Key Takeaways

  • Raising capital for your business can be easy - if you already know the right investors

  • For everyone else there’s networking events, cold-calling… and more recently, the blockchain

  • Tokenized Private Placements are about to revolutionize how business owners find and connect with investors, making it faster and easier to raise capital than ever before

  • Blockstation’s Tokenized Private Placement Accelerator will launch later this year - subscribe to our newsletter for updates

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By: Marko M. Hafez, Co-Founder and President

Raising capital for your business is never easy, even if you already know the right investors. For most people though, just getting that far involves a lot of legwork. There are lots of tips and tricks for deciding between private equity vs. venture capital. For how to get investors, from attending high-profile networking events to simply contacting likely candidates out of the blue on LinkedIn.

These methods work. And they’ll never go out of style. But they can be time consuming, taking you away from the work of growing your business in the first place.

That’s why growing regulatory approval of the blockchain and digital assets around the world is so exciting: it opens up new ways to connect with investors in less time, speeding up the fundraising process.

We saw the technology at work during the Initial Coin Offering (ICO) boom of 2017, with over $5.6 billion USD raised across hundreds of projects. The first three months of 2018 saw over $6.3 billion raised. The most impressive part of this explosion in funding is that much of it happened directly between companies and investors in short periods of time, rather than relying on intermediaries like brokers and venture capital firms.

What about blockchain technology makes this possible?

Tokenization is the Future of Fundraising

The key is a new kind of service provider: tokenization platforms. Entrepreneurs can work with these service providers to mint blockchain tokens (often referred to as security or equity tokens) representing equity or shares in their company. They may also program smart contracts into these tokens to automatically enforce certain rules trading restrictions, mitigating risk of abusive tactics.

The Blockstation Tokenized Private Placement Accelerator is one example, an end-to-end solution for the entire lifecycle of your offering including:

  • tokenization

  • share ledger management

  • disclosure documentation

  • broker arrangement agreement

  • capital raise

  • issuance

  • smart contracts

  • trading

  • custodianship

  • reporting

  • shareholder communication

  • voting

It even includes built-in Know-Your-Client (KYC) and Anti-Money Laundering (AML) functionality for companies to conduct accredited investor verification before accepting funds, ensuring a compliant raise. You can even connect with professional brokers to lead your raise, or seek advice on topics like share distribution and what is a fair percentage for an investor.

Ready to go public with a Tokenized IPO on a national stock exchange? The Accelerator facilitates that as well, expanding your private placement memorandum to a full prospectus and connecting you with secondary markets for listing around the world.

Key Lessons for Raising Capital on the Blockchain

#1: Connect Directly with Investors

Similar to crowdfunding platforms, services like Blockstation make it easy for entrepreneurs to connect with personal investors for small business (or medium or large, for that matter) by creating their company profile in a single centralized marketplace to attract interest from all around the world.

#2: Marketing is Key

With traditional networking, you perfect your pitch for face-to-face meetings, be it the 30-second elevator pitch or a comprehensive slide deck for VCs. Online, look to viral Kickstarter fundraisers for inspiration, as a strong web presence and sales pitch for a mass audience will be key to success.

#3: Fundraising Goes Global

On the internet, you can connect with investors from around the world. On the blockchain, you make it incredibly cost-effective for investors to send funds internationally using Bitcoin and Ether, saving on costly wire transfer fees that often price smaller retail investors out of the cross-border market.

#4 Everything is Faster on the Blockchain

With a tokenized private placement, transactions can be completed, cleared and settled the same day - meaning near-instant confirmation for you and your investors without the wait, as well as real-time access to accurate transaction records.

#5 Boost your Offering with Investor Incentives

One of the easiest ways to attract investors is to offer dividends, but the administrative overhead can be costly enough that many revenue-generating companies can’t afford it

On the blockchain, the combination of inexpensive transaction fees and smart contracts automate that the administration of these payouts mean offering dividends is a viable option for more companies, giving you another tool to attract the investors you need.

The Maturation of Digital Assets for Capital Markets

Blockchain technology and the digital asset marketplace are ready for prime time in capital markets, waiting for businesses of all sizes to transform the way they raise capital. And Blockstation is proud to support this transformation with its Tokenized Private Placement Accelerator. 

What do you think? Will tokenization transform how you raise capital? Let us know on social media using #Blockstation, join the conversation on our Telegram group, and subscribe to our mailing list to receive updates as we move closer to launch!

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This content is for informational purposes only. You should not construe this content as legal, tax, investment, financial, or other advice, nor as a solicitation, recommendation, endorsement, or offer by Blockstation or any associated third party to buy or sell any securities or other financial instruments in any jurisdiction in which such solicitation or offer would be unlawful under the applicable securities laws. All Content is information of a general nature and does not address the circumstances of any particular individual or entity, nor does it constitute professional and/or financial advice, nor does it constitute a comprehensive or complete statement of the matters discussed or the law relating thereto. Blockstation is not a fiduciary by virtue of any person’s use of or access to content. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of the content before making any decisions based on such content.