This article attempts to introduce on-chain private sale financing tools from a technical perspective, as well as its positive significance in promoting the standardization and development of the Crypto private sale financing industry.

There are many private sale investment products similar to AngelList, such as Carta, EquityZen, Venture360, Forge Global, etc., but there is no doubt that AngelList is the most representative. Therefore, this article takes it as an example to help us understand different solutions in the context of different technological eras.

What is private sale investment and financing?

Private equity financing is a broad and complex field, but simply put, its essence is a financial transaction. In traditional private equity financing, private equity financing is a financial transaction that exchanges fiat currency for equity.

Although private sale financing is just a financial transaction, it involves a lot of complex and specialized work and collaboration.

From an investment perspective, an investment typically goes through four stages: fundraising, investment, post-investment management, and exit. In this process, the work of institutions or fund managers involves entity registration, onboarding and managing investors, financial management, due diligence, as well as a large number of agreement signings, legal work, auditing, and so on. As an investor, it is necessary to identify investment institutions and fund managers, as well as review very complex fund recruitment documents. From a financing perspective, startups also require a lot of complex work to complete financing, including entity registration, financing planning and management, equity structure management, financial management, etc.

This work is often beyond the professional competence of the participants. Start-up founders often don't have the fundraising experience and relevant expertise, and many investors are confused by the large number of contracts (e.g., fund prospectuses) and the complex onboarding process, and creating and running a private equity fund is a huge undertaking. In order to accomplish these tasks, they need to pay additional capital costs, time costs, labor costs, learning costs, and introduce more additional collaboration, such as hiring lawyers and financial managers. Therefore, private investment and financing is a business with a high threshold.

What is AngelList?

In the previous chapter, we mentioned that private sale investment and financing involves a large amount of complex and specialized work and cooperation. This not only makes participation difficult but also leads to high costs, low efficiency, and restrictions on business boundaries.

AngelList is an online toolkit that serves the private sale investment and financing sector. In simple terms, it abstracts the complex and specialized tasks involved in various stages of private sale investment and financing transactions into different components and programs (different components and programs can be combined into different business flows, such as onboarding investors), and then uses internet technology to run them online, allowing people around the world to efficiently participate in these business flows with just a simple click, without worrying about the specialized and complex specific affairs involved. For example:

• Investment Institutions and Fund Managers: Investment institutions or fund managers can conveniently create an online operational framework through tools provided by Angellist, such as Rolling Funds, Venture Funds, Syndicate, and Scout Funds. Through these online tools, investment institutions and fund managers can easily and efficiently carry out fundraising, investment, and other related tasks. With the fund management tools offered by Angellist, investment institutions can easily create or link multiple bank accounts worldwide and use them as fundraising and investment accounts while ensuring asset security (, for example, the sweep accounts feature ). Additionally, Angellist provides several tools to facilitate investment institutions in tasks such as contract signing, tier sharing, notifications, and public announcements.
• Investors: Investors can easily find excellent investment institutions through Angellist and conveniently contact and join them using the tools provided by Angellist (investor onboarding). Once investors join one or more investment institutions, they can conveniently view and track the operational status of the investment institutions using the tools provided by Angellist.
• Startups: Startups can use the funding tools provided by Angellist to quickly initiate financing and manage funding. At the same time, Angellist also offers a range of management tools for startups, such as Cap table, legal entity setup, and more. Additionally, startups can link their bank accounts to use Angellist for managing funds, such as transfers, taxes, and more.

Two keywords: program, online.

Online

Before the Online wave, applications were usually offline native applications, such as early financial management, text processing, etc. From a technical perspective, simply put, these applications' business logic and data are stored on the client side, not needing to rely on a network environment. Online, on the other hand, deploys and runs the business logic and data of applications on cloud services and interacts with users through the internet. We can call this type of application online applications, with the typical representative being web applications (.

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For example, before the release of Google Docs in 2006, word processing applications such as Word were offline native applications. If I want to invite someone else to co-edit a document, I can only export my document as a .doc file, send it to someone else (such as an email), import the file into Word for editing, and then export the edited document again as a .doc file and send it to me. I need to open everyone's documents one by one and summarize everyone's edits to form the final version. And such a process often needs to be repeated many times, which is simply a disaster. Google Docs takes us into a whole new era, and as you can see today, we can not only edit and modify in real-time, comment and discuss in real-time, but also call any supported third-party application in Google Docs, such as inserting a Google Sheet, a piece of Youtube, etc. That's the huge difference online makes.

The work involved in private sale financing is much more complicated than document collaboration. For instance, in a financing round for a startup, the startup needs to prepare financing materials and contact investors through different channels, then discuss and sign investment agreements with all interested investors. After that, they also need to manage the financing funds, establish an employee option pool, manage equity distribution, and more. Before the emergence of online tools represented by Angellist, these processes were completely disjointed, and we could only use some simple tools to manually complete these tasks. As the financing rounds increase, these tasks become more complex. Online tools make everything simpler. For example, using the financing tool )Raise( provided by Angellist, startups can complete all processes in the financing process in a one-stop manner online. Moreover, since the modules can call each other, the entire fundraising process can achieve a high degree of automation. For instance, when a fundraising round is completed, Raise will automatically help the startup update the equity structure table.

As you can see, Online has very significant advantages: improving efficiency, expanding boundaries, while reducing financial and time costs.

• Improve Efficiency: By moving workflows online, the efficiency of investor onboarding, investment processes, fundraising for startups, and signing legal agreements is significantly enhanced.
• Expand Boundaries: Online has allowed us to break through traditional social circles. Investors have gained more opportunities to participate in private sales, venture capital firms have raised funds from more investors, startups have connected with more venture capital firms, and venture capital firms have also obtained more investment targets.
• Reduce Costs: While improving efficiency and expanding business boundaries, Online has also significantly reduced the financial and time costs of private sale investment and financing affairs, thanks to a wealth of online tools. For example, Cap table management, as AngelList puts it:

AngelList's equity structure chart eliminates the hassle of managing the largest asset (equity) of startups. By leveraging unparalleled automation while maintaining compliance, better decisions can be made.

This is the paradigm shift brought about by technological transformation in specific industries.

New Challenges Brought by Crypto

The most significant difference between Crypto private sale financing and traditional private equity financing is that the investment currency in Crypto private sale financing is usually cryptocurrency, such as USDT, USDC, ETH, etc. Since tools like AngelList cannot be used for private sale financing, currently, most Crypto private sale financing uses simple management methods, such as managing fundraising assets through multi-signature wallets, completing fundraising and investments through manual transfers, and using traditional financial management software to record and manage funds and portfolios, etc. This rough operational and management model not only causes efficiency and complexity issues but, more importantly, brings about various risks.

) capital risk

Typically, after completing fundraising, the funds of investors are managed by the investment institution using multi-signature wallets or even personal wallets (. The relevant personnel of the investment institution hold the management rights of the funds, while the investors ), such as LPs of the fund ###, do not have substantial protection. Therefore, technically they can misappropriate these funds or even run away with the money. As you can see, such things have already happened. Due to the fact that the Crypto private sale financing industry is still far from being regulated, coupled with the fact that most jurisdictions' support for Crypto is still far from perfect, it is difficult to protect the rights and interests of investment institutions and investors through legal means.

( default risk

Currently, all transaction links in Crypto financing use paper contracts to bind both parties. For example, investment institutions raise funds from investors, investment institutions invest in startups, and startups release tokens to investment institutions. This reliance on traditional trust mechanisms is effective in traditional equity private sales, but its binding force is limited in Crypto, as the support for Crypto in most jurisdictions is still far from perfect. In particular, Crypto financing is usually cross-jurisdictional, which further amplifies its difficulties.

) Venture Capital Chaos

In the field of Crypto private sale investments, there are many organizations and individuals that are actually speculative coin trading groups and second-hand dealers masquerading as VCs. They use the guise of being VCs to obtain investment shares in startups, then through social means, exaggerate and promote to temporarily inflate the coin price before selling off, or sell the shares at a premium to other institutions and individuals after acquiring them. Such institutions not only fail to provide real assistance to startups but also create numerous troubles, obstacles, and even harm to them, which is extremely detrimental to the development of startups. Moreover, startups often find it difficult to effectively identify these speculative coin groups and second-hand dealers.

The above only discusses the core interests of various participants in the Crypto investment and financing field. In addition, there are many other issues; however, there is no doubt that asset-related issues are particularly important for us to focus on. So, in the case where traditional trust mechanisms like the judicial system ( cannot effectively protect the rights and interests of Crypto investment and financing participants, is there a way we can address these risks?

New Opportunities Brought by Crypto

Cryptocurrencies have brought new challenges to private sales fundraising, but on the other hand, cryptocurrencies have also brought new opportunities for private sales fundraising.

In the chapter "What is Private Sale Financing," we discussed that traditional private sale financing can be viewed as a financial transaction that exchanges fiat currency for equity. Since these two transactional items are in different accounting systems, the transaction can only proceed asynchronously, meaning that ) payment of investment funds and 2### allocation of equity must occur separately. Therefore, to ensure performance by both parties in the transaction, a third party must be introduced, specifically traditional trust mechanisms such as the judicial system ### to constrain both parties. In contrast, the investment currency in Crypto private sale financing is typically cryptocurrency, and startups also often use cryptocurrency to represent their enterprise value ( such as ETH, CRV, RICE, etc. ).

This means that we can view Crypto private sale financing as a type of coin-to-coin transaction, and it is a coin-to-coin transaction within the same accounting system ( blockchain ).

Compared to traditional private sales for investment and financing, this type of cryptocurrency trading not only simplifies various investment and financing processes such as fundraising, investment, management, and exit, but also benefits from numerous technical features of cryptocurrencies. These processes can be executed on a technical level to constrain both parties in the transaction without relying on traditional trust mechanisms such as judiciary, insurance, or arbitration, thereby protecting the rights and interests of both parties and addressing many of the risks mentioned above.

Let's briefly understand cryptocurrency through several technical concepts such as ) smart contracts, programmable money, and data availability ), and how it can address the risk issues mentioned above, thus bringing new opportunities for private sale investment and financing.

( smart contract

In the context of blockchain, a smart contract is a program that is deployed and stored on the blockchain, used to receive user instructions and execute results according to programming logic ) internally or externally (. This is similar to a vending machine, where when a user selects 1 bottle of cola and pays the amount set by the program ), for example, 1 USD (, the vending machine will automatically "dispense" 1 bottle of cola.

Unlike vending machines, smart contracts are typically irreversible and immutable once deployed on the blockchain. This means that no one can tamper with it. In other words, we cannot modify the programming logic of this "vending machine" after it starts running to make it "dispense" 10 bottles of cola after a user selects 1 bottle of cola and pays 1 USD. It will always operate on the logic of 1 USD for 1 bottle of cola. Of course, you might say that a hacker attack could achieve this, but that's another topic.

Additionally, due to the permissionless nature of smart contracts, no one can prevent users from utilizing smart contracts.

) programmable currency

Whether in traditional financial systems or blockchain, they achieve the digitization of currency through "digital value records," which can both be referred to as digital currency. In traditional internet financial systems, digital currency is a set of digital records representing tradable value stored in an online database. It allows programming logic outside the database, such as online banking APP###, to adjust the digital value records in the database through APIs.

In the blockchain, digital currency is a smart contract designed for monetizable valuable items, deployed and stored in the blockchain database. For example, ERC20(, it also contains digital records representing tradable value, but its digital records are adjusted.

1. Constrained by its own programming logic. Just like the example of the vending machine mentioned above.
2. And under the premise of conforming to its own programming logic, allow the programming logic of other smart contracts within the blockchain database to adjust their digital value records. This is similar to a vending machine connected to a lucky draw wheel, where users can choose not to purchase a cola for 1 USD but instead authorize the vending machine to use the lucky draw wheel to control which beverage the vending machine "dispenses". You know, the lucky draw wheel might have cola, cars, but it could also be "Thank you".

Due to its programmable properties, this digital currency that runs on the blockchain is also known as programmable currency, but we usually refer to it as cryptocurrency.

) data availability

The blockchain is not only an open network that anyone can access and use (, but it also has the characteristic of data availability. This means that we can access any user's blockchain account to verify any transactions that user has made on the blockchain. Therefore, it can help us:

• Verify the investment history of the investment institution.
• Verify the investment preferences of investment institutions.
• Verify the investment strategies of the investment institutions ) long-termism or speculation ###.
• Monitor and track the flow of funds of investment institutions. For example, when institutions exhibit behaviors such as misappropriation of funds, take timely action to stop it, or assist relevant institutions like judicial bodies ( in handling the situation.

As you know, this is simply a fantasy in the traditional financial sector.

Now, let's take a look at how to leverage these technical characteristics to address the three types of risks mentioned above.

) fund security

For example, we can deploy a fund management contract for investment institutions on the blockchain, and investment institutions can invite investors to deposit funds into the contract ( such as USDT) to complete the fundraising. The fund control of the contract account is subject to the programming logic of the contract, and the investment institution can set up a manager team to control the funds through the voting mechanism when deploying the contract ( fund model ), or it can hand over the control of funds to all investors ### investment club (. This can technically avoid the problem of misappropriation of funds by internal personnel of investment institutions.

We can also deploy a redemption contract to enhance the security of the fund management contract. We can set a fixed redemption period, just like traditional open-end funds, such as once every 30 days. This way, investors can decide every 30 days whether to keep their funds in the investment institution or withdraw based on their judgment of the institution's performance. Alternatively, we can set the redemption period after each investment transaction is initiated, allowing investors to decide whether to participate in a specific investment based on their agreement with it. Due to the permissionless nature of smart contracts, the act of redeeming by investors to protect the safety of their funds cannot be blocked by any party.

) performance security

Give an example of a SAFT investment agreement. We know that while we can view crypto private sales as a currency-to-currency transaction, it is usually not a simple transaction like a swap where payment is made simultaneously with the delivery. Instead, there is typically a vesting schedule, meaning that the recipient of the investment funds will start releasing the payback tokens to the investors at a certain time in the future according to a specific release rule after receiving the investment. Therefore, the vesting schedule is usually the most important part of a SAFT investment agreement and also the part that is most prone to defaults and disputes.

We can deploy an investment agreement contract on-chain, using programming logic to implement the trading rules in the SAFT agreement, including investment currency, Payback currency, price, Vesting Schedule, etc. When the investing institution and the invested party create an investment transaction through this smart contract (, the parameters are stipulated, such as Vesting Schedule ), and "sign" the transaction. At the same time that the investing institution pays the investment amount, the Payback currency of the invested party will be held in the smart contract, and then the investor can autonomously receive Payback tokens from the smart contract according to the timeline stipulated in the Vesting Schedule (no one can stop him). To give an example:

Investor Bob created a SAFT investment transaction with entrepreneur Lisa using an investment agreement smart contract, and the transaction details are as follows:

• Investment Currency: USDT
• Investment Amount: 100,000
• Investor: 0x1Bfe1F47a3566Ee904d5C592ab9268B931516B56 (Bob's wallet address )
• Investment Fund Receiver: 0xEF72177cb6CE54f17a75c174C7032BF7703689b4 ### Lisa's wallet address (
• Payback Currency: RICE
• Payback Amount: 100,000
• Vesting Start: 10/01/2025
• Vesting End: 10/01/2028
• Claim Interval：30 Days

When Bob and Lisa "sign" the transaction on-chain, 100,000 USDT from Bob's wallet will be transferred to Lisa's wallet address, while 100,000 RICE from Lisa's wallet will be transferred to the escrow contract. Starting from October 1, 2025, Bob can withdraw RICE from the escrow contract every 30 days, with each withdrawal being one thirty-sixth of the total amount, until October 1, 2028, for a total of 100,000 RICE.

• Bob will definitely be able to receive RICE from the smart contract starting from October 1, 2025, without the need for anyone's permission.
• Lisa cannot prevent the execution of the agreement after the investment agreement transaction is successfully completed.
• Lisa cannot retrieve RICE from the custody contract.
• No one can stop Bob from using the contract to receive RICE.

) venture capital identification

Due to the openness and data availability of blockchain, we can access the fund management accounts of investment institutions on-chain at any time, analyzing their historical transactions to verify whether the investment performance and philosophy promoted by the institution are true. For example, if Bob claims to be very optimistic about Lisa's project and will therefore hold RICE for the long term, but his transaction records show that Bob immediately sells all his RICE after each withdrawal, then you should be cautious when Bob approaches you expressing a desire to invest in your project. Alternatively, if Bob immediately transfers large amounts to a group of people after each RICE withdrawal, then it is highly likely that Bob is a reseller.

In addition, we can summarize the investment preferences of investment institutions by analyzing these historical transactions, such as the investment fields, which can also significantly save the time cost for startups in seeking investment institutions and communicating with them.

Onchain

In the above, we briefly introduced how to transform Crypto investment and financing transactions into on-chain processes to highlight its advantages in asset security, as well as how to leverage the technical characteristics of blockchain data availability to help us better identify investment institutions. As you know, there are still many other transaction and management aspects in Crypto investment and financing. If we were to put all these transaction and management aspects on-chain, that is, to build a corresponding smart contract for each transaction link and allow these contracts to be freely combined and called upon each other, we could create an on-chain investment and financing toolkit, which would be an on-chain Angellist.

The above image lists some basic smart contracts, such as the Fundraising contract for fundraising, the Limit contract for restricting the number of participants in fundraising, the Fund Pool for holding funds, the voting contract for controlling the fund pool, the Investment contract for investing, the Vesting contract for releasing project tokens, the Eligibility contract for restricting the qualifications of fundraising participants or fund managers, and the Fee & Carry contract to help investment institutions gain profits, etc.

We can freely combine these contracts to achieve different functions, just like Lego. As shown in the figure above, we can use a combination of Investment and Vesting contracts to form a simple on-chain investment agreement. Once both parties confirm the investment and financing, it will automatically execute according to the agreement, being unstoppable and immutable, without the need for any third-party trust mechanisms.

Startups can use a combination of Fundraising and Vesting contracts to build an on-chain enterprise management tool for managing fundraising and the Cap table.

Furthermore, we can use a combination of Fundraising, Vesting, Limit, Eligibility, and Voting contracts to build an on-chain crowdfunding platform or Launchpad, which will be truly decentralized, permissionless, and community-driven, without the asset risks associated with centralized control.

We can also use all the contracts listed in the above figure to build more complex businesses, such as running a private sale fund, investment club, SPV, etc. With more functional modules, we can achieve more complex business requirements, such as setting redemption periods and redemption fees for the fund, or implementing a GP + LP fund operation structure, and so on.

These contracts not only provide us with trustless trading guarantees, but they also model the trading process of private sales for investment and financing, allowing us to easily complete professional work without the need to master related expertise and skills. Therefore, it possesses all the advantages of being on-chain, including ( efficiency, boundaries, and costs ), while also ensuring the security of private sales transactions and performance issues from a technical perspective.

This is a new paradigm shift brought by blockchain technology for private sale investment and financing.

Today & Future

Since the birth of The DAO in 2016, a large number of developers and builders have been working towards the vision of "Onchain Ventures", including Moloch, DAOhaus, TheLAO, Nouns, Juice Box, PartyDAO, Gnosis Auction, Superfluid, Syndicate, Furo, Kali, DAOSquare, and more. These builders are constructing solutions based on their own understanding of Onchain Ventures in their respective focused areas. Many have given up midway, but more are continuing to iterate and improve these solutions.

As the founder of DAOSquare, I am also honored to be a promoter and builder of this vision. My efforts with DAOSquare are focused on creating an on-chain AngelList, providing a comprehensive toolkit for Crypto private sale financing, technically ensuring the asset security and compliance of all parties involved in the transactions, as well as reducing the financial and time costs for all parties while improving financing efficiency and expanding business boundaries.

Like all other solution builders, I believe in the importance of Onchain Ventures for Crypto private sale financing and the overall development of Crypto. I also believe in the future prospects of Onchain Ventures, as capital is always an important driving force for industry development, whether in traditional fields or in Crypto. Therefore, I think that in the near future, as the Crypto private sale financing industry continues to improve and standardize, these products serving Crypto financing will shine brightly. Let's wait and see.