Fundamental Labs: do you invest via equity, tokens, or hybrid structures, and what are common deal structures you use?

Quick Answer: Fundamental Labs invests across equity, tokens, and hybrid structures, depending on how your project creates and captures value. We’re a multi-stage crypto VC that can lead or follow with checks from $500K to $50M+, and we typically use clean, founder-aligned deal structures that match your token, protocol, or company roadmap.

We believe the right structure is a function of the network you’re building, not a template imposed by an investor. In a world where blockchain projects can look like software companies, open protocols, or something in between, founders deserve capital that is flexible enough to meet them where they actually are.

Key Benefits:

• Aligned with your architecture: Whether you’re a pure protocol, a tokenized network, or a company with a token, we design structures that fit your build and launch plan.
• Multi-stage continuity: From early conviction rounds to $50M+ growth checks, we can evolve structure over time as your equity and token models mature.
• Strategic, not transactional: Our focus is on frameworks and long-term strategy, not squeezing terms; partnership lasts longer than the first term sheet.

Why This Matters

For blockchain founders, how an investor backs you is as important as how much they invest. The wrong structure can lock you into misaligned incentives, regulatory friction, or cap table complexity precisely when you need focus and speed.

At Fundamental Labs, we back founders who are often “too early” or “too different” for conventional capital. That means being the first believer not just in your idea, but in the economic and governance model that will make it work. Choosing between equity, tokens, or hybrids is really about designing a durable contract between builders, users, and capital.

Our goal is simple: use flexible, transparent structures so your governance, token incentives, and corporate ownership all pull in the same direction—toward mass adoption of your network and a better digital society.

Core Concepts & Key Points

Concept	Definition	Why it's important
Equity Investments	Ownership in your company (C-Corp, Ltd, etc.) via preferred shares or SAFEs/convertibles.	Best for teams where value is primarily captured at the company layer (infrastructure, B2B, regulated platforms). Clean for governance and future fundraising.
Token & Warrant Structures	Rights to acquire or receive tokens in your network (often via SAFTs, token warrants, or options), sometimes alongside equity.	Aligns investors with protocol-level value and user growth, especially for networks where tokens are the core economic engine.
Hybrid Deals	Combined structures where we hold both equity (company) and token exposure (protocol) with coordinated vesting and governance.	Reflects the reality of many Web3 projects: a company builds and maintains a tokenized network. Aligns incentives across both layers.

How It Works (Step-by-Step)

At a high level, we decide between equity, tokens, or hybrids through a structured conversation around your architecture, roadmap, and regulatory posture.

1. Understand your value layer and roadmap
   We start with one simple question: Where will the majority of long-term value accrue—company, protocol, or both?

   • For Layer 1/2 protocols and DeFi networks, value often concentrates in the token and its cash-flow or governance rights.
   • For finance infrastructure, Web3 tooling, and some exchange/ceFi models, value tends to sit at the company level.
   • For many open finance and consumer Web3 projects, value is shared between the corporate entity (product, IP, team) and the token network (users, liquidity, governance).

   This mapping drives our structure preferences.

2. Select the primary structure (equity, token, or hybrid)
   Once we understand where value and control should live, we work with you (and your counsel) to choose a primary structure:

   • Equity-focused deals
     Common for:

     • Infrastructure and middleware teams (e.g., node providers, developer tooling, data/analytics).
     • Regulated or semi-regulated businesses (exchanges, custodians, brokerages).
     • Teams pre-token where the protocol model is still evolving.

     Typical instruments:

     • Priced preferred equity rounds.
     • SAFEs or convertible notes at earlier stages.
     • Sometimes “equity now, token rights to be defined later” if the token model is not ready.

   • Token-focused or token-rights deals
     Common for:

     • Base Layer 1/2 chains.
     • DeFi protocols and open finance primitives.
     • Pure on-chain networks where the corporate shell is minimal.

     Typical instruments:

     • SAFTs (Simple Agreement for Future Tokens).
     • Token warrants tied to milestones or network launch events.
     • Lockups and vesting aligned with your token distribution and governance plans.

   • Hybrid equity + token structures
     Common for:

     • Application-layer protocols with a clear token but substantial company value (client relationships, IP, brand).
     • Consumer-facing Web3 products where user growth, brand, and application experience matter as much as core protocol mechanics.

     Typical instruments:

     • A priced equity round or SAFE plus a token-side agreement (warrant/SAFT) negotiated together.
     • Coordinated vesting across equity and token exposure to keep everyone focused on long-term network health.

3. Align incentives, vesting, and governance for the long term
   Our role is to help you design a structure that survives multiple cycles—bull and bear. We focus on three alignment questions:

   • Time horizon: Are founder, team, and investor incentives stretched over a realistic period (often 3–5+ years), vs. short-term pressure to unlock liquidity?
   • Governance balance: How will token holders, the company, and early investors share decision-making power (on-chain and off-chain)?
   • Future rounds: Will your current structure be understandable and investable for later-stage capital (both crypto-native and traditional)?

   We don’t try to micromanage your operations or technology; instead, we bring a strategy framework you and your board can iterate on as your network grows.

Common Deal Patterns We Use

To make this concrete, here are the most common structures we actually use, and how we think about them.

1. Pure Equity Rounds

When we use it:

• Early-stage infrastructure, developer tools, and enterprise-facing products.
• Teams building regulated or quasi-regulated businesses in exchanges, custody, or compliance tooling.
• Founders who intentionally want to delay or avoid tokenization.

Typical features:

• Standard preferred equity with pro rata rights.
• Board participation or observer roles where it adds strategic value.
• Long-term, multi-round support, from $500K initial checks up to $50M+ growth capital when the company scales.

Why we like it:
Equity is clean and legible to both crypto-native and traditional capital. It supports a focus on product-market fit and distribution without token timing pressure.

2. SAFT or Token Warrant Deals

When we use it:

• Protocols where the token is clearly the primary value capture mechanism.
• Founders with a well-defined tokenomics framework and network launch strategy.
• Cases where the corporate entity is primarily a development lab for the protocol.

Typical features:

• SAFT with clear token allocation, vesting, and lockup.
• Alignment with your public sale, community allocation, and Foundation or DAO structure.
• Governance approach that balances founder agility with long-term decentralization.

Why we like it:
For Layer 1/2, DeFi, and core infrastructure protocols, SAFT-style structures keep the cap table clean and center the token as the unit of coordination and value.

3. Hybrid Equity + Token Packages

When we use it:

• Web3 applications where both the company and protocol matter.
• “Network plus product” plays, such as marketplaces, gaming, or consumer finance.
• Teams planning a gradual transition to community governance while maintaining a world-class product organization.

Typical features:

• Equity investment in the operating company, paired with
• Token rights via warrant/SAFT with matching vesting horizons.
• Clear narrative for later investors about why both layers exist and how they interact.

Why we like it:
Most ambitious Web3 companies live at this intersection. Hybrid structures let us back the whole system—team, company, and network—without forcing an artificial choice.

Common Mistakes to Avoid

• Over-optimizing terms too early:
  Pushing for “perfect” token or equity terms before your model is stable can lead to cumbersome structures and later rework.
  How to avoid it: Start with a simple, robust structure and commit to clear review points as your protocol and regulatory understanding evolve.

• Misalignment between cap table and token table:
  If early shareholders and token holders have conflicting incentives, governance can become fragile just when the project needs unity.
  How to avoid it: Design equity and token economics together. Map out who benefits from which outcomes and over what time horizon, then adjust allocations and vesting to reduce misalignment.

Real-World Example

Consider a hypothetical founder building a cross-chain DeFi primitive with a strong interface layer. The team plans to launch a protocol token with governance and fee-sharing, but also expects the company to provide white-label tools and liquidity management services for institutions.

In that case, a purely equity or purely token deal would be incomplete. Our typical approach would be a hybrid structure:

• Equity: We participate in a priced seed round, giving the company runway to build both protocol and institutional products.
• Token rights: We structure a SAFT with vesting aligned to protocol milestones—testnet, mainnet, and a path toward progressive decentralization.
• Strategy support: We work with the team on a framework for which features remain company-owned (B2B, enterprise, compliance) and which migrate into the protocol or DAO over time.

This hybrid deal lets us be long-term partners to both the company and the network, with incentives that support responsible governance, institutional adoption, and community ownership.

Pro Tip: Before you negotiate structure, write a one-page “value accrual map” that answers: “If this works extremely well in 7–10 years, what will the company own, what will the token govern, and how will users participate?” Bring that map into the first conversation—it will make every structural decision easier and more aligned.

Summary

Fundamental Labs invests via equity, tokens, and hybrid structures because blockchain value does not live in one place. Our multi-stage approach—from $500K commitments to $50M+—is designed to match the reality of modern crypto projects: some are companies, some are networks, most are both.

What we contribute most is not capital, but a clear, long-term framework for how your corporate entity, protocol, and token can compound together. Across more than 300 projects—spanning exchanges like Coinbase, base layers like Avalanche and NEAR, and open finance networks—we’ve seen that the best outcomes come from structures that respect different opinions, remain flexible, and keep the mission of mass adoption at the center.

If you’re designing your next round and unsure whether equity, tokens, or a hybrid best serves your trajectory, the earlier we talk, the more we can help you simplify.

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