A New Workflow - Part 7
Social Capital CEO Chamath Palihapitiya stated last year that Venture capital is headed for a ‘huge, rude awakening’. If investors want to survive, they need to seek out a deep, operational understanding of their portfolio businesses.
We believe the landscape of Venture Capital is shifting and the importance for investors to be a value-add to founders is more important than ever in this service industry. For this reason, we believe many of the blockchain advantages above will be increasingly helpful to founders, and we are easily enabling access to them.
The current process to issue and transfer shares in a privately held company comes with an overhead legal cost that is commonly not included in day-to-day startup operations and a latency associated with additional paperwork.
A similar but more time and cost consuming flow occurs if a company wants to accept investment.
The Equity Token platform allows founders to easily tokenize a portion or all of their corporations shares. The shares of a company are represented by tokens via consent from the board of directors. Then the value of the shares are tied to the value of the newly generated unique company token. Unlike utility tokens, equity tokens are backed by the intrinsic value of the company’s assets and are cryptographic signature of a share.
What was once a piece of paper and is commonly now a pdf, is now represented by a cryptographic token. Once the tokenized equity has been generated for the company, the platform allows founders to then distribute their equity, manage their network, and their capitalization table via the Equity Token Platform.
Smart contracts (SC) can be executed automatically based on a set of rules included to (but not limited to) restrict transfer to certain parties, enforce vesting periods and multi-signature requirements. In order to facilitate this process Equity Token designed a new set of smart contracts to work together, with the sole purpose of saving companies from unexpected legal fees and saving the executive team time. As well as peace of mind for employees and investors. The SC’s created by Equity Token automate the avoidance of future legal expenses and save the company valuable time.
After incorporation, any company will be able to adopt an equity tokenization structure for their stock. Once a company is incorporated they will be able to upload their existing cap-table to adopt tokenization for their company.
Upon adoption of equity tokenization, a company’s multi-signature wallet will be created and deposited with issued tokens. Company board of directors will be able to grant tokens to employees and/or investors (receivers) seamlessly.