigation has a way of piercing the "nobody can see I own this" assumption. The extra cost is modest — roughly US$10K for the foundation, a couple of thousand more for the vehicle beneath it — against the credibility signal it sends to investors who've seen enough shortcuts to spot one from a distance.

For a US-centric project with a genuinely non-security token, a Wyoming DUNA (decentralized unincorporated nonprofit association) is a materially cheaper alternative to an offshore foundation — worth its own conversation, and its own article.

Governance in the interim doesn't need to be a production: a Cayman foundation is deliberately founderless, with no named members or shareholders, and can sit quietly as the shareholder of the token vehicle until roughly a month or six weeks before token launch — at which point the constitution gets swapped for a properly decentralised one.

Keep the BVI vehicle, or let it go?

Depends entirely on your inflation model. Mint every token that will ever exist on day one, and you can migrate everything into the foundation's community-controlled treasury and let the BVI vehicle lapse. Plan ongoing minting, and you keep the BVI entity — owned by the foundation, not by you personally — issuing tokens indefinitely as new mints trigger.