So, you’ve got a terrific project, say a 200-room hotel in Miami Beach. You want to raise funds for a total renovation, which will cost millions. But you don’t have enough cash on hand to cover the costs, at least to do it right. And you don’t want to go through the extra time and expense involved in an IPO. What can you do?
You think about it and then come up with a great idea. What not sell off pieces of ownership in each of the 200 rooms? The prospective owners would get a cut of the revenue generated by each room.
You’re perfectly positioned for an STO, or security token offering. It’s like an IPO, but instead of using investment bankers and a host of other financial professional and lawyers, you’re selling your “stock” directly to investors.
But what do you have to do to raise enough cash to complete the project?
You will need a lawyer. Just one, though. This will cost money and the fees range from $10,000 to $500,000. You just have to shop around. The first thing that lawyer must do before filing your offering with the SEC is to produce a private placement memorandum (PPM). This is the equivalent of a prospectus for an IPO and serves the same purpose. It will include a subscription agreement that your investors must agree to and sign. The PPM will lay out the terms of the investment. Typically you would register for a Regulation D, 506c and, most likely, a Regulation S. The Reg. D allows you to accept investment from accredited investors within the US. Reg. S permits the sale of your tokens to non-US residents.
It is HIGHLY recommended that you also engage a licensed escrow agent to handle the monetary transactions. This will eliminate a lot of headaches and engender trust, especially if you’re selling security tokens.
There are a couple of crucial caveats with this. For one thing, all of your tokens must have a 12-month lock-in (if you’re an SEC reporting company, however, you only need a 6-month lock-in). Secondly, your tokens cannot be listed on any secondary exchanges that are not securities compliant, like OpenFinance for instance. The tokens can be traded from one accredited investor to another, but not to the general public. Non-US investors don’t need to be accredited, however, they may only sell to accredited investors in the US and elsewhere. The lock-in rules and restrictions will still apply.
Here’s where the hard part comes in. Now you have to deal with building out the technology. You’ll need to create your token, build and launch your STO, and begin taking funds. First and foremost, you’ll need a smart contract that is not only geographically and jurisdictionally aware, but also KYC, AML and accreditation aware. Also, regulation aware and transferable. You’ll want the flexibility to make changes in your offering like the ability to change your pre and main sale start and end dates; the ability to reissue new tokens and freeze old ones if an investor happens to lose his wallet private key. You’ll want that smart contract be upgradable in case you want to change currencies and easily evolve with regulatory requirements and changes in different jurisdictions.
This is where BrightCOIN comes in. On our platform you can create your token, give it a name and symbol, and a per token price in either ETH or USD; build your offering’s start and end dates, pre-sale and main sale periods, along with allotting tokens for founders, advisors, bounties and rewards, company holdings, and any other group of people to whom you would like to award tokens. You can set your soft cap and
Once your offering has closed, BrightCOIN will automatically issue and distribute your tokens for you. Of course, you’ll want all of this to be secure and transparent. The BrightCOIN smart contract has been fully audited, and is always available for third party audits. And since the BrightCOIN smart contract is built on the ERC20 protocol, all transactions are logged on the Ethereum blockchain enabling full transparency.
On the BrightCOIN platform, your PPM and other necessary legal documents will be displayed for investors to read and accept. You’ll also need KYC, AML, live photo ID verification, and accredited investor verification, all of which are baked into the BrightCOIN platform. Your investors will be able to quickly and easily complete their transaction on your own branded contributor portal.
Best of all you can complete all of this yourself with our WYSIWYG editor, enabling you to build a token offering in minutes without any coding. And, of course, with our basic package for STOs in the US, for zero upfront costs. It’s an entrepreneur’s dream scenario.
Make no mistake, launching an STO is not easy at all. But BrightCOIN makes the whole process a lot simpler and easy. We’re really excited about the future, especially of security tokens. Although the cryptocurrency markets are volatile (more on that in a future post), they always stabilize. But the key is to approach your tokens as if they were actual stocks or financial instruments. The assets that back your token are what really count.