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

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.

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.

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/

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.