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Simple Agreement for Future Tokens
I need a Simple Agreement for Future Tokens (SAFT) for a South African startup looking to raise funds through token sales, ensuring compliance with local regulations. The agreement should outline the terms for future token issuance, investor rights, and include provisions for token distribution upon network launch.
What is a Simple Agreement for Future Tokens?
A Simple Agreement for Future Tokens (SAFT) is a legal contract used by South African blockchain startups to raise capital from investors before launching their digital tokens. It works like an advance purchase agreement - investors provide funding now in exchange for tokens that will be delivered once the network goes live.
Under South African financial regulations, SAFTs help companies navigate securities laws while building their blockchain projects. The agreement typically includes key details like token pricing, delivery conditions, and investor rights. Unlike an ICO, where tokens are issued immediately, SAFTs create a formal commitment for future token distribution, giving both parties clear legal protection during the development phase.
When should you use a Simple Agreement for Future Tokens?
Use a Simple Agreement for Future Tokens when your blockchain startup needs to raise capital before launching its digital token platform. This agreement works especially well for South African tech companies developing blockchain networks that aren't ready for immediate token distribution but need funding to complete development.
The SAFT structure makes sense when your project requires substantial development time before token launch, and you need to comply with local securities regulations while securing early investors. It's particularly valuable for projects that want to avoid the regulatory complications of an immediate token sale, or when dealing with sophisticated investors who understand the development timeline and associated risks.
What are the different types of Simple Agreement for Future Tokens?
- Basic SAFT: The standard version used by most South African blockchain startups, focusing on token delivery terms and investment amounts
- Milestone-Based SAFT: Links token distribution to specific project achievements, protecting investors through development checkpoints
- Convertible SAFT: Includes options to convert the agreement into equity if the token launch doesn't proceed
- Multiple-Round SAFT: Structures token distribution across several investment phases with different pricing tiers
- Industry-Specific SAFT: Customized versions for sectors like DeFi, gaming, or enterprise blockchain projects, with relevant technical specifications
Who should typically use a Simple Agreement for Future Tokens?
- Blockchain Startups: Tech companies developing token-based platforms who need capital for development while staying compliant with South African regulations
- Venture Capital Firms: Professional investors who provide funding through SAFTs, often taking larger positions in promising blockchain projects
- Legal Counsel: Attorneys specializing in digital assets who draft and review agreements to ensure regulatory compliance
- Financial Advisors: Professionals who guide clients on SAFT investments and associated risks
- Regulatory Bodies: South African authorities who oversee these agreements within securities law frameworks
How do you write a Simple Agreement for Future Tokens?
- Token Details: Document your token's technical specifications, utility, and planned distribution mechanism
- Project Timeline: Map out key development milestones and expected token launch date
- Investment Terms: Define token pricing, minimum investment amounts, and vesting schedules
- Company Information: Gather registration documents, director details, and blockchain project documentation
- Risk Disclosures: List potential project risks and regulatory considerations under South African law
- Compliance Check: Verify alignment with FSCA guidelines and local securities regulations
- Smart Contract Details: Include technical specifications for token issuance and distribution mechanisms
What should be included in a Simple Agreement for Future Tokens?
- Parties & Definitions: Clear identification of token issuer, investor details, and key terms
- Token Description: Detailed specifications of the future tokens, including utility and rights
- Investment Terms: Purchase amount, token price, and delivery conditions
- Triggering Events: Conditions for token distribution or agreement termination
- Vesting Schedule: Timeline and conditions for token release
- Risk Disclosures: Comprehensive listing of project and investment risks
- Compliance Statements: References to relevant South African securities laws and FSCA requirements
- Dispute Resolution: South African jurisdiction and arbitration procedures
What's the difference between a Simple Agreement for Future Tokens and a Simple Agreement for Future Equity?
A Simple Agreement for Future Tokens (SAFT) differs significantly from a Simple Agreement for Future Equity (SAFE) in several key aspects, though both are investment instruments used in South African startup funding.
- Asset Type: SAFTs promise future blockchain tokens, while SAFEs convert to company equity shares
- Regulatory Framework: SAFTs must comply with both securities laws and crypto-asset regulations, whereas SAFEs only deal with traditional securities rules
- Project Stage: SAFTs are specifically for blockchain projects under development, while SAFEs suit any early-stage startup
- Investment Outcome: SAFT investors receive utility tokens usable on the platform, but SAFE investors become shareholders in the company
- Risk Profile: SAFTs carry additional technical and regulatory risks related to token development and crypto-asset compliance that aren't present in SAFEs
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