As a founder, you might face tough choices during crypto fundraising. Raise now and risk early dilution, or wait and lose momentum. Meanwhile, investors want token exposure. But jumping straight into token sales can trigger regulatory risks.
In this case, Token Warrants can offer a smarter path. They let you lock in funding today, but delay token issuance until your project hits real milestones. It can be your Token Generation Event (TGE) or mainnet launch.
This gives you breathing room. No rushed tokenomics. No cap table chaos. And investors stay aligned until you’re ready.
In this guide, you’ll learn when and how to use Token Warrants. And most importantly, why they’re becoming a must-have tool for Web3 founders raising in today’s fast-moving market.
Token Warrants: A Smarter Way to Fundraise Without Losing Control
Raising capital in Web3 is nothing like traditional fundraising. Regulations change fast. Tokenomics keep evolving. And timing can make or break your project.
For founders, staying flexible while protecting long-term goals is non-negotiable. Token Warrants help you do both. They give investors the right (but not the obligation) to buy tokens later, after you’ve hit major milestones like TGE or network launch.
Used well, Token Warrants become a powerful lever. They help you control dilution, align investor incentives, and avoid rushing into token sales during uncertain regulatory conditions.
Today, they’re more relevant than ever. Crypto fundraising surged 180% in November 2023, hitting $1.67 billion across 111 deals. As capital flows back into Web3, founders need smarter ways to structure deals. Token Warrants offer exactly that.
Where Token Warrants Fit in the Web3 Fundraising Stack
Crypto fundraising has matured. Gone are the days when a simple token sale could solve everything. Today, founders need to think carefully about how each fundraising tool affects control, timing, and future tokenomics.
Get it right, and you keep flexibility. Get it wrong, and you could be stuck with early dilution or legal risks.
You’ve probably heard of (or used) SAFTs, Token Sale Agreements, or Token Side Letters. Let’s break them down and see where Token Warrants offer something better.
SAFT: Direct but legally risky
SAFTs (Simple Agreements for Future Tokens) are simple on paper. Investors pay upfront and get tokens later, usually after launch.
But here’s the catch: they can bring serious legal risks. Selling future tokens before your product or utility is live can trigger securities issues in many countries.
Founders often underestimate this risk. SAFTs may bring quick funding, but they can expose you to expensive regulatory problems later.
Read Also: SAFT vs SAFE Agreement for Crypto Fundraising
Token Sale Agreements: Immediate but rigid
Token Sale Agreements (TSAs) are even more straightforward. Investors pay, tokens get issued immediately.
But this forces your hand. If you sell too early, tokens may hit the market before your product or community are ready. That’s when price crashes, bad optics, and tokenomics headaches start. For founders still building, this can backfire fast.
Token Side Letters: Flexible perks, but limited scope
Side Letters add extra rights on top of SAFTs or TSAs. Investors might get better discounts, longer lock-ups, or more governance access.
But they don’t solve the real issue. You still need to sell tokens upfront. Side Letters help smooth terms, but they don’t delay issuance or reduce early dilution.
Where Token Warrants Win
This is why more founders now turn to Token Warrants. Token Warrants give investors the right to buy tokens later (after you hit real milestones). Think of it like this: they commit now, but you keep control of when tokens are issued.
That means:
No pressure to issue tokens before you’re ready.
More time to perfect tokenomics and launch strategy.
A way to align investors with your roadmap (they benefit only when you hit success markers).
Reduced risk of regulatory scrutiny, since tokens aren’t issued upfront.
In short, Token Warrants give you breathing room and flexibility. There are two things founders rarely have during fundraising.
When You Should Consider Token Warrants
Token Warrants make sense when you face challenges like:
You need to delay token issuance until your product, network, or ecosystem reaches key milestones.
Your roadmap is milestone-driven and you want investors motivated to support long-term goals.
You want to avoid early dilution and navigate regulatory uncertainties smartly.
In these cases, Token Warrants provide something rare in Web3 fundraising. They let you raise capital while staying in control of your project’s future.
Key Terms and Mechanics of Token Warrants (What Founders Must Know)
Token Warrants are flexible. But that flexibility only works if they are structured clearly. Loose or vague terms can lead to confusion down the road. Investors need clarity. You need control. Smart founders make sure both sides know exactly how the warrant works from day one.
Here’s what to get right.
Trigger Events → When investors can exercise
First, define the trigger. This is when investors can actually use their warrant to buy tokens. The clearer this is, the better. No vague language. No gray areas. Not “sometime later” but tied to specific milestones.
Typical trigger events include:
Token Generation Event (TGE) or when your tokens officially go live.
Mainnet launch or when your network and product becomes operational.
Liquidity or product milestones. This is when you hit agreed KPIs, like user traction or exchange listing.
Be specific. Clear triggers avoid disputes later and keep everyone on the same page.
Token Pricing → What investors pay at exercise
Next, you need to agree on price or at least, how the price will be calculated. This shapes how attractive the warrant is for investors.
You have a few ways to set this, common pricing models include:
Fixed price: Agreed upfront. Simple, easy to explain, and predictable.
Discounted price: A percentage (%) off the market price at the time of exercise. This option aims to reward early supporters.
Valuation caps or floors: Protect both sides against extreme swings in price (whether it’s good or bad).
Choosing the right pricing model depends on your roadmap and market outlook. Fixed prices offer clarity. Discounts attract investors. Caps/floors protect tokenomics.
Expiry and Exercise Window → How long investors have to use the Token Warrants
Token Warrants should not last forever. You need a clear window for investors to use them. This is called an exercise window. The name is pretty much self explanatory, it’s a window for investors to exercise their rights.
Most Token Warrants expire within 12 to 36 months after the trigger event. This gives investors time to decide, but prevents long-term overhang on your cap table.
Pro tip: Make sure expiry terms are crystal clear. Unexercised warrants should disappear automatically to avoid lingering liabilities.
Vesting and Cliff → Controlling token unlocks after exercise
Even after investors exercise the warrant, you may not want all the tokens to flood the market right away.
A vesting schedule spreads out token release. A cliff can delay the first unlock.
This prevents sudden sell-offs, supports token price stability, and keeps investors tied to your project’s success.
Learn more about how to plan token vesting for your web3 projects.
Investor Rights →What they can (and can’t) do
Before exercise:
Transferability: Warrants are often non-transferable unless negotiated otherwise.
Voting/governance rights: Typically none. Warrants do not equal tokens until exercised.
After exercise:
Investors become token holders and gain whatever rights those tokens carry (voting, utility, etc).
Clear rights = clear expectations. Spell this out clearly. It prevents confusion and avoids giving investors more power than intended.
Strategic Benefits for Founders and Projects
Avoid unnecessary dilution before launch
Issuing tokens too early often hurts founders the most.
Once tokens are out there, they dilute your team, your community, and your future growth options. Worse, they might hit the market before your tokenomics or ecosystem are fully ready.
With Token Warrants, you avoid this trap. Investors commit, but tokens don’t hit circulation until you decide. That keeps your cap table tighter and protects your token’s future value.
Align investors with your roadmap
Token Warrants naturally tie investor returns to your success.
Unlike SAFTs or direct token sales, investors don’t get tokens right away. They only get them when you hit key milestones.
This keeps everyone focused and aligned with your roadmap. Investors are motivated to help you reach major goals because when you win, they win too.
Manage regulatory risk by delaying token issuance
Let’s face it, the regulatory landscape for crypto is still messy.
Selling tokens upfront often invites extra scrutiny. Token Warrants offer a cleaner path. No tokens are issued until real milestones are met.
This reduces the chance of triggering securities regulations too early. It’s not a magic shield, however. Of course, you still need legal advice. But it’s often a safer, cleaner path.
Stay flexible during strategic or bridge rounds
Not every round is about scaling fast. Sometimes, you need strategic partners or bridge funding to hit your next milestone.
Token Warrants give you that option. You can bring in investors without immediately changing your tokenomics or circulating supply.
This means you can close rounds quickly, without the pressure to issue tokens right away.
Legal and Regulatory Considerations (And Why Expert Drafting Matters)
If poorly structured, Token Warrants can create serious risks. Especially when it comes to legal and regulatory issues. As a founder, this is where you need to be careful. Let’s break down what you should watch.
Jurisdiction matters and rules aren’t the same everywhere
Token rules vary by country. What’s allowed in one place may be illegal in another.
For example:
In the U.S., warrants can easily cross into securities territory. That means dealing with the SEC, filings, and heavy compliance.
In Europe or offshore jurisdictions, rules can be lighter. But they are often unclear and still evolving.
You can’t simply copy what another project did. You can’t assume what worked for another project will work for yours. Each deal needs to be carefully reviewed based on where your investors and business operate.
This is where working with a Web3 Agency, like TokenMinds, makes a huge difference. Having the right partner helps you stay ahead of regulatory risks while structuring deals smartly.
Token Warrants could still be seen as securities
Even though you aren’t issuing tokens right away, regulators may still view Token Warrants as investment contracts.
Especially if the terms focus on profit. If classified as securities, this brings serious obligations:
Investor disclosures
Registrations
Ongoing reporting
Smart drafting reduces this risk, but doesn’t eliminate it. This is why precision matters so much at the agreement stage.
KYC/AML obligations still apply
Just because tokens aren’t issued yet doesn’t mean you can ignore compliance. Investors should still be verified (KYC), and you should follow anti-money laundering (AML) rules.
Especially if warrants will eventually convert into liquid tokens. Skipping this can delay listings, block exchanges, or even cause legal action later. Tight KYC/AML processes should be built into your warrant agreements from day one.
Drafting must be clear and precise
The biggest mistake founders make with Token Warrants? Being vague. Unclear terms around triggers, expiry, pricing, or transferability can lead to disputes. Worse, it opens loopholes that investors (or regulators) can exploit.
You want your agreements airtight: simple, clear, and aligned with your tokenomics.
Best Practices for Issuing Token Warrants (Founder Playbook)
Here’s how to issue Token Warrants the smart way.
Define clear and measurable trigger events
This is where many founders make mistakes. “Launch” or “network live” sounds simple, but in crypto, it’s vague. Investors and founders may see it differently.
Instead, be specific:
TGE completed with tokens tradable on exchanges
Mainnet operational with X number of validators
Achieved 100,000 users or daily active wallets
When triggers are clear, everyone knows when the warrant becomes exercisable.
If you’d like to explore more about TGE, read our ultimate guide on how to plan your Token Generation Event (TGE).
Synchronize vesting with roadmap and tokenomics
The last thing you want is 10% of your supply unlocking at once because investors exercised all their warrants.
So, plan ahead:
Align warrant token vesting with your broader unlock schedule.
Use cliffs and gradual releases to avoid sudden dumps.
Make sure warrant holders can’t disrupt your circulating supply at sensitive times.
Your tokenomics should flow smoothly, with no bottlenecks or spikes.
Avoid conflicts with existing agreements
Founders often have multiple agreements running at once. SAFTs, Token Sale Agreements, Side Letters, and now Token Warrants.
Mixing these without proper coordination is dangerous. It can lead to:
Overlapping rights (like double discounts)
Pro rata issues
Priority disputes at liquidity events
Make sure your Token Warrants slot cleanly into your existing cap table and investor rights stack.
Maintain cap table hygiene
Warrants don’t show up on your circulating supply, but they still count.
Track them carefully:
Know how much potential dilution they represent.
Report warrant status to investors and internal teams.
Update forecasts and models regularly.
Real-World Use Cases and Trends of Token Warrants
Strategic VC rounds for milestone-based investor alignment
When raising from top-tier investors, founders often face a trade-off. VCs want exposure to tokens, but you may not be ready to issue them. Maybe your tokenomics aren’t finalized, or your product still needs time.
With Token Warrants, you can close the round now, give investors upside later, and only issue tokens when the project hits critical milestones.
A great example of this is the Wormhole’s $225M raise at a $2.5 billion valuation. Do you know that it was done entirely with token warrants? No tokens upfront. No equity. Just pure milestone-based rights to purchase tokens in the future.
Advisors and partners, reward tied to deliverables
Advisors often ask for tokens, but issuing them immediately can create problems. What if they don’t deliver? What if your project gets delayed?
Token Warrants let you offer upside, without handing out tokens on day one. Instead, tokens only flow after they add value or hit agreed KPIs. This keeps everyone motivated and protects your supply from deadweight dilution.
Post-mainnet expansions to raise capital without flooding the market
Your network is live, but you need capital to scale. Maybe for marketing, liquidity, or ecosystem growth.
Selling tokens directly could tank your price. Instead, Token Warrants let you raise cash without increasing circulating supply immediately.
When timed well, this reduces sell pressure and supports healthier token price action.
Final Thoughts: Why Smart Founders are Turning to Token Warrants
Raising capital in crypto is a balancing act. Go too fast, and you risk poor tokenomics, early dilution, and legal trouble. Go too slow, and you risk missing out on key investors and growth windows.
Token Warrants help solve this.But they aren’t for every project. If your roadmap is unclear, or if your milestones are soft, Token Warrants can create confusion instead of clarity.
But if you have strong conviction in your roadmap and you know exactly when value will be created, Token Warrants can become your ally.
With Token Warrants, you shift the conversation with investors. From "Buy tokens now" to "Join us for the journey and earn your upside when we deliver."
In Web3, timing and control are everything. Token Warrants let you protect both. If you’re serious about raising capital without giving up control too soon, it’s worth thinking about how Token Warrants fit into your fundraising stack.
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FAQ
How are Token Warrants different from SAFTs?
With SAFTs, investors pay now and expect tokens later (usually delivered soon after launch).
Token Warrants, on the other hand, only give investors the right to buy tokens later, when certain milestones are met. This gives you, as the founder, more control over when tokens are actually issued.
Do Token Warrants impact tokenomics?
Yes, and you need to plan for it.
Tokens that may be issued through Token Warrants should be included in your fully diluted supply. You’ll want to factor them into your unlock schedules and allocation models to avoid surprises later.
Are Token Warrants transferable or tradable?
Usually no, unless the warrant agreement says otherwise.
Most Token Warrants are non-transferable to prevent them from being sold on secondary markets. This protects your token cap table and keeps your investor group stable.
Do Token Warrants need to comply with securities laws?
In many cases, yes.
Even though no tokens are issued upfront, warrants can still be viewed as investment contracts. Especially if tied to profit or price appreciation. Smart structuring helps, but you should always work with legal counsel to ensure you meet local laws. Our team at TokenMinds can help with this.
How do Token Warrants affect the cap table and dilution?
Token Warrants don’t immediately dilute your cap table.
But once exercised, they convert into tokens. Which adds to your circulating supply and impacts ownership percentages. Make sure you track potential dilution and communicate it clearly to your investors and team.
