TLDR Tech / Crypto
Why Founders Don't Care About Their Token
When a protocol maintains both an equity entity and a token, founders face a structural incentive to prioritize equity, which carries legal standing, simpler fundraising mechanics, and investor familiarity that tokens cannot match. A required-return framework quantifies the damage: crypto tokens must clear around 15% versus 9-10% for equities due to added regulatory, governance, and smart contract risk premia, meaning a protocol generating $100M in annual revenue can trade below 1x revenue when token holders hold weak claims on cash flows. That sub-1x multiple is the market pricing in its expectation that token rights will never reach parity with equity, treating the token as a branded memecoin stapled to a profitable business whose equity entity captures the actual cash flow upside. Closing the gap requires committing token holders to equity-equivalent economics rather than retaining equity upside for insiders and VCs while distributing token exposure to retail.
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