Frequently asked questions
Everything investors ask.
How is a Preflop covenant different from a loan?
A loan has a fixed repayment schedule regardless of income. A covenant scales with actual earnings. If you earn less, you pay less. There's no interest rate and no compounding. In Phase 1 (years 1 to T), backers receive s% of gross income with no cap. Venture-scale upside. In Phase 2 (year T+), the token converts to a perpetual e% stake in the issuer's Total Economic Benefit. If income drops to zero, payment drops to zero. There's no traditional default, just a lower-than-expected return.
Wait, there's no cap? What if they make $100M?
Correct. There's no cap. If an issuer raises $100K at 5% share and later earns $10M in a single year, backers collectively receive $500K that year. This is intentional: Preflop is human-capital venture. A 3× or 5× cap crushes the upside that makes early-stage risk rational. Without a cap, a single breakout issuer makes the book, exactly like a fund.
What is TEB (Total Economic Benefit)?
TEB is a defined term in the covenant. It includes W2 wage income, K-1 partnership income, cash realizations from equity the issuer holds (acquisition proceeds, IPO distributions, secondaries), book advances and royalties, board fees, speaking fees: any cash realized from the issuer's human capital. TEB exists to prevent gaming: you can't route around it by taking stock instead of salary, because the stock eventually turns into TEB when it's realized.
What happens in Phase 2? Does the token expire?
No. At the end of year T, the dividend period closes. But the token doesn't retire. It converts to a perpetual claim on e% of the issuer's annual TEB, trading forever on the secondary market. If the issuer IPOs in year 15 and realizes $80M in equity, each token holder's pro-rata share of e% of that $80M flows through. The token is a tradeable slice of lifetime human capital.
How is this different from selling equity in a company?
Company equity gives you ownership of one legal entity. A Preflop covenant gives you a claim on the person, regardless of which company they run, how many companies they build, whether they join Google, write a book, or become a senator. There's no cap table dilution in any single company, no board seats, no liquidation preferences. The issuer keeps full control of every career decision.
What happens if someone defaults, stops reporting income?
The covenant is a legally binding agreement with a Reg D / Reg CF wrapper. Non-reporting triggers cure periods, mediation, and ultimately legal recourse. Plaid-verified income makes underreporting difficult. The smart contract can be paused by the platform if reporting lapses, and the on-chain record creates a permanent audit trail.
What if the issuer dies or becomes permanently disabled?
Death or permanent disability is a recognized event, not a total loss. Phase 1: the covenant converts early to Phase 2, and tokens become a perpetual claim against the estate's realized TEB (royalties, equity that vests and liquidates, trust distributions, deferred compensation). Phase 2: standard succession. The perpetual claim continues against any ongoing TEB stream. Optional life/disability insurance wrappers are on the roadmap for backers who want to hedge the idiosyncratic early-death risk.
Can the issuer buy back their tokens?
Yes. An issuer can buy tokens on the secondary market like anyone else. Buying all 10,000 tokens effectively terminates both Phase 1 and Phase 2 obligations. The price depends on where the market values them at that moment. After breakout events, a buyback can be very expensive. This is analogous to a company buying back its stock.
Why are tokens necessary? Why not just a paper contract?
Tokens make ISAs fungible, transferable, and composable. A paper ISA is a bilateral contract between two parties: illiquid and impossible to price. A token is a standardized unit that can be traded, pooled into indices, structured into tranches, and used as collateral. The fixed supply of 10,000 tokens per issuer (standardized across both listing paths) creates a well-defined unit of ownership for market clearing.
Why Base (Ethereum L2) and not Ethereum mainnet or Solana?
Gas costs. Deploying a covenant contract on mainnet costs ~$50–100 in gas. On Base it's ~$0.01. For an MVP processing $50K–250K raises, the gas cost needs to be negligible. Base is EVM-compatible (largest developer talent pool), backed by Coinbase (regulatory credibility + fiat on/off ramp), and has a growing DeFi ecosystem for when secondary market and derivatives launch.
Are these tokens securities?
Yes. We treat them as securities. They represent a right to participate in an individual's future economic benefit. Our legal posture is Reg D for accredited investors at launch, with a path to Reg A+ / Reg CF for broader access once regulatory precedent is established. We're working with securities counsel. The uncapped Phase 1 + perpetual Phase 2 structure makes this closer to an equity-like security than a revenue-based financing note, and we disclose it as such.
What ERC standard do the tokens use?
Standard ERC-20. Each covenant deploys a new ERC-20 contract with a fixed supply of 10,000 tokens. This means tokens are compatible with any Ethereum wallet, DEX, or DeFi protocol. No custom standards needed. Composability from day one.
How do you price a person's future income?
In Phase 1, we don't. The market does. Backers decide what return they require by choosing which covenants to fund. In Phase 2, we introduce prediction markets on key milestones that generate probability estimates. In Phase 3, ML models trained on actual income trajectory data from Phase 1–2 produce DCF-based valuations using a geometric Brownian motion model with Poisson jump processes for regime changes. The model gets more accurate as data accumulates.
What's the conviction score and how is it computed?
The conviction score (0–100) determines who lists, not what they're priced at. It's computed from 8 application signals: profile completeness, proof of work (links), stage advancement, domain specificity, income trajectory, raise calibration, pitch quality, and optionality signals. Current weights are hand-tuned; they'll be retrained via regression against actual income outcomes as Phase 2 data accumulates.
What returns can backers expect?
Returns come from three sources: (1) Phase 1 income-linked dividends (uncapped, scale with issuer income), (2) Phase 2 perpetual dividends on e% of TEB forever, and (3) capital gains on the secondary market as the token reprices to reflect new information. There is no cap on return multiples. In a base case (issuer earns $80K-$150K steady state), backers see modest cash yield. In a breakout case (issuer builds a unicorn or becomes a top creator), a single token can pay back the entire fund. The return distribution is power-law, not normal.
What's the risk of total loss?
If the issuer's income stays at zero for the entire term, backers receive nothing. The default probability estimate on each covenant page quantifies this risk. Diversification via index products (Phase 4) mitigates individual default risk. The risk/return profile is similar to early-stage venture: high variance on individual bets, strong returns on a diversified portfolio.
When will tokens be tradeable?
Secondary trading opens in Phase 4 (month 12+), once the AI pricing engine has enough data to produce reliable fair values. Before that, tokens are held by original backers and generate returns only through dividends. The current market page is a preview of what the exchange will look like.
What prevents market manipulation?
Fixed supply (10,000 tokens per issuer, no new minting), income verification via Plaid (hard to fake the fundamentals), transparent conviction scoring (everyone sees the same data), and the AI pricing engine providing a NAV anchor that limits how far market price can deviate from fundamentals.
How big can this market get?
$4.5 trillion in angel and early VC capital is deployed annually. Less than 2% of early-career individuals who could put capital to productive use ever secure institutional capital. The bottleneck is origination and pricing, not liquidity. The tradeable human-capital derivatives market is currently $0. We're not competing for an existing market. We're creating one.
Who should raise via Preflop?
Early-career individuals who don't want to take on debt or dilute themselves to fund what comes next. Pre-seed founders who don't want to give up 10–25% equity before validating their idea. Researchers, creators, and professionals on a credible trajectory who need runway. The sweet spot is an issuer with documented proof of work, a credible path, and real upside but who can't or shouldn't raise institutional capital yet. If you're already generating significant revenue and can raise a priced round, traditional VC may be better. If you're pre-revenue and need runway without dilution, a covenant is the right instrument.
How much can I raise?
Current range: $25K–$500K principal. Share rate (s): 2–15% of Phase 1 income. Dividend duration (T): 5–15 years. Equity conversion (e): 1–5% of TEB in perpetuity. These are the knobs. The longer the dividend term and the higher the equity conversion, the more backers you'll attract, at the cost of future upside.
What does it cost?
2.5% origination fee on capital raised (deducted at funding close). No monthly fees during the covenant term. If the covenant doesn't get funded, you pay nothing.
