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SeedSAFT raise funds now, issue tokens later
Funding Guides 4 min read

Introducing SeedSAFT, you can now do a token raise on SeedLegals

Published:  Dec 5, 2022
Kirsty Macsween
Kirsty MacSween

We’re proud to announce SeedSAFT, our first fundraising solution for companies looking to raise with crypto.

More and more companies are issuing blockchain-based tokens as a fundraising strategy. But until now, there’s been no trusted legal agreement used across the industry.

So we analysed dozens of the different SAFTs and worked with industry leaders to build what we hope will become the new standard: SeedSAFT, the first automated SAFT for companies that want to raise cash now, mint tokens later.

Why? Because we’re always working to make fundraising easier, faster and more economical. And when it comes to the documentation involved, we believe crypto doesn’t have to be cryptic.

In this post

SAFT fundamentals

SAFT stands for Simple Agreement for Future Tokens, and it follows the same basic principles as the SAFE (Simple Agreement for Future Equity), popular in the US, and SeedFAST, our UK market standard equivalent.

A SAFE or SeedFAST allows investors to invest now with the investment converting into shares at some future time when the company does a funding round. A SAFT allows purchasers to pre-pay for tokens that haven’t been released yet. The purchaser receives their tokens at a future time following a token generation event when tokens are issued.

Traditionally, investors buy shares with the hope that the value of the company will grow and with it the value of their shares. With a SAFT, the purchaser puts their cash upfront for tokens, with the hope that there will be a market for those tokens later.

When you issue shares, investors generally understand what ‘shares’ means and the rules of equity investing (return of capital on a sale of the company, preemption, voting rights, etc). But with tokens, especially ones that haven’t launched yet, investors will want more information about what the tokens do and how they work, the so-called ‘tokenomics’, before they’ll give you their money.

That’s why SAFTs typically come with a whitepaper, or link to an online whitepaper that describes the token, its uses and the token’s return of capital potential. It’s roughly equivalent to a pitch deck in a funding round.

Who can use a SeedSAFT, and when?

SeedSAFT helps you bring in funds before you’ve fully developed the token, but ideally after you’ve already developed a sufficiently detailed description of the offering. SeedSAFT is designed to raise investment once you have a clear idea of how the token will work, including its market price and tokenomics.

If you’ve already done the token issuance, then you’d need a Token Purchase Agreement instead of a SAFT. You might not actually need any agreement at all if the conditions of subscription are embedded within the token’s smart contract.

To create a SeedSAFT, first you’ll need:

  • a whitepaper detailing the token’s specifications. This isn’t legally binding, but it’s expected that you stick as closely as possible to the plan you set out here. A whitepaper usually includes:
    • the tokenomics
    • your token distribution plan, including prices and stages of distribution
    • how you’ll issue the tokens to the purchaser
  • an estimate of when your token generation event will take place

If your token plans aren’t yet at this stage or you’re already ready to put your tokens into circulation, then you’ll need a Token Warrant or a Token Purchase Agreement instead.

SeedSAFT is currently available for UK-registered companies and companies using English law. We’re working to launch SeedSAFT for Singapore-registered companies next - if you’re interested, get in touch.

SeedSAFT key terms

With SeedSAFT, you decide whether the purchaser will pay in fiat, cryptocurrency, stablecoin or another token. Your SeedSAFT will also include the details of the account or wallet the payment will be paid into so you can receive your funds directly.

The SeedSAFT sets out:

  • the discount to the token price at launch, if any
  • the longstop date, if any – this is the deadline for a token generation event to take place. If no tokens have been issued by this point, then the payment is refunded
  • information about the vesting schedule and lock-up rules that restrict the purchaser’s ability to sell or transfer the tokens
  • the option to provide a refund to your purchasers if the tokens are not issued by the longstop date, or if the company is liquidated, or if the funding target is not reached by the funding deadline (if you have one)

When you create your SeedSAFT, the SeedLegals platform also creates all the supporting documents you might need, including an investor consent notice, board resolution and shareholders resolution.

SeedSAFT is just the start

We want to create documents for every part of your token raise journey. That’s why we’re working on a Token Warrant and Token Purchase Agreement to sit alongside SeedSAFT.

Our Token Warrant will give purchasers the right to buy tokens that you might issue in the future, even if you’re still in the early stages of working out what they’ll do and how they’ll work. The Token Warrant will be for companies who might wish to issue tokens to investors as a sweetener for making an equity investment in a funding round, or perhaps to an advisor in return for services. Basically, it’s the token equivalent of a warrant for equity, or granting share options.

The Token Purchase Agreement is for when tokens are just about to be issued or are already in circulation, rather than a SeedSAFT which is an advance purchase of tokens that will issued at some time in the future.

How can we help?

If you’re looking for support on correctly structuring your tokens, please seek specialist advice.

Our step-by-step workflow, inline instructions and expert help from our team make it quick and easy to generate the documents you need for your token raise. And as with everything on SeedLegals, it’s easy to sign, share and store online.

Speak to our team today to find out if SeedSAFT is right for you, or register your interest for our Token Warrant or Token Purchase Agreement.

Start your journey with us

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