Equity crowdfunding, venture capital, IPO — whatever method of capital attraction you’ve opted to go for with your business, each of them comes with its fair share of inherent shortcomings that could be avoided by sticking with Tokenomica instead. Here’s a list of ways our tech could help streamline the process of raising investor capital for your company:
1. Reducing your costs
According to PwC, the average IPO cost for a company set up to collect up to $100m in revenue amounts to approximately $10.1 million, with underwriting fees eating up 4% to 7% of total gross proceeds. As for equity crowdfunding, issuer fees charged by certain platforms in Europe amount to 6% on the average, as evident by our own study shared to the member of our club. These figures are by no means moderate: in both cases intermediaries cost share issuers big time, consuming a huge proportion of their revenue.
This is not the case for Tokenomica: our Platform only charges a 4% issuer fee — your expenses are significantly reduced. As an issuer, you’ve got to take care of set-up costs and legal fees, but none of this is collected by Tokenomica.
2. Saving up your time
The raw truth: raising venture capital can take forever. There’s no actual time limit for finding enough investors that will buy your pitch, especially when it comes to endless roadshows comprised of tiresome meetings. The same goes for IPOs: the aforementioned study by PwC suggests that preparations for an IPO normally take 12 to 18 months. Then, according to Tarrida, the average equity crowdfunding campaign takes 2-4 months to prepare, which makes it the least time-consuming fundraising method of all three.
Setting up a campaign on Tokenomica takes just as long as equity crowdfunding, if not less: at a minimum estimate, preparing your campaign will take approximately a month. Unlike with VC or IPO, you’ll no longer have to wait for an eternity to finally get to the fundraising stage.
3. Addressing the issue of control
A common problem for many IPOs: after putting years of hard work into their brainchild, the CEO of a given company finds out they’re losing control over it after going public — as the company issues more stocks and the number of owners increases, the management’s control of the company becomes diluted, with shareholders gaining more authority during the decision-making process. In the case of venture capital, VC firm representatives often become members of the investee’s management team, meaning that the latter relinquishes a significant part of the control to the former. On top of that, VC firms often have the power to override any major decision investee makes.
By contrast, equity crowdfunding is reputed to be lacking any investor control at all: since all funds from investors are collected by shell companies (SPVs), the shell retains all shares after collecting investor funds and transferring them to the project, meaning that investors don’t have any voting rights and can’t influence the future of the company in any way. Instead of a share of stock, they typically receive a certificate with the right of claim and income, but voting rights and control over the shares remain with the platform or SPV.
With Tokenomica, you can lead your company the way you want to: thanks to the programmable voting rights, you can determine an extent to which tokenholders affect the decisionmaking process. Moreover, the platform offers flexible options for legal structuring depending on the jurisdiction of your company and your key target investors. An issuer can go with any legal structure that suits him best and complies with the legal requirements of the EU.
4. Bringing the secondary market for equity crowdfunding
If you are set to launch an equity crowdfunding campaign, you can’t but come to terms with the fact that your investors will not be able to trade their assets, given that there are no secondary markets for small unlisted companies. Thus, since your shares are not being traded, they lose in liquidity, while your company loses in value.
With an aim to solve this problem, Tokenomica is building a secondary trading platform, where your shares could easily be traded as smart securities, thereby staying liquid. Your equity crowdfunding shares will finally be tradable!
5. Intermediaries are out of the picture
To round out the picture, sticking with Tokenomica also offers the possibility of disintermediation — courtesy of the blockchain technology. As said before, most companies that go public usually do so with the assistance of an investment banking firm acting in the capacity of an underwriter — an intermediary that costs its issuer up to 7% of total IPO proceeds. Where are these numbers even coming from? How justified are they?
Intermediaries cost businesses a lot. Is there any reason not to go with a solution that allows to avoid them in the first place?
Tokenomica’s fundraising campaign is now full throttle! Become a shareholder of Tokenomica during the PreSale and join us on our journey to change the securities market!