Better For Founders, Investors, Employees, and Customers - Part 6
Founders are the heart and soul of the equity markets as without founders there are no companies. Our mission for Equity Token is to increase the level of support founders receive around the world by increasing their access to the best backers. Currently, startup founders have three main financial instruments to fundraise through:
SAFE - Simple Agreement for Future Equity
We envision a future where founders have a fourth mainstream financial instrument to fundraise with:
“The creation of the Equity Token platform will allow founders to tokenize the existing shares of their corporation onto the blockchain, and therefore create its own unique security token. Once the startup’s token is placed on the blockchain the founder will have access to the following advantages over traditional papered shares.”
Lower fees with automation: smart contracts remove the middlemen normally required for financial transactions along with the fees typically owed to them. For example, in April 2018, a $99 million dollar transaction was sent in two and a half minutes via the blockchain for only $0.40 in fees. Smart contracts also automate some of the complex tasks involved in managing a security.
Global market exposure: within regulatory limits, tokenized equity can be marketed to anyone with an internet connection, increasing the global access to investors. Allowing founders on one continent to more easily fundraise from other investors around the world. The world is shifting from flying into Silicon Valley to walk down Sand Hill Road, to founders being able to fundraise from around the world. As of 2015, fully half the people on earth live within a 2,050-mile radius of the Burmese city of Mong Khet, in the Asia Pacific. High growth technology companies in the region only make up 10% of the local index. While at the same time the technology sector in the United States represents 23% of the SAP and more than 60% of the NASDAQ. There is a disconnect between global supply and demand for high growth technology companies.
Liquidity: the average time to liquidity for unicorn companies has risen to 8.8 years. The trend of companies staying longer is driving demand for liquidity on secondary markets. tokenized exchanges allow owners to easily trade and transact once their lock-up expires. Main exchanges such as Coinbase are adding support for ERC-20 tokens.
Speed: transactions on the blockchain happen in real time, allowing for instant transfers of tokenized equity between founders, investors, employees and without unnecessary middlemen.
Equity Management: Blockchain technologies create immutable ledgers, to record all transactions. This transparency into where the equity of a company lies results in a clearer capitalization table which is easier for founders, investors, and employees to manage their portion.
Combining several of the advantages blockchain technology provides to companies, Notation Capital did an analysis which determined that blockchain deals are to be valued at a 2.25x premium when compared to a traditional startup of a similar stage. Research from public company stocks also suggest that customers who own equity in a company spend 54% more while referring twice as many people.