digital assets

Why mini IPOs make sense (Tokenizing equity)

why mini IPOs make sense
Tokenizing equity of an Aktiengesellschaft (LLC) in Liechtenstein

So what benefits would an entrepreneur have if he were to tokenize his business on the Ethereum Blockchain?

  1. better visibility means we could reduce the dark pool trading in the long term if in the future, more and more entrepreneurs would use newer technology and start tokenizing their equity early on.
  2. increased loyalty — employees could see their tokenized shares on a blockchain explorer, like etherscan.io with a current market value. Work hard everyday to deliver enough value that investors appreciate it, and ultimately, employees and every investor will benefit from it. (Ross Campell also created a brilliant post about the automation of vesting shares.)
  3. less compliance & admin costs — yes, you read it right. I believe with the right compliance tools, software and algorithms we will have less fraud and can act earlier if and when certain players want to abuse the system. The way shares are currently handled in certain jurisdictions is just very inefficient and expensive. I envision a future where we will have borderless exchanges trading every type of asset. (there are many other types of financial instruments beside equity or bonds)
  4. increased liquidity — especially if you are early, everything from incorporation funding to Series A or other funding rounds are always in the hands of VCs, PEs or institutional investors,  depending on the field you are working in.
  5. easier collateral — let’s assume that you would like to use your current shares of an early-stage startup (until Series A); it’s its a pretty difficult (if not impossible) way to find lenders who will use the collateral with reasonable valuation and fees. This, however, could change if you are able to also approach peer-to-peer lending platforms where they accept such tokenized shares as collateral.

  1. be honest with your investors, for example with internal data in your investor dashboard
  2. make sure you take care of your KYC/AML duties (e.g. outsource this to leading companies to do it for you)
  3. structure your offering to be as creative as possible online on your website
  4. make sure you promote your offering within the EEA once the prospectus is approved in Liechtenstein and notified in other European Union jurisdictions; this allows you to promote your offering to everyone in those jurisdictions. However, keep in mind that each ad should be written off by your lawyer, just to make sure you’re protected legally and prevent anybody from taking legal action to you
  5. further, execute your product and keep your investors up-to-date. Ask them to vote on important issues; if you structure your token, you can easily do this via your investor dashboard at any given time

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