How to Structure a Security Token Offering (STO)

How to Structure a Security Token Offering (STO)

2 STO Structures That Can Drive Success


Are you a Startup? (Blockchain or Other)

  • Sell Preferred Equity Lite!
  • Tokenize Later (after the round!)
    • It’s a much easier sell to investors who probably aren’t as familiar with securities tokens compared to a more traditional term sheet.
    • Liquidity is a key factor, but until the secondary markets are up and live, making the process as familiar and comfortable as possible is key.

Are you a Successful Business? (multi million dollar yearly revenues)

  • Tokenize common shares w/ dividend and/or rev-share model for STO round:
    • As a startup, this is the exact wrong way to go about it because you’ve not proven that a dividend/rev share is worth anything.
    • In comparison, I believe larger, more successful companies that have a track record of success and big revenues will in fact have success structuring an offer like this.
    • It’s also a great way to “bridge the gap” between the market’s current state and when exchanges like tZero and Open Finance are up and running.
    • Instead of just “liquidity”, take the time to explain how your investors will still see consistent ROI with the potential to be explosive in the future when your security tokens are tradeable, etc.
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