Founders

1/ We're seeing more and more crypto startups stuck with predatory terms from early-stage deals. 

Don't let early-stage investors set you up for long-term failure and jeopardize future fundraising rounds. 

Here's what you should look out for:

Trying to solve more problems than I cause @a16zcrypto

https://linktr.ee/milesjennings

3/ Investor's Behaving Badly - Short Lockups:

Short lockups can be dangerous, enabling investors to sell early and disrupt project stability. 

Lockup schedules should be the same among investors and ensure long-term commitment from all stakeholders.

4/ Investor's Behaving Badly - Blocking Rights:

Unqualified approval rights over a token launch give investors hold up rights to negotiate for  better economics. 

Founders should maintain control over launch decisions to avoid strategic misalignments.

5/ Investor's Behaving Badly - Network Exploitation:

Investors shouldn't compete with their portfolio companies. 

Unrestricted use of company tech by investors can undermine the project’s goals and should be prohibited.

6/ Investor's Behaving Badly - Disregarding Regulatory Compliance:

Investors ignoring portco regulatory compliance likely don't take their own compliance seriously either, which can put companies at risk. 

Prioritize partnerships with those that care about the law.

7/ For more, see the post we just published:

7/ For more, see the post we just published: 
https://a16zcrypto.com/posts/article/token-rights-in-term-sheets-how-to-avoid-predatory-deals/

2/ Investor's Behaving Badly - Fixed Token Allocation Rights:

Beware fixed, non-dilutable token interests. They limit flexibility and future growth, forcing founders to sacrifice builder incentives. 

Token rights should be proportional to equity and dilutable.

Not quite the right conclusion. Its an incentive alignment problem, and it's a solvable one:

BDFL of Quilibrium, Eng @ Farcaster, ex-Coinbase, always opinionated, never hydrated

/quilibrium

All but one of these are based around deals involving tokens. Seems like the correct route is for founders to not entertain token-oriented deals at all. Hopefully crypto VCs that want to rise above the problem will do the same.