Raising Money With a Security Token Offering

Raising money with Security Token Offerings (STOs) is a way to exchange for equity, debt, or asset-backed securities. Tokens are issued to investors as representations of their investments. Securities regulations apply to all securities, whether they are digital or traditional, including digital asset securities (also called security tokens).

With securitize, you can leverage blockchain technology and security tokens to raise money and provide shareholder liquidity while maintaining full regulatory compliance.

Raising Money on Blockchain: What's The Strategy?

Digital

Blockchains, like databases, are ledgers where transactional data is recorded, similar to a ledger. On the blockchain, each transaction is recorded and verified in a block. In smart contracts, predefined rules are written into the block to trigger activities, such as distributions, at specific dates or milestones.

Creating the issuance, recording the transaction, transferring securities, and recording shareholder information are all digital processes.

Quicker

People tend to believe that digital activities with little or no human interaction take place faster. Typically, financial activities leverage blockchains as well.

Due to the lack of human involvement in operational tasks, blockchain marketplaces can trade 24 hours a day and are able to achieve an instant settlement, whereas public market stock transactions generally take T+2 (trade + 2 days) settlement periods.

Transparental

Blockchain records are transparent and auditable. Securitize's issuer dashboard provides real-time visibility into shareholders. As well as sending shareholder communications, issuing rewards and perks, and issuing distributions, issuers have the ability to send shareholder communications.

Asset classes using security token offerings

Startup and private companies

Increasingly, companies are using blockchain services to raise money and manage their cap tables. With Securitize, you can raise capital and provide liquidity to established startups and private companies.

Investment funds

Asset managers, hedge funds, venture capital funds, and even crypto funds are turning to digital assets. Securitize got its start tokenizing the first venture capital funds to issue a security token.

Real estate

STOs have been used to raise capital for real estate projects by early adopters like developers and investors. Among the leading partners for tokenizing real estate issuances is Securitize.

How Are STOs Different From Traditional Crowdfunding strategies?

Traditional crowdfunding involves a variety of industries. ICOs usually only involve blockchain-based projects. STOs also involve a variety of industries.

Traditional crowdsourcing and initial coin offerings are governed by limited regulations. Security Token Offerings, on the other hand, are governed in accordance with SEC Guidelines in all countries.

Why ICO & STO Are The Future Of Blockchain?

Initial Coin Offerings and Security Token Offerings are far better deals for investors. Liquidity is not guaranteed, and you are locked up for a period of time.

The Bulletin Board option offered by crowdfunding platforms is useless since transactions must be finalized outside the platform, exposing the platform to counterparty risk. Consequently, illiquid shares are more like a bet than an investment.

When it comes to ICOs and STOs, there is a lot more liquidity due to the daily fluctuations. Higher liquidity also means higher valuations. As businesses and projects begin to flourish, the value of cryptocurrencies increases.

However, if your project is not a blockchain project, you have no choice but to use Traditional Crowdfunding platforms! But now, STO platforms are on board with all types of projects!

On the other hand, equity crowdfunding is a small part of the total crowdfunding market. The company would be able to exit after 3-5 years and only if it went public or was acquired.

Why then is crowdfunding still popular, especially in the UK? Crowdfunding is supported by tax reliefs. The long answer is more complicated, but many people treat it as a hobby, a nice way to pass the time, and a way to make money.

Conclusion

The best method is to use STOs. A prospectus provides information, but only facts can be included due to regulations. Secondary markets provide liquidity before exiting STOs.

Therefore, crowdfunding is for small national projects. An STO can be used to fund large, international projects - prospectuses can be deposited and self-issuance rights can be utilized.

Crowdfunding, on the other hand, has low returns and doesn't usually allow for a diversified portfolio. The UK is the only market where a campaign might make sense - the rest of Europe is not significant.

UFUND offers utility and security tokens services for businesses to access funds; investors have multiple opportunities to get substantial returns and trade Tokens, products, and commodities.