We believe our research on the best practices for Web3 founders should be freely accessible for everyone. However, please note that we are not lawyers. We just want to get this information out there so you have a starting point before seeking legal council.
Intro
The first step in establishing a legal structure is registering an initial entity, the Developer Company. Once the initial teams and founders have started working on the project, the development starts in a centralized development which requires an entity to for protecting the founders, collecting intellectual property, signing contracts, renting office space, and raising funds when starting a decentralized network.
This company is usually set up within the first 3-5 months of a project's development.
Purpose & Responsibilities
The main purposes of the Developer Company are:
Protection for founders
- By creating a legal entity, the founders of the project can separate their personal assets from the assets and liabilities of the business. This can provide some protection for the founders in case the project runs into legal or financial difficulties.
Start decentralized development of the protocol
- Hold a FIAT bank account
- Create a work environment and operational structure
- Hire employees and pay salaries
- Rent an office
- Own and protect rights to intellectual property
IP Development
- All intellectual property created is owned by the company
- Hold trademark rights and own assets such as graphics, etc.
- Sign NDAs / NCA agreements with employees and contractors
Fundraising
The DevCo is needed when a project starts to raise funds, as an entity is needed to sell equity and sign fundraising documents with investors.
- Pre-Seed / Early Seed: Raise funds at early fundraising stages via equity + (optional: future tokens to be purchased additionally once the tokens are launched)
- Investment Documents : SAFE + Token Warrant
- Fundraising responsibilities by the Developer Company: Fulfill due diligence for investors; IP ownership is secured, developers are employed, etc.
Development Stage Detail
- Early Stage 8-18month:
- Start developing the protocol
- Develop proof of concept
- Start developing Tokennomics
- Initial marketing & media:
- Twitter, blog posts
- Brand building
- Develop business and revenue model
- Develop GTM strategy
- Finalize pitch deck
- Finalize Equity Cap Table & Token Cap Table
- Testnet Launch & Validator Bootstrapping
- Finalizing Tokenomics
- Finalizing Whitepaper
- Finalizing Genesis File
- Launching Devnet
- Launching Private Testnet + Incentivized Testnet
- Bootstrapping Validators who will deploy Mainnet
Later Stage Purpose
- At a later stage, after the network has launched, the developer company is intended to receive funds in the form of grants or service agreements with the foundation to execute, further develop, and maintain the protocol.
Jurisdiction / Entity Type
Delaware C-Corp