Web3 startups’ cap tables can look quite different from conventional ones. Along with issuing fairness as a type of incentive alignment for workers, as a typical startup would, crypto corporations typically additionally subject tokens that signify possession. Tokens are a completely separate asset class with their very own complexities, guidelines and laws.
Cap desk administration software program firm Carta commanded a $7.4 billion valuation final August for its suite of instruments that assist corporations navigate fairness issuance, compensation and associated challenges. Whereas Carta has been round for practically a decade, there’s a brand new upstart trying to replicate its mannequin for the nascent cohort of web3 startups, via a deal with token administration — LiquiFi.
Due to the relative newness of token-based compensation as a widespread apply, many web3 corporations handle their cap tables manually, utilizing customized, in-house programs and spreadsheets, Robin Ji, CEO and co-founder of LiquiFi informed TechCrunch.
LiquiFi, a part of Y Combinator’s winter 2022 batch, helps startups automate their token vesting, handle their token cap desk and subject token grants in compliance with laws, Ji mentioned. Ji and LiquiFi co-founder and CTO Oliver Tang acknowledged the challenges related to token-based compensation after working at different crypto corporations, Eco and Set Labs, respectively.
Since its founding final 12 months, the corporate has gone stay on Ethereum and Polygon, and is “shortly increasing to different chains,” Ji mentioned. Whereas he didn’t share the variety of prospects the corporate is working with immediately, he mentioned LiquiFi’s buyer listing consists of each massive DeFi protocols and smaller startups which are simply launching a token for the primary time.
“We undoubtedly have a protracted listing of consumers which are about to launch a token, however haven’t onboarded but,” Ji added.
Token administration differs from fairness administration due to some basic variations between the 2 asset lessons, Ji mentioned. Tokens are extra dynamic than fairness — you’ll be able to vote with them, stake them, lend them out, and supply liquidity, he continued.
One other key distinction is that when conventional fairness is transferred, authorized papers and agreements serve the aim of monitoring possession. In distinction, when tokens are transferred, belongings transfer on a blockchain and a switch of custody takes place, Ji defined. The expertise wanted to switch tokens could be advanced, generally requiring corporations to jot down customized code.
“In a standard [platform like] Carta, you principally click on buttons, work with legal professionals to draft agreements, and also you ship it off for them to signal, and that’s principally the switch of belongings,” Ji mentioned. “However with tokens, there’s that, plus the precise asset that’s being transferred, so the expertise piece is one factor … The second piece with tokens is normal know-how of compliance and processes.”
LiquiFi helps corporations with each points. Its product immediately is geared towards corporations that have already got their very own tokens or are on the verge of launching them. Finally, although, Ji hopes so as to add options that may serve prospects properly earlier than they’ve launched a token by serving to them determine normal practices and processes to handle their token allocation.
“The identical manner that you’d take into consideration distributing fairness to traders or staff, there’s the same technique that you simply wish to apply on reserving a finite provide of tokens, and the way you wish to allocate them to the respective events for one of the best ROI for what you are promoting,” Ji mentioned.
The core product features a dashboard the place prospects can see their sensible contracts and tokens excellent in addition to tax compliance options. LiquiFi can be engaged on a product that may permit people with locked or vesting tokens to earn extra yield on these tokens whereas they’re being held — a completely new functionality that no different firm had developed beforehand, Ji mentioned.
The startup introduced immediately that it has raised $5 million in seed funding led by Dragonfly Capital Companions. Nascent, Alliance DAO, sixth Man Ventures, Robotic Ventures, Y Combinator and Orange DAO additionally participated within the spherical, in addition to outstanding angel traders within the crypto area together with Balaji Srinivasan, Katie Haun, Packy McCormick, Anthony “Pomp” Pompliano and Anthony Sassano.
LiquiFi plans to make use of the funding to spend money on product improvement, design, advertising and marketing and gross sales, Ji mentioned. The corporate additionally hopes to rent in-house counsel and construct out a recruiting staff, he added. By way of including compatibility with different blockchains, he mentioned the corporate plans to start out with EVM-compatible ones within the close to time period and finally develop to different chains corresponding to Solana and Terra.
The corporate’s fundraising course of moved quick, Ji mentioned. He hopes the enterprise will have the ability to proceed scaling quickly.
“The largest danger for us is simply ensuring that we’re transferring as quick because the [crypto] market is transferring, as a result of if we don’t, then we’re going to be left behind,” he mentioned.
