Vircon Legal managed the SAFE financing round and parallel token warrant process for Covalent. The transaction closed on 4 October 2022. The financial terms of the round were not disclosed at the request of the parties.
SAFE-plus-token-warrant structures sit in one of the more legally demanding categories of early-stage Web3 financing. The architecture asks the legal team to align two parallel instruments: a SAFE covering the eventual equity issuance into a future priced round, and a Token Warrant covering the eventual on-chain token issuance, so that both instruments operate consistently across multiple regulatory perimeters, deliver the economics the parties agreed on at signing, and avoid the structural mismatches that have historically created friction at conversion. Getting these workstreams aligned at closing is what allows the company to enter subsequent fundraising and token-issuance events without expensive remediation.
Vircon Legal managed the round end-to-end: SAFE structuring with valuation cap and discount mechanics calibrated to the company’s roadmap, parallel Token Warrant drafting with token-economy considerations, regulatory positioning across the relevant jurisdictions involved, AML/KYC framework for the investor onboarding, governance and information-rights design between the SAFE-holders and the operating team, founder commitments, and the post-closing corporate housekeeping required after the change in capital structure. Cross-border SAFE-plus-token-warrant structuring requires careful attention to how the equity and token instruments will eventually convert: the same investor often holds both, and the cleanest closings are the ones where the parties have a shared, documented understanding of how conversion will work at the underlying triggering events.
Web3 capital structures continue to evolve, with SAFE-plus-token-warrant remaining one of the better-tested instrument pairs for projects that anticipate both an equity-priced round and an eventual token issuance. The Covalent transaction is among the cleaner executions of this structure that Vircon Legal advised on, and the documentation work continued to provide structural clarity through the project’s subsequent capital-formation activity.
For more on our crypto, Web3 and capital markets practice, see our CASP / Crypto Compliance, Capital Markets, and US Company Formations & Flip-Ups pages.
The Vircon Legal team on this matter was led by Managing Partner Erdem Mümtaz Hacıpaşaoğlu.
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Crypto-asset regulation, token offerings, exchange and custody licensing.
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Delaware C-Corp, flip-up structures, SAFE/convertible notes, 83(b).
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SaaS, software licensing, cloud services and IT contracts.
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