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

Introduction:

In the world of crypto companies, there are two cap tables that play a crucial role in their operations and success. These cap tables are known as the equity cap table and the token cap table. While they may sound similar, they have distinct differences and serve different purposes. In this article, we will explore what these cap tables are and how they relate to each other.

The Equity Cap Table:

The equity cap table is a familiar concept for traditional companies. It represents the ownership structure of a company in terms of equity shares. The equity cap table outlines the distribution of ownership among the company's founders, employees, and investors. It provides a clear picture of who owns what percentage of the company.

In the context of crypto companies, the equity cap table dictates the ownership of the treasury. The treasury is a unique element in crypto cap tables and captures tokens from the foundation's efforts to participate in the community. These efforts can include running validators or stakers, which are essential for the network's stability and security.

The Token Cap Table:

The token cap table, on the other hand, is specific to crypto companies. It represents the distribution of tokens within the company's ecosystem. Tokens are a form of digital currency that hold value and can be used within the company's network. They incentivize network participants, such as validators and stakers, to contribute to the growth and success of the network.

In the token cap table, the community allocation takes precedence. Community tokens are distributed to network participants to jumpstart network effects. These tokens serve as incentives for validators and stakers to actively engage in the network and contribute to its development. The community allocation plays a significant role in building a strong and vibrant crypto community.

The Relationship Between the Two Cap Tables:

While the equity cap table and the token cap table have different focuses, they are interconnected and influence each other in several ways. The treasury's ownership, as dictated by the equity cap table, is distributed pro-rata across the equity cap table. This means that the distribution of tokens within the token cap table is influenced by the ownership structure outlined in the equity cap table.

Furthermore, the investor token ownership rights in the equity cap table can impact the token distribution. In some cases, investors may have the right to purchase tokens at a discounted price in early rounds. This creates a unique dynamic where equity investors can become token holders and benefit from the success of the network.

Actionable Advice:

• 1. Understand the Importance of Community Allocation: As a crypto company, it is essential to prioritize the community allocation in your token cap table. By incentivizing network participants to actively engage in the network, you can foster a strong and vibrant community that contributes to the growth and success of your company.

• 2. Consider the Interplay between Equity and Token Ownership: When structuring your cap tables, it is crucial to consider the relationship between equity and token ownership. By aligning the interests of equity investors and token holders, you can create a harmonious ecosystem where both parties benefit from the company's success.

• 3. Evaluate Bespoke Deals Carefully: In the crypto industry, most deals are bespoke and tailored to specific circumstances. When entering into such deals, it is important to evaluate them carefully and consider the long-term implications for your cap tables. Be mindful of the potential impact on token distribution and ensure that it aligns with your overall strategic goals.

Conclusion:

In the world of crypto companies, the equity cap table and the token cap table are two critical components that shape the ownership and distribution of value within the company's ecosystem. While they have distinct differences, they are interconnected and influence each other in various ways. By understanding the relationship between these cap tables and incorporating actionable advice, crypto companies can optimize their ownership structures and create a strong foundation for success.