Equity Crowdfunding and Tokenization Drive Each Other Forward

The third edition of the State of Security Tokens report is out. There is interesting data coming out of it, including the fact that global equity crowdfunding has exploded from $8.61 billion raised in 2020 to $113.52 billion last year, a 1,021% increase.

Token City enables Security Token Offerings, which in essence are tokenized equity crowdfunding rounds, with many better features than traditional equity crowdfunding. We know, because our leadership has spent the past 8 years working on it.

What the advantages are

Equity crowdfunding is a method of raising capital by selling small equity stakes in a company to a large number of investors, typically through online platforms. It enables access to a wider pool of investors, since crowdfunding platforms allow companies to reach a large number of investors, including those who may not have previously had the opportunity to invest in private companies.

In effect, this means it lowers barriers to entry. Traditional forms of fundraising, such as venture capital and angel investing, can be difficult for startups to access. Equity crowdfunding allows companies to raise capital with less restrictive requirements and lower minimum investments, while at the same time enabling investments from retail investors who would otherwise be left out. equity crowdfunding also allows investors to diversify their portfolio and easily spread risk across a variety of companies and industries.

Crowdfunding platforms bring other benefits, like increase transparency by providing investors with detailed information about the company and its business plan, allowing them to make more informed investment decisions. They also allow startups to maintain control of their stock. Giving up equity in a company can be a difficult decision, but equity crowdfunding allows companies to raise capital by issuing debt instead of captal shares.

How tokenization improves it

Asset tokenization is the process of digitally representing real-world assets, such as real estate, artwork, or equity in a company, using tokens on a blockchain. These tokens can be bought, sold, and traded online through digital asset platforms like Token City, similar to the way stocks are traded on a stock exchange.

Tokenized assets can be easily traded on a digital asset platform like Token City, providing greater liquidity for investors. By making it easier for investors to buy and sell shares, capital is more readily available, both because companies can attract more investors, and because investors can exit positions that used to completely lack liquidity.

Tokenization also enables fractional ownership, allowing company shares to be divided into smaller, more affordable units. This makes it possible for investors to purchase fractional ownership in a company, rather than having to buy an entire share. If equity crowdfunding lowers barriers to entry, tokenization basically eliminates them.

Tokenization can automate processes involved in equity crowdfunding, such as the issuance, transfer, and management of shares. This reduces the costs and complexity of the process, making it more accessible for companies and investors. Tokenization also helps increase investor confidence, by making it easier to track and verify ownership of shares, improving transparency and reducing the risk of fraud. Lastly, tokenized equity crowdfunding can enable investors to participate in rounds regardless of their location (when regulation permits it).