If you’re reading this article, you’re either interested in creating a Security Token Offering (STO) or participating in one.
Perhaps you’re an entrepreneur looking for innovative funding sources to grow your project to the next level, or maybe you’re just sick and tired of all the hassle (& hustle) that comes with lobbying to get funding from traditional investors…
Or you’re simply an innovator and realized long ago that the blockchain technology and STOs are the future of fundraising.
Whichever applies most to you…
There’s some good news and bad news:
The good news is that STOs allow you to raise more funds in record time without the uncertainty of traditional fundraising, and get instant access to a worldwide pool of investors with virtually unlimited funding possibilities.
However, the bad news is that there’s a lot of misinformation out there.
According to Marvin Steinberg, a leading STO expert and Founder of CPI Technologies, “Today, scores of providers are trying to sell sub-par solutions based on false assumptions that over-promise, but under-deliver. Since the demand for STOs is rising at an incredible rate, a lot of companies fall into this trap, just because they’re afraid to miss out on the action.”
Creating a Security Token Offering carries with it a lot of risks as-well, from technical, promotional, and of course, legal aspects.
What this means is that not only do businesses have to build a rock-solid platform that works extremely reliably, they also have to successfully market and promote the STO, while also complying with hundreds of strict regulations at the same time.
For example, businesses must be able to:
- Choose the perfect STO Type and Structure for the project
- Know which Jurisdiction to use (and, more importantly, which ones to avoid)
- Take care of the most important legal aspects to avoid fines
- Architect a 3-part crowdfunding campaign to quickly get investors for the STO
…and do all of this at each stage of the STO creation process.
The 7 Stages of Launching a Successful STO
Although the entire process of starting an STO is very comprehensive, Marvin Steinberg has put together a condensed 7-step guide that will help you get started the right way with your STO efforts, regardless if you’re new to the topic or quite familiar with it.
Stage 1. Choose an STO Type and a Jurisdiction
Marvin Steinberg asserts that this first step is critical and has a huge effect on everything that comes after it.
And that’s because the security token type will determine the rights of investors, along with important details regarding dividend payments, ownership of the asset, share in the company, access to the services of the company, and other aspects.
Stage 2. Set a Business Structure, Model and Goals
After choosing an STO type and the jurisdiction for the Base Company (the company generating revenue for your investors), it’s time to create a Special Purpose Vehicle (SPV).
Marvin Steinberg explains SPVs are basically structures through a separate entity which then also become an equity shareholder in the Base company (acting as the revenue entity). This “Token Model” unlocks the ability to offer investors access to Equity Shares and Dividend Rights.
Stage 3. Right Set up of Legal, Risks, and Opportunities
After the foundations are set, it’s time to take care of the legal aspects of launching an STO.
Marvin Steinberg explains that it is advantageous to leverage the EU’s “small offering exemption,” which involves 3 main rounds:
- Initiation: this first “round” of the crowdfunding
- 2nd Round: includes everything from finding and onboarding investors, due diligence of the KYC and AML processes, and processes regarding investment
- 3rd Round: this round is targeted at institutional and corporate investors
Stage 4. Set up the Security Token Smart Contract on the Blockchain
After the legal part is taken care of, it’s time to get technical.
Marvin Steinberg describes that depending on the requirements of the STO, you’ll need to create a Token on the Blockchain, by typically selecting Ethereum, Stellar or EOS as the main Blockchain where the Token will be issued.
Then, you need to select the Token Type, Token Framework, and Tokenomics Model.
Stage 5. Set up the STO Dashboard for the Tokensale
As you can imagine, in order to launch an STO, you need to have a solid infrastructure that ensures the issuance is safe and complies with legal regulations. Marvin Steinberg asserts that it is important to have a dashboard dedicated to investor services.
This part must be handled well.
Stage 6. Launch the STO to an Investor Network
A successful STO is heavily dependent on the investor network that it’s capable of reaching.
While the team behind the project might have a strong network, founders often rely on the networks of consultants, advisors, brokers, and fundraisers to reach the right people.
This is particularly important for STOs rather than ICOs, as non-securitized tokens often make use of regulatory loopholes that would otherwise prevent them from selling to the public.
Marvin Steinberg highlights that once you have the network, you can start selling your tokens. This typically happens in 3 distinct stages:
- Private sale
- Main sale
Stage 7. Execute a Highly-effective Marketing Strategy to Convert More Investors
Marvin Steinberg goes on that this final step is extremely important if you actually want to make money with your STO.
Due to the heavily-regulated marketing rules set by major advertising companies, such as Google and Facebook, for the Crypto industry, running regular PPC ads is not an option.
Therefore, you’ll need to use different marketing strategies, uniquely developed from scratch for your business needs, while taking into consideration the exact goals, milestones, metrics, and KPIs that will help you become successful (so you get an ROI as soon as possible)
Given the depth of each step involved in the launch of an STO, it’s clear that starting a successful STO is a very comprehensive process.
Whether you’ve been researching STOs for a long time, or you just started thinking about getting new types of funding recently, it’s critical that you get help from a certified STO advisor, so you can follow these steps the right way, while avoiding the most common mistakes that many companies make when starting an STO.
Find Someone Who Has a Proven Track Record of STO Success
Demand for STOs is rising at an incredible rate and companies are scrambling to understand all the complex technical, promotional, and legal implications.
To be successful, it’s highly recommended that you ask help from A-players and proven companies in the field.
People like Marvin Steinberg and his company, CPI Tech. In fact, one of CPI Tech’s latest STO projects is the Times Square Token, an ambitious $700M undertaking that aims to “tokenize” a part of Times Square itself with the power of the Blockchain, empowering anyone to invest in real estate (along with all its perks), regardless of their background, geographic location, or financial situation.
Co-founded with tech-wizard Maximilian Schmidt, CPI Tech is a global leader in providing full white-label STO services to ambitious companies. It’s the first Blockchain Growth Promoter and Business Facilitator that helps companies sell more products with STO crowdsales, and that’s because Marvin Steinberg & Maximilian Schmidt specialize in creating highly-scalable, user-friendly blockchain software that’s also profitable. Their clients regularly see an ROI, not after years, but only a few months (or even less). And now they’re looking for new success stories.
STOs are the Future of Fundraising
Marvin Steinberg asserts that during the early days of fundraising through blockchain solutions, much of the media spotlight was on ICO news and ICO lists. Now, that clamor has siphoned down despite the popularity of the IEO list. The reasoning is that ICOs have proven to be largely unsafe for investors due to the lack of legal frameworks.
Real, existing businesses that seek growth opportunities without the jargon involved with traditional VC are seeking a way to raise through the blockchain, but that will be primarily possible with STOs, and slowly, STO lists will dominate investor searches.
To bolster exposure of security tokens, Marvin Steinberg has created a guide that covers critical points that every STO must account for in order to be executed successfully. If you want to learn even more about STOs, Marvin’s guide is a good start. It covers everything you need to know about STOs, like what they are, how they work, and most importantly, how you can benefit from using one.
Whether you’ve been researching this topic for a long time, or you just started thinking about getting new types of funding recently, this is a great crash course into the world of STOs, without wasting hours of your time with miscellaneous details. Get the ultimate STO guide for free here.