Web3 cap tables typically range across four different categories, Chris Matta, president of 3iQ Digital Assets, explained to TechCrunch. The first is the traditional cap table, which is similar to traditional technology companies and follows a classic business model that\u2019s more \u201caccessible and understandable by investors,\u201d but would not include a token model.<\/p>\n

The second is a hybrid cap table that has a core list of traditional equity holders along with some investors who are in a token conversion agreement that will grant them token allotments once the token tied to the company is launched. \u201cThese business models focus on the token but use the equity as a transition structure,\u201d Matta said.<\/p>\n

Third is a token-first structure, which has a \u201clean cap table\u201d consisting of the startup founders that\u2019s a pure placeholder on the road to a fully tokenized structure, i.e., the primary capital-raising vehicle, Matta said. \u201cThese structures were popular in the 2017-2018 [Initial Coin Offering] days and have become less prevalent today.\u201d<\/p>\n

\u201cThe days are long but the years are short in crypto,\u201d Stan Miroshnik, partner and co-founder of 10T Holdings, said to TechCrunch. \u201cWhen we started the fund (over three years ago), the premise was really there was no one tooled up to write a $50 million check into the blockchain space at all.\u201d<\/p>\n

In the past 12 months, there\u2019s been a combination of traditional growth investors and crypto-focused investors tapping deeper into the space. Then there are strong existing venture asset managers with more dedicated crypto strategies like Andreessen Horowitz (a16z), Lightspeed Venture Partners, Bain Capital and Sequoia Capital, to name a few.<\/p>\n

Yet, things are accelerating across the board in crypto. Last year, about $32 billion of capital pooled into the crypto world, and this year, $11.35 billion has been invested to date, according to data compiled by PitchBook.<\/p>\n

There\u2019s a clear difference between traditional equity investing and putting capital to work in web3 and crypto companies in terms of ownership, Gao told TechCrunch. \u201cIn traditional equity investing you want to have a Series A or seed stage investor have 20 to 30% ownership of the company,\u201d he said. \u201cBut having 20 to 30% ownership of a token or of a network is very bad and frowned upon by the community. And web3 is all about the community.\u201d<\/p>\n

One way that web3 and traditional venture investments differ is how equity stakes are purchased. \u201cTokenized equity\u201d is a common term across the digital asset industry and involves issuing a digital token, or cryptocurrency, that can signify equity in an organization. The token then serves as equity for investors, but can also be bought by retail investors through a centralized crypto exchange like Coinbase or a decentralized crypto exchange like Uniswap.<\/p>\n

Tokenized equity is different from traditional equity because ownership rights differ; board seats are not handed out to tokenized equity holders, and in a DAO, where tokens equal voting power, venture investors may not be able to arrogate more votes per share, as is standard in some startup deals.<\/p>\n

If there\u2019s a token holder that has 20% ownership of a network, it\u2019s too centralized for web3\u2019s mission of decentralization, Gao noted. \u201cThere will be fear from the community that the individual or entity can dump on the retail investors or community or they\u2019ll have too much voting power relative to the rest of the community, so investors are open to taking lower ownership of a token.\u201d<\/p>\n

Owning traditional equity in web3 is similar to owning equity in Web 2.0 companies, Gao said. But the nuance is that owning 10% equity of a web3 protocol doesn\u2019t necessarily equate to owning 10% of the organization\u2019s tokens, Gao said. Therefore, an investor would most likely get fewer tokens, perhaps as high as 5%, even if they have more equity. This can be used for a number of things, like governing power to vote on issues within the organization, but without giving them a majority stake.<\/p>\n