The Two Cap Tables of Crypto Companies: What They Are and How They Relate to Each Other

The Two Cap Tables of Crypto Companies: What They Are and How They Relate to Each Other

In the world of cryptocurrency, there are two cap tables that play a crucial role in the success and growth of crypto companies. These cap tables are known as the equity cap table and the token cap table. While they serve different purposes, they are closely related and work hand in hand to ensure the stability and prosperity of crypto companies.

Let's start by understanding the equity cap table. This cap table dictates the ownership of the company's equity and is typically distributed pro-rata across the equity cap table. It includes the shares owned by investors, founders, employees, and other stakeholders. It is the traditional way of representing ownership in a company and is widely used in the world of finance.

However, in the realm of cryptocurrency, the token cap table takes center stage. It is similar to the equity cap table but has some unique elements that set it apart. The token cap table includes the ownership of tokens, which are the lifeblood of the crypto economy. These tokens are often used as a means of exchange within the network and carry significant value.

One notable difference between the two cap tables is the presence of the treasury in the token cap table. The treasury captures tokens from the foundation's efforts to participate in the community, such as running validators or stakers. This treasury is a vital component of the crypto ecosystem and plays a crucial role in the development and growth of the network.

It is important to note that most deals in the crypto space are bespoke, meaning they are tailored to the specific needs and goals of the company. Investor token ownership rights may take the form of a warrant, giving equity investors the right, but not the obligation, to purchase tokens at a discounted price in an early funding round. This unique feature further blurs the lines between the equity cap table and the token cap table.

Now that we have a clear understanding of the two cap tables, let's shift our focus to another important topic in the world of startups and growth: activation rate. Activation rate is a metric that measures the percentage of users who hit a specific milestone in a product's onboarding process. It is a highly predictive and actionable metric that growth teams can directly impact.

A good activation rate should be highly predictive of long-term value delivery to the user, which often translates into long-term retention and monetization. Users who successfully hit the activation milestone should retain at a rate at least 2x better than those who do not complete the activation step. This indicates that the activation process has effectively demonstrated the value of the product to the user.