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Raising capital on the blockchain with STOs
Tokenize the World Episode 2 - Host Angie Lau and Henry Chong talk about raising capital on the blockchain, the advantages of STOs and how time is running out for traditional IPOs. Henry believes that slips of paper are now a thing of the past and companies that move forward to Crypto 2.0 will be the ones to succeed in the 21st century.
Direct listings in special purpose acquisition companies, or SPACs have become popular alternatives to a traditional IPO when raising capital of late. However, they aren't the only options. Blockchain-based alternative would be to tokenize equity and to make those tokens available to a company's user base.
How does raising capital on the blockchain work?
Capital raising in the blockchain today is largely focused around ICOs, issuing utility tokens. That's been a great proof of concept. It's shown that you can build alternative value networks around companies and communities where you can go fundraise from that community, and find a way to reward that community for their participation. I think the time now is for us to move to what I call crypto 2.0, using security tokens that can merge the best of tokenization with all the underlying benefits of a real security or share upon the funds so that we can turn all the stakeholders of these communities into shareholders.
What are the key advantages of security tokens for companies and investors?
STO shave all the natural rights, obligations and investor protection of traditional equities, but with all the benefits of being in token form. And once we combine that with the benefits of tokenization, we can really rethink what it means to turn communities, stakeholders into shareholders.
There’s a lot of talk right now about crypto companies like Coinbase and OpenSea going public on traditional exchanges. And it's understandable why they want to do so, I just think that they're planning to list on the wrong place. It's strange to have crypto companies wanting to issue paper-based shares, listing on traditional exchanges where their own stakeholder base and community can't really or easily access their own equity.
Could traditional IPOs potentially be replaced by STOs at some point in the future?
I think they already are. The whole crypto environment has shown that ICOs and NFTs are really exciting ways, not of raising capital, raising funds, but as away of really bringing together a community. And that's why the crypto market today is so dynamic. I think there's absolutely no reason why all the paper shares and issuances out there aren't also going to be digitized. I can't imagine that in 10 years time when we're all living in the metaverse, that we'll still have slips of paper representing the assets that we see around us: the companies we work for, the buildings in which we live, all of this can and should be tokenized.
Every business, including the traditional ones out there, are driven by their stakeholders(customers, suppliers, and employees…) and I think they need to rethink what it means to draw these stakeholders together. How can we incentivize this network of people upon whom our business depends on for survival? Not only find a way to reward them, but find a way to really build community around them? Companies who figure out how to do that are companies that will succeed in the 21st century.
