ICO project log 11: valuations
what happens when you have to tell your investors you’re launching a token
Over the next 60 days, we’re documenting every step of what it looks like to launch a token the right way, in the United States, in 2026.
This is the project log: a written companion to each daily video. Short updates on what we’re working on, what’s blocking us, and what we’re learning along the way.
Day 22/60
Dennison’s back in New York after ETH Denver. The event was high signal, and there are other teams preparing to launch on the platform, but the real update is what’s happening behind the scenes: the legal process is now fully underway.
Side letters and investor notifications
If you raised equity and gave investors a side letter, there’s a legal step most people don’t think about until it’s staring them in the face. We’re not lawyers: this is how the process was explained to us by our legal team. The side letter is a promise: if you launch a token, those investors get access to a portion of the allocation. But that promise doesn’t execute itself.
Before the token goes live, every investor on the cap table has to be formally notified. That means documentation: what the token is, how the launch works, what they’re getting, and on what terms. And then they have to sign off. It’s not a courtesy email. It’s a legal requirement, and it takes time, especially with a large cap table.
We’re in this process right now. Dennison is meeting with our legal team at Cooley basically every other day to work through it. The pace is intense, but skipping steps here is not an option.
The valuation problem
Here’s the part that surprised us: you don’t get to pick your own valuation.
When investors exercise their warrants, they need a price. That price has to come from an independent third-party firm that evaluates the protocol: the work that’s gone into it, the complexity of the system, comparable projects, and a range of other inputs. The output is an initial valuation that determines what investors pay for their token allocations.
This matters for two reasons. First, it’s what your investors are actually paying when they exercise. The warrant is a separate instrument from the equity: they have to purchase the tokens, and the price needs to be defensible.
Second, and this is the one that catches people off guard: the valuation affects the team. When team members receive their token allocations, it looks to the IRS like they’re receiving a new asset. If the valuation isn’t handled properly, it can trigger a significant tax liability. For founders with larger allocations, “significant” can mean substantial. Getting this valuation right, and getting it from an independent source, protects everyone.
The throughline
This is the unsexy part of launching a token. No one makes content about cap table notifications and third-party valuation firms. But this is exactly the kind of process that separates compliant launches from ones that create legal problems years down the road.
We’re showing it because it’s real, and because anyone considering a token launch should know that this step exists. Dennison’s advice from the episode: do not skip this process. It will bite you if you do.
We’re documenting everything: the legal sequencing, the tax strategy, the custody setup, the go-to-market, all of it. If you’re building in crypto and thinking about launching a token, this is the playbook we wish existed.
Disclaimer: This content is for informational and educational purposes only. Nothing in this series constitutes financial advice, investment advice, or a solicitation to buy or sell any token or security.