Why Tokenized Securities May Well Lower the Barrier to Entry for Entrepreneurs

Entrepreneurs who are able to conduct STOs, as well as not spend the millions of dollars required for an ICO, will enable more startups to enter the market.


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People often dream of starting their own business. Of being the boss. Setting their own hours. Following their passions. however dreams are hard to come by these days. as well as starting a business, in many cases, is actually a seemingly insurmountable task. The barrier to entry is actually especially high when you take into account the funds, time as well as effort needed to start, as well as the addition of the funds further required to keep the dream afloat until profitability is actually reached.

Related: Preparing a Security Token Offering? Here’s Your Marketing Playbook.

however there are solutions out there: For instance, entrepreneurs emerging within the cryptocurrency space can work to unlock the power of tokenized securities, to lower the barrier to entry posed by their need to raise money.

Over recent years, This specific scenario has enhanced. Kickstarter for example, is actually an online location where communities come together to help fund projects as well as ideas. Indiegogo is actually another example, whose site has stated, “By giving entrepreneurs everywhere a platform to launch fresh as well as groundbreaking products, we help surface innovations in tech, design, as well as much more, all before they go mainstream.”

In 2017, the initial coin offering craze proved to be a massively successful way for entrepreneurs to raise significant funds for their projects. ICO fund-raising carried over to 2018, with $6.3 billion raised in ICOs within the first quarter of 2018 alone.

Unfortunately many of the projects in which raised funds in 2017 have shown little traction since in which rise, as well as a couple have even disappeared with the money. Furthermore, the current infrastructure surrounding ICOs is actually missing stability as well as proper backing. There have been reports of fraud, as well as as a result, many investors have lost money. In July 2018, Satis Group Crypto Research reported in which about 81 percent of ICOs since 2017 had been found to be scams. One reason is actually in which guidelines as well as regulations are currently very loose for the ICO market.

Related: How This specific Cryptocurrency Innovation Will Transform Traditional Investment Offerings

Additionally, many projects over the past year or so have been able to raise fantastic amounts of capital initially, however then often lost significant value once they were out of the investor spotlight; many projects simply faded by existence. In a recent interview I conducted with Desico (tokenized securities) CEO as well as co-founder Laimonas Noreika, he pointed out, “Companies used ICOs as a fund-raising mechanism, not because their tokenomics needed a utility token.

“in which’s why most of the utility tokens issued are below their initial capitalization,” Noreika said.

This specific loss of value is actually caused by the value exchange between investors as well as projects. When an investor puts money toward an ICO, he or she receives a specified number of coins or tokens in exchange. The investor may then trade, hold or use these assets as he or she pleases.

Yet, tokens do not fluctuate in cost based on the success of the underlying project. At This specific point, ICOs’ utility token assets are confusing. Their utility beyond trading definitely lies only in whatever ecosystem they support, which is actually also speculative. Prices reflect whatever people surmise their value to be.

Stocks, in contrast, reflect the success or failure of the underlying companies. Dividends are paid out to investors of certain companies, as well as earnings largely dictate stocks’ prices, using a direct correlation to the stock cost as well as the value of the company. Owning a stock essentially means owning part of the underlying company.

however for a company to go public using a stock offering, or initial public offering (IPO), requires an extremely large amount of capital — as far as the average person is actually concerned. A study by Strategy& (formerly Booz & Co.) showed in which “based on public registration statements, on average companies incur underwriter fees equal to 5 percent to 7 percent of gross proceeds, plus yet another $3.7 million of costs directly attributable to their IPO.”

Tokenized securities are a solution to the ICO problem because they seem to be the best of both worlds; as well as Desico is actually one company helping to make This specific scenario a reality. Tokenized securities take the benefits as well as successes of ICOs, as well as match them with the stability as well as backing of traditional stocks/securities.

within the interview, Noreika explained in which “the item will all change when companies possess the chance to attract funding without pretending in which they need a utility token. Instead, they can offer asset-backed investment opportunities for investors.”

Where STOs are beneficial

Security token offerings (STOs) possess the benefits of cryptocurrencies, however are matched with the legitimacy of traditional securities. Tokenized securities have greater liquidity, as they can be moved easily by exchange to exchange as well as be held in regulated wallets. STOs also mean in which the barrier to entry narrows for entrepreneurs as well as modest businesses.

Instead of having fixed rates totaling millions of dollars, STOs conducted through Desico have fees based on a percentage of the total crypto raised. IPOs generally have high costs associated,” Noreika said. “Conducting an STO through Desico enables projects to pay a percentage [around 4.5 percent] of their total fund-raising, instead of high fixed rates.”

Entrepreneurs who are able to conduct STOs, as well as not have to spend the millions of dollars required for an ICO, will enable more startups to enter the market. They will possess the freedom to conduct a regulated as well as stable offering, in compliance with the law, while giving their investors a safer vehicle to put their money into.  

Tokenized securities also hold their value based on the associated company, as well as fraudulent practices are minimized due to compliance with governing bodies.

In This specific context, another platform in which enables tokenized securities is actually Republic. Republic is actually an affiliate of AngelList as well as CoinList, the latter of whose CEO, Kendrick Nguyen, is actually a founding advisor as well as a highly credentialed one: Prior to Republic, Nguyen served as general counsel as well as venture hacker at AngelList as well as, before in which, as a fellow of Stanford Law School as well as the Rock Center for Corporate Governance at Stanford University.

“We follow guidance by the SEC as well as FINRA very closely as well as work hard to protect our investors,” Nguyen told me. “using a rigorous due diligence as well as selection process, we’re a highly curated platform for both equity-focused as well as crypto-focused offerings. We think innovation, efficiency as well as inclusive entrepreneurship will ultimately be the outcome of all the development happening with blockchain technology.”

Finally, Noreika made yet another interesting statement: “I believe in which tokens need securitization much more than securities need tokens, at least at the current stage of the market,” he said.

Related: What You Need To Know About ICOs: Carlos Domingo, Co-Founder as well as MP, SPiCE VC

There is actually a validity to This specific statement: the item sums up the public’s ability to enter the ring without millions of dollars for their project. Indeed, the existence of tokenized securities seems to make the future a little bit brighter for all those entrepreneurs out there facing the inevitable struggle with finances.

Why Tokenized Securities May Well Lower the Barrier to Entry for Entrepreneurs