Frequently asked questions
Everything investors ask.
How is an ISA 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, no compounding, and a hard cap on total payments. The issuer can never owe more than C × P (cap × principal). If income drops to zero, payment drops to zero. There's no default in the traditional sense — just a lower-than-expected return for backers.
How is this different from selling equity?
Equity gives ownership of a company. A covenant gives a temporary claim on an individual's income — regardless of what company they work at, or whether they start one at all. There's no cap table dilution, no board seats, no liquidation preferences. The issuer maintains full control of their career and creative decisions. The claim expires after the term or when the cap is reached.
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 the same enforcement mechanisms as any financial obligation: cure periods, mediation, and ultimately legal recourse. In practice, income verification via Plaid 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.
Can the issuer buy back their tokens?
Yes — an issuer can buy tokens on the secondary market like anyone else. If they buy all 1,000 tokens, they've effectively bought out their obligation. This is analogous to a company buying back its own stock. The price they'd pay depends on market conditions and their income trajectory at that point.
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 1,000 tokens per covenant 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?
They represent revenue participation rights, not equity. Our legal posture is Reg D for accredited investors (Phase 1) and Reg CF for broader access (Phase 2). We're working with securities counsel to ensure compliance. The token classification as a revenue participation instrument — not an equity security — is supported by the fixed-term, capped-return structure that makes it more analogous to a revenue-based financing note than a stock.
What ERC standard do the tokens use?
Standard ERC-20. Each covenant deploys a new ERC-20 contract with a fixed supply of 1,000 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 depend on the issuer's income trajectory. A backer who buys tokens at issuance gets returns from two sources: (1) periodic dividends from income-share payments, and (2) capital gains if the token appreciates on the secondary market. The cap limits maximum return to C× (e.g. 3× for a 3× cap). Early backers in high-growth issuers can see significant capital gains before the cap is reached.
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 (1,000 tokens per covenant, 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. 300M+ independent creators and founders globally have no institutional funding path. Less than 2% of founders ever secure capital. 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?
Anyone with high future earning potential who doesn't want to give up equity or take on debt. The sweet spot: pre-seed founders who haven't found PMF yet, researchers leaving academia for startups, creators with growing audiences building a business. If you're already generating revenue and can raise a priced round, traditional VC may be better. If you're pre-revenue and need runway without dilution, an ISA covenant is the right instrument.
How much can I raise?
Current range: $10K–$250K. Share rates: 2–10%. Caps: 1.5–5×. Terms: 2–10 years. These ranges are designed for pre-seed and seed-stage raises. If you need more than $250K, you likely have enough traction for a traditional raise.
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.