Sourcing for funds is always a hard task for entrepreneurs, especially when starting a new business. Most of the times, as an entrepreneur, you will be forced to spend quite a considerable amount of time meeting with prospective investors instead of using that time to concentrate on your business.
The time squandered by meeting with potential investors could be used in developing the business while still informing the investors about the business. To do so, you could consider using tokenization instead.
Currently, the most commonly used methods used method for funding startups is Initial coin offering (ICOs), Initial Exchange Offering (IEOs) and Security Token Offering (STOs). Despite there being a number of handles, ICOs have proven quite resourceful when it comes to crowdfunding. You are able to access funds from a wide base within a very short time while at the same time saving the time of meeting with the investors in person to concentrate on your business.
There are also other methods like Security Token Offering (STOs) which is better regulated compared to ICOs. Unlike ICOs, STOs are vetted by the SEC.
How does it work?
We all know that blockchain is decentralized and that is stored distributed ledgers. At the same time, blockchains come up with tokens/cryptocurrency coins to be used for transactions within the networks.
As an entrepreneur, you can tap into the benefits of using tokens to fund your next business.
With tokenization, you create digital securities for your business/company. The tokens or digital securities are backed by the assets of the business. You then let investors buy the digital assets once they know what your business is all about.
In the process, you are able to get funds in exchange for the digital assets while at the same time the investors have a claim of the company just as in the traditional shares.
However, even with the lucrative opportunities that tokenization offers for entrepreneurs in this era, there are still handles, most of which have to do with regulations that still hinder the full-scale adoption of this technology. We have seen countries like China and South Korea put a ban on such forms of raising fund.
Benefits of using tokenization in funding your business
- It increases the enterprise value of your business
The tokens reflect the value of the assets of your company and they can also be traded on exchange platforms.
Also, since the tokens have a value of their own, they also add up to the overall value of the enterprise.
- It offers better liquidity to investors
Compared to traditional stock markets, tokenization offers a more liquid form of investment. With tokens, there are lots of exchange platforms where investors can trade their tokens and there are always ready buyers.
- You can raise capital without diluting your ownership of the assets behind the token
Since tokenization involves the creation of tokens that are sold to fund your business, the created tokens/ digital assets add an extra layer of enterprise value in addition to the company’s capital stock and assets.
In addition, it gives you the opportunity to fund the business without compromising on the ownership of the assets.