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Security Token Offerings or STOs as we popularly call them are one of the ways in which you can raise funds for a business concept. The advantage of STOs over IPOs lies in the fact that they do not usually involve complex registration systems.
But at the same time, they are better than an ICO in terms of compliance and reliability. With the best of both worlds in STOs, a lot of businesses are beginning to consider an STO for their upcoming business ideas. So let us look at some of the most important factors that can make or break an STO.
1. Choosing a relevant token type
Depending on your business goals, you can choose from any of the following types of security tokens:
· Equity token – They are backed by company capital or stocks.
· Debt Token – These tokens offer a promise of payback to the investors
· Utility Token – This type of token helps organizations raise funds for Blockchain projects which can later be used by investors to buy the goods and services offered by the issuer.
· Asset-Based Token – It is a Blockchain-based token which is backed by a tangible or non-tangible asset of specific value
Knowing the most suitable token type for your business concept is the first step to creating a better STO. At Alwin, our consultants will help you identify the most relevant security token for your business goals.
2. Regulatory filings and Collateral Compliance
To comply with SEC regulations, the organization must ensure that all regulatory filings are completed and you have disclosed the terms of your token offering and also conform to collateral compliance requirements. This is one of the most cost-intensive steps when building a security token.
You will require legal help in completing all the legal formalities. Alwin encourages clients to include us in the process of discussing compliance with the legal team. This helps you in the long run, where legal compliance will meet the process of token development and deployment.
3. Interoperability of the Token
The good token will have these two main things in terms of interoperability:
· A popular and reliable Blockchain network
· A reliable token factory
Alwin’s Blockchain developers are experienced in developing Blockchains on a variety of platforms. This gives us a lot of insight into the advantages and disadvantages of different Blockchains. While Ethereum has become the most popular Blockchain platform, we feel that there are lots of newer Blockchains that are extremely competitive in terms of security as well as the services provided.
As for the token factory or the issuance platform that you use, Polymath is considered to be the most popular, but other platforms like Harbor and Securitize have gained considerable traction too. There are newer token offerings that are beginning to look very promising too. Many of these offer you the option of deploying the security tokens on any Blockchain without having compatibility problems.
Some of the most common token standards used at this time are:
· ERC – 1400
· ERC – 1404
4. Efficacy of the smart contract
Smart contracts must be coded very carefully. Details about the smart contract will play an important role in the impact of your security tokens on investors. Your investors will have a lot of money at stake if your smart contract ends up with a bug or malfunctions.
The chain is always as strong as its weakest link. This is why Alwin’s team of developers is constantly studying and re-studying the codes to check for concerns or problems before they are deployed.
5. Selecting Brokers or Dealers, Transfer Agents, and Money Services
To build a better STO, you also have to have an entire team of brokers or dealers, transfer agents, and professionals offering money services to back your venture. With the right team, you can launch a successful STO and expect success in your business venture. Choose the right brokers, and make sure that you already have the transfer agents who will oversee the issuance of tokens and ensure that legal requirements are conformed with. Finally, your capital can be converted to fiat money with the help of money services so that you can start funding your project or business.
This is only the beginning
Creating an STO is only the beginning of your journey. Once investors start showing interest in your STO, it is important for you to vet every investor just like investors would vet your token.
You will also be required to set up an after-sales support system so that inquiries about the token and information required by investors can easily be made available. Finally, with your token starting to sell, you will also have to look for exchanges where the tokens can be listed.
As an end-to-end blockchain development company, Alwin Technologies provides you with support and consultation on all of these and more.
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STOs undergo a long and complex process which requires lots of input from developers, legal teams, designers, marketers, business intelligence and data analysts. Only after careful introspection of the market, industry performance, competition and target customers can an STO be launched for success.
Selecting the right STO development company is crucial step for your success. If you choose the wrong STO development services, then it can be a hassle. So, its extremely important that you choose the best STO development company from the start.