Welcome to the brave new world of blockchain-based capital raising!
Securing the capital required for starting a new project can be difficult, especially since the outbreak of the COVID-19 pandemic. This is why non-traditional forms of fundraising like ICO, STO, and IEO are gaining more popularity. These methods can often help businesses secure large amounts of money.
ICO or Initial Coin Offering refers to a form of crowdfunding via crypto tokens. It was one of the first methods that gained popularity after the rise of crypto, and many startups have used it to navigate around the strict rules that an initial investment process needs to follow. The basic necessity for the launch of an ICO is a website with the wallet address to which cryptocurrencies are sent. It was characterized by no legal boundaries, no investor protection, complete anonymity, and often the lack of MVP.
Any individual or company can fund any project or become an investor. It usually works through the issuance of digital coins against investments. Even though initially the investments were made via cryptocurrencies such as Bitcoin and Ethereum, the ICO processes evolved and started accepting fiat currencies as well. Investors buy the offered token which server as a utility in the proposed project.
Benefits:
– Easy to launch
– Lower launching cost, which makes it ideal for startups
– Investors will have complete control of their funds
– Limited government intervention
– The fundraising process is simpler when compared to STO and IEO
Disadvantages
– Declined market acceptance due to scams and frauds
– The issuer needs to manage all logistics involved, including KYC verifications.
– Once you buy the token you still need it to be listed on an exchange to trade it
IEO or Initial Exchange Offering. The aim behind launching IEO is usually the same as ICO. Essentially, it is to provide tokens to a large group of investors. However, there is one major difference. IEOs are launched and managed by a token exchange instead of the company that created the token.
The exchange holds and sells the token on behalf of the project team. As the exchange platform sells tokens, token issuers pay a listing fee along with the percentage of tokens sold during the IEO. In turn, tokens are presented on the platform and listed after the end of IEO.
Benefits
– No need to create an audience from scratch
– Traders in the exchange are already KYC/AML verified
– Easier to issue tokens compared to ICO or STO
Disadvantages:
– Listing cost to pay upfront
– Less control of issuance and token pricing
– High risk of token dumping and losing market value very early.
STO stands for security token offering. It is a process similar to an ICO where an investor exchanges money for coins or tokens representing their investment. They are linked to an underlying investment asset in a way like stocks, bonds, real estate investment trusts (REIT) or other funds.
Security Tokens are defined as financial securities in accordance with the Howey test and empower investors with financial benefits such as:
• Dividends
• Equity
• Profit Sharing Rights
• Buy-Back Rights
Benefits:
– Tokens are backed by the assets of the issuing company and have real value
– Comply with government regulations, which makes it more trustworthy
– Better market acceptance than ICO and IEO
Disadvantages
– Costly to launch (compliance cost, regulated by security laws)
– Low liquidity level
– Similarly to ICOs you have to wait for the token to get listed on an exchange to be able to trade it
We act as lead advisor in managing the whole fund raising and STO / IEO process for you, including assemble a STO professional team, advise and organize the resources necessary for a successful execution and provide ongoing services after the fundraising exercise.
Business Model Review
Provide guidance on your project, laying the groundwork for a solid business model designed to weather the volatile cryptocurrency market. Project and Economics analysis to ensure the proposition is attractive to investors while feasible for your business.
Token Model along with Issuance Structure
Provide Guidance on how to create a sustainable tokenomics strategy that keeps your token’s market value and cap raise healthy; Determine Token Rights and Economics; Help determine Issuance Phases, Token Values, Dividends, etc.
Legal Structure and Compliance Model
Analyze the existing business and token strategy, then provide guidance to help ensure there is a sound legal structure to proceed with the STO;
Identify the best legal jurisdiction to run the STO.
Legal Entity Creation
Assistance in the formation of entities that provide sound legal structure to proceed with the STO and opening of bank accounts.
Legal Collateral
Our trusted network of STO legal professionals create well written, clear collateral that protects both you and your contributors, including token agreements, contracts, KYC/AML compliant, privacy policies, terms of use, disclaimers, and more.
Private Placement Memorandum (PPM)
Our network of legal professionals will work with clients through every step of developing the Private Placement Memorandum, including preparing and filing necessary documents with regulatory bodies such as MAS / SEC.
Tokenization Platform
A complete suite of Tokenization Management System delivered in conjunction with a strategic partner offering an industry leading solution including KYC/AML approvals, creation of wallets, investor accreditation process, e-signatures for the fund subscription agreement, investment process email notifications and investors mailing, blockchain information retrieval, token issuance, smart contract and so on.
Marketing and PR Campaign
Creation of website, marketing collaterals, video, one pagers, banners, social media channels, and engagement with blockchain media and bloggers..