There’s a very good reason startups flock to the Bay Area — it’s way easier to raise VC money there than anywhere else in the world.

Why then, is there not a corresponding concentration of Ethereum startups in San Francisco? Well, it’s largely because ‘Token Sales’ have democratised access to funding for blockchain based projects.

As a contributor to several token sales, and as the co-founder of a project planning one later in the year, I am fully on board with the concept.

In several recent cases however, a fancy website, and (using the term exceedingly loosely) a “white paper”, has been all that’s necessary for a pre-product, pre-revenue startup to raise millions of dollars, thereby avoiding altogether the wheat-chaff sorting process of—crazy I know—actually building something people want before asking investors for money.

Very early stage projects do not need millions of dollars. Frugality is a vital quality in a startup. Limited resources make you focus on doing as much as you can on as little as possible—a mindset which stands you in good stead when you do have money. It makes you concentrate on hiring sparsely, but really well, and only when you absolutely need to. And you sleep soundly at night knowing that those few, amazing people you do hire, joined you because they vibe with your mission and culture, not because they’re for sale to the highest bidder.

A few projects are making efforts to be better though.

Instead of going in for the big kill, they’re raising money more modestly, and in multiple stages — rather like the funding stages in Venture Capital. First they do a small sale—the equivalent of an Angel round. If that goes well, in the future, they can sell some more.

Even that however, is challenging.

In the very early days of a project, it’s hard to know if issuing a token is really the right thing to do. Even if you’re certain your protocol/dApp requires a token, it can be complicated to design for compliance with the relevant regulations — most notably concerning US securities.

There has been some excellent work done to make this easier for projects by the likes of Coinbase, but it’s only a reference. Conducting a token sale properly absolutely requires specialist legal counsel, and a suitable legal entity to conduct the sale.

If all that sounds expensive, it’s because it is. Typically way out of budget for a couple of dudes in a basement. Yet conducting a token sale without first putting your house in order legally speaking, jeopardises both project, and token purchaser.