Here's what you need to know about SAFTs - the cryptocurrency fundraising craze that's shaking up venture capital

Just as blockchain technology is shaking up the startup space, it's also revamping the way venture capital firms invest in emerging companies.

Over the last year and a half, startups have raised nearly $4 billion through initial coin offerings, or ICOs, which are a kind of unregulated fundraising technique involving the creation of new digtial tokens, or units of value.

Venture capitalists have been wanting a piece of the action. Enter the Simple Agreements for Future Tokens, otherwise known as a SAFT.

In a SAFT deal, VCs invest a certain amount of money in a startup in exchange for its promise to one day give them a set amount of the tokens it sells in an ICO. The agreements are premised on the notion that once the company's service is up and running and consumers are using the tokens to pay for things on it, those tokens will become valuable.

A SAFT is like a mashup of buying a gift card for a store that hasn't yet opened and purchasing shares in a private company.

As more and more blockchain startups look to raise funding, VCs are experimenting with SAFTs as a way to get involved early on. Among the pioneers is Matt Huang at Sequoia Capital.

Here's what you need to know about this emerging funding technique: