They say that many hands make light work – but what if that’s not always true?
In the world of investment, involving multiple third parties might be normal, yet it doesn’t always create effective working practices. Perhaps it’s time we looked for a quicker, slicker way of helping companies to generate capital…
Public or private – do we need all these people?
Until now, businesses have been faced with two main choices when they want to raise funds: launch an IPO or a private offer. While some companies have achieved this successfully, there are many stakeholders involved in bringing this type of fundraising to fruition. And this can be a source of major frustration.
All of the legal and admin requirements are managed by intermediaries, data is secured and safeguarded by third party custodians, and even the asset being traded is held by a Central Security Depository. This sounds like it should make life easier – leave it to the experts to look after the process – but in reality, it doesn’t – for a number of reasons.
Slow and steady wins the race?
The first major issue with existing investment processes is that the more people that are involved in a transaction, the harder it is to get it over the line. Multiple stakeholders need to be communicated with and coordinated, and this takes time; it’s not surprising that it takes the average company 6-9 months to go public.
Secondly, more parties mean less control; in a traditional investment round, it’s not uncommon for companies to have no direct relationship with their shareholders.
Ultimately it is a company’s responsibility to ensure their investor information is accurate and up-to-date, and they will shoulder the burden of any penalties that occur for failing to meet compliance guidelines. However, it is very difficult to maintain records when someone else is engaging with each shareholder on their behalf, or they are using in-house systems to manage the share register.
Businesses need to trust that the knowledge and practices of the partners they engage meet legal guidelines, and that they are regularly communicating with shareholders to check their details are correct.
More people = more payments
Last but definitely not least, the more people are involved in a fundraising offer, the more invoices companies will have to pay.
The most basic complaint associated with IPOs and legacy private fundraising methods is that it is expensive, which precludes many high growth SMEs from launching an offer. This is why companies are turning to alternative investment options like ICOs, crowdfunding and peer-to-peer lending to generate income.
However, these platforms do not always offer the same level of legal protection and compliance support, and they’re often a one-off way of raising funds, rather than an investment platform that businesses can benefit from for life.
Taking ownership of investor relationships
To truly innovate investment and democratise the fundraising process, companies need to look for a solution that cuts out the unnecessary middlemen, but which offers a secure framework for delivering long-term value.
Own is pioneering an approach that encompasses all these requirements, to provide businesses with quicker, cheaper access to capital, at the same time as giving them the tools to nurture investor relationships for life.
Because our FAST Platform is built on the blockchain, we can cut out many of the intermediaries and custodians associated with traditional capital raising methods like IPOs. For example, our bespoke blockchain takes over the function of Central Security Depositories (CSDs). This makes the process much speedier and – more importantly – less expensive, at the same time as offering a secure transactional infrastructure.
We’ve also thought about how our technology can offer ongoing benefits to businesses, building-in management, analytics and CRM tools that enable companies to ensure accuracy and compliance of shareholder data and understand their investor base in detail.
Companies can easily engage shareholders online to encourage active participation in things like voting resolutions and share new, exclusive investment opportunities, without the need to invest in multiple pieces of software involving yet more stakeholders.
Putting the company first
There’s clearly a disenchantment among businesses about the way investment models currently operate, and the time has come to shake up the industry.
Own is at the forefront of this evolution, developing new ways in which companies can engage potential investors directly – without complex third–party networks diluting those relationships.
By using the latest tokenization technology, we can enable ambitious businesses to break down the barriers posed by traditional fundraising methods, streamlining the way in which capital is generated, and making it cheaper. This way, we ensure that companies get priority, and get them the tools to nurture life-long investor relationships.
Book a free demo to see how our technology works.