3 reasons to create a Security Token Offering
A better investment method for growing businesses
The global economy is powered by SMEs, yet it’s difficult for these businesses to secure the capital needed to keep growing.
There are around 30 million small and medium sized businesses across the world, and a high proportion of them are frustrated with the inaccessibility of fundraising methods like IPO. They are actively looking for a cheaper, easier alternative.
Many companies have come into contact with the concept of Security Token Offerings (STOs) but aren’t quite sure whether it’s the right choice for their business. If this sounds familiar, our new ebook – 8 things to consider before launching your own security token – is the ideal guide to shape your decision.
Free to download, our ebook is packed with helpful advice to determine whether an STO is suitable for your business, and help you find the right technology partner to launch your first offer. We cover the fundamental questions you should ask before dipping your toe in the water; starting with what you want to achieve by creating digital assets.
Here are three key reasons that many companies decide to launch a Security Token Offer, to bring them stronger results than they can achieve through traditional investment methods.
1. To raise capital
Cash flow is king to all businesses and, as we’ve touched on already, legacy models like IPOs and private fundraising aren’t always set up for the needs of SMEs. They can be time consuming and lengthy, involve a number of third parties that need to be coordinated throughout the process, and ultimately cost a lot to execute.
As STOs digitise assets they are much quicker to launch – the typical time frame with a good technology partner is 4-10 weeks. This means that growing businesses can access capital quickly, going straight to potential investors to participate, rather than relying on intermediaries and custodians.
Even more importantly, STOs offer immediate liquidity, meaning resources can be injected straight into your business as soon as investment is secured.
2. To attract new investors
Many businesses struggle with the disparity between the demographic of customers and investors; ultimately you want them to be one and the same. This is because legacy systems like IPOs and private fundraising offers attract a certain type of person, and this doesn’t tend to be the young and digitally-savvy generation who aren’t prepared to wait for a good opportunity.
STOs are opening the doors to Millennial investors, who are attracted by the immediate and no-nonsense approach to buying and selling digital assets. As we touched on in a recent blog post on why businesses need Milennials to start investing, the potential of this demographic has not yet been fully explored, and it presents a great opportunity for companies to secure investment among audiences that will buy their products or services and become unofficial brand ambassadors.
3. Reducing the cost of investor management
One fundamental problem with the way investment works today is that it’s set up to raise money. What happens afterwards? At a very basic level, there is a compliance and duty of care for businesses to safeguard investor data and ensure it’s up to date – however there’s a lot more that can be done with this information.
In addition to raising capital quickly and easily, many companies are looking at the long-term value that the right STO platform can bring by helping them to nurture and maintain investor relationships.
Some leading STO technology platforms, for example, include a number of in-built CRM tools that enable users to communicate digitally with their investor base, issue dividend payments and company updates, and even run voting opportunities online to avoid the need for complex email conversations and lengthy AGMs.
By digitising investor relationships and running interactions through a central hub, engagement is much quicker and more frequent. Solutions like WeOwn’s Digital Marketplace also include sophisticated analytics functions, so businesses can segment marketing communications to reach the necessary outcomes for company growth.
Find the right technology to reach your target
The STO market’s potential is huge – experts predict it will be worth trillions of dollars in a few years’ time – but it will only pay off for individual businesses that understand why you want to get involved. Establishing clear objectives up-front is critical to this success.
With a goal in mind from the outset, you will be able to set focused objectives and plan your first fundraising campaign effectively. And more importantly, it will help your team to choose the right technology provider, as you can match your objectives to their solution’s features and functions.
Download our free ebook – 8 things to consider when launching your own security token – for further advice on setting up a successful STO.