Security Token Offering

Steps in conducting an STO

STEP 1 ASSEMBLE A FORMIDABLE TEAM

In this era where information is instantly available, potential investors and Exchanges will know instantly the background of the project team members. If the project team comprises mostly inexperienced people, it will seriously affect the confidence of the investors and the Exchanges. Therefore, the project owner must assemble a formidable team that comprises experts in business, legal, technology, marketing, and other related disciplines. As most STO projects are blockchain-based, it is a must to hire blockchain experts.

STEP 2 TO DECIDE WHETHER STO IS SUITABLE FOR THE COMPANY

Though STO might be easier and less costly than traditional IPOs, it is not necessarily more beneficial. Therefore, the project needs to analyze and evaluate the options before deciding to go ahead with STO.

STEP 3 DECIDE ON THE TYPES OF SECURITY TOKEN

The project team needs to decide on what type of security token they wish to issue. The most common type is the equity token. Equity token means token holders become a shareholder of the company which allows them to receive periodic dividends and have voting rights.

STEP 4 DECIDE ON THE SOFT CAP AND HARD CAP

Next, the project team must decide on the amount to raise in the STO campaign. Specifically, it means they have to decide on the soft cap and hard Cap. A hard cap is the upper limit of the STO’s goal whereas a soft cap is the lower limit, more like the actual amount the team is aiming to raise. Besides that, they have to determine the initial token price at the private sale stage, how many tokens to be minted and how will tokens are distributed.

STEP 5 WRITING THE WHITEPAPER

The whitepaper is a document that comprises a thorough description of the project, distribution of tokens, business model, tokenomics, and more. It also includes information about the project team which usually comprises the board members, the marketing team, the technical team, the legal team, and the advisers.

STEP 6 DEVELOPING THE TOKEN

The token is an integral part of the STO project. Without a native token, what can you sell to the investors? Therefore, it is crucial to design the token from day 1, and start developing it as soon as possible.

STEP 7 MARKETING

The project team must carry out an aggressive marketing campaign for its STO initiative in order to broadcast the news to as many investors as possible. However, they need to choose a jurisdiction that allows the STO campaign, is crypto-friendly, and has fewer red tapes. I would recommend Malta as they are crypto-friendly and intend to turn the country into an international STO hub.

STEP 8 LISTING YOUR SECURITY TOKEN

Finally, the project team also must choose a crypto Exchange to list its STO. They need to conduct due diligence in searching for a trusted Exchange before deciding to engage one. A good guide is to look for Exchanges that rank within the top 50 on Coinmarketcap. Besides, they need to analyze reviews of the Exchanges on various crypto platforms. STO fees may also be another concern, as a top rank Exchange may charge an extremely high fee. Therefore, there is always a trade-off between the fee and the reputation of the Exchange.

REFERENCES

https://hackernoon.com/security-token-offerings-what-is-it-and-how-to-market-it-a067f46a6f2

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