Overallocation Logic

This feature is active in ZAP Labs raises.

All token launches on ZAP allow surpassing the Hard Cap, which introduces two major benefits.

First, accurate demand assessment: Projects and investors can gauge the early demand for a token, which can critically inform both future fundraising strategy and holding behaviour. In addition, this early demand metric is valuable for projects seeking additional capital from VCs.

Second, equitable allocation: Allowing raises to exceed the Hard Cap eliminates the common ‘first-come-first-serve’ practice. This in turn removes advantages that investors may gain as a result of time zone, internet speed, and other technological advantages.

Here’s how Overallocation works:

• Equal Dilution: In the event of an oversubscribed pool, each investor experiences an equal percentage of dilution.

• Immediate Refunds: Post-launch, investors are refunded in USDB for the diluted portion of their investment.

• Token Vesting: Investors receive the non-diluted portion of their investment as project tokens, as per the token vesting schedule.

• Larger Allocation: Investors can lock their excess USDB in an option pool reserved for future raises, enhancing their allocation in an upcoming raise.

This system ensures a fair and proportionate distribution for all investors, while motivating investors with a large dilution amount to participate in a future raise.