- The Current State of Startup Investing
Many tech giants today began as modest startups and have grown into companies worth hundreds of billions. The huge financial gains from these companies primarily went to a select 3% of early investors. While these few prospered, most couldn’t partake in or profit from these ventures. Historically, startup investments were limited to this elite group, widening the wealth disparity.
Let’s break down the hurdles that often stand between potential investors and exciting startup ventures:
- Ticket Size Barrier: Traditionally, to get involved in a startup, you’d need to put down at least $50k. Such a high entry ticket makes it prohibitive for most to even consider startup investments.
- Networking Barrier: Beyond the hefty financial commitment, access often comes down to ‘who you know’. Those without the right connections can find it near impossible to get a seat at the table.
- Liquidity Barrier: Even if you do manage to invest, your funds are often tied up for a long haul. Typically, investments in startups are illiquid, meaning you might be waiting 7 years or more to see a return or even just to regain access to your capital.
These barriers have kept many would-be investors on the sidelines.
2. Breaking Down the Startup IPO Concept
To change the status quo and democratize startup investments, we at Arcton have invented a new model called “Startup-IPO”. With this model, everyone can gain access to high-quality startup investments and have the flexibility to trade their shares as easily as on a stock exchange.
The term “IPO” is universally recognized as the pinnacle of a company’s journey, a declaration of maturity in the financial world, traditionally associated with established corporations making their debut in public markets. But what if we reinvent this model, pulling the trajectory forward and opening it up for startups?
The Anatomy of a Startup IPO: Unlike traditional IPOs that introduce mature companies to public exchanges, a Startup IPO offers shares of nascent ventures to the public, democratizing early-stage investments. This not only lets more individuals tap into the high-growth potential of startups, but also creates liquidity in an arena known for its long-term commitment.
Tokenization and 24/7 Liquidity: By leveraging blockchain technology, real startup shares are transformed into digital tokens, granting them the flexibility and immediacy of cryptocurrencies. These tokens, representing genuine startup equity, can then be traded continuously on decentralized exchanges, ensuring 24/7 liquidity. This is a game-changer; traditionally, startup investments tied up capital for 7+ years, but with this model, investors have the freedom to trade their shares at any time, making the market more dynamic and reflective of a startup’s true value at any moment.
The Role of Legislation: Switzerland’s progressive stance on digital assets has been a boon for such innovations. The Swiss DLT Bill provides a legal framework for tokenizing real assets, including startup shares. This is the regulatory assurance that bolsters the Startup IPO concept, ensuring that it’s not just a novel idea, but a legally viable one.
In essence, a Startup IPO is more than just a new investment method; it’s a reimagining of how early-stage investments work. By bridging traditional startup investing with decentralized finance, we’re paving the way for a more inclusive and dynamic financial future.
3. Tokenization’s Seamless Integration with Decentralized Finance
The transformative power of tokenization is best realized when it bridges with the dynamic world of decentralized finance (DeFi).
Transforming Startup Shares with Tokenization: In line with the Swiss DLT Bill, we convert equity of startups into digital ERC-20 tokens. During the Startup IPO, these tokens representing real startup shares become available for everyone to purchase. This process not only democratizes access but ensures that startup shares are now in a format that’s ready to interact with DeFi.
The DeFi Touch: While tokenization digitizes assets, true liquidity and continuous trading are achieved through DeFi. This is where our partnership with Camelot comes into play. After the IPO, these tokenized shares don’t just sit idle; they are traded actively and around the clock on Camelot, our trusted decentralized exchange partner.
Sustained Liquidity: The beauty of integrating with DeFi platforms like Camelot is the assurance of deep, sustained liquidity. Investors aren’t just buying into startups; they’re investing in a system where their assets are fluid, and they have the freedom to make decisions without being bottlenecked by traditional trading constraints.
While tokenization presents assets in a new digital format, it’s the marriage with DeFi that brings the real revolution.
4. The Startup IPO Process with Arcton
1. Equity Tokenization: Arcton’s journey starts with the process of tokenizing a startup’s shares. This is done in compliance with the Swiss DLT Bill, ensuring that the digital tokens genuinely represent a fraction of the real-world company.
2. Public Offering: Once the shares are tokenized, they’re presented to the public via Arcton’s platform during the IPO phase. This democratizes startup investments as it allows anyone, regardless of their financial stature, to buy into startups using either USDC or traditional fiat currencies.
3. Registry Entry: Post the purchase phase, these digital tokens representing shares are formally registered in the Commercial Registry. This involves validation from a Swiss notary and the Commercial Register, ensuring everything is above board.
4. Liquidity through DeFi: Once registered, it’s time to introduce liquidity into the system. A pool is created on Camelot, our decentralized exchange partner, and it’s seeded with both shares and USDC. This ensures that there’s always enough liquidity in the market for investors to trade these tokenized shares.
5. Claim and Trade: Investors, post-purchase, can claim their shares. What’s groundbreaking here is that they aren’t just locked into a long-term holding. They can actively trade these shares on the secondary market, earn trading fees, or even use them for other DeFi strategies, thanks to the continuous trading enabled by DeFi.
6. Continuous Evolution: Arcton’s vision doesn’t stop at creating a fluid market for startup shares. We’re consistently exploring new ways to enhance the utility of these tokenized shares, ensuring our investors always have an edge in the market.
5. Accessing a New On-Chain Asset Class
In the evolving world of decentralized finance, the creation and integration of diverse asset classes on the blockchain have become pivotal. This push for diversification goes beyond merely transacting with cryptocurrencies or tokens; it aims to infuse traditional financial instruments into the digital realm.
Arcton’s introduction of tokenized startup shares is a testament to this vision. By taking an age-old investment avenue and making it available on-chain, a broader spectrum of assets becomes accessible to the crypto community. This innovative approach ensures that investors can diversify their portfolios, balancing the volatility of cryptocurrencies with the potential steady growth of startup investments.
The melding of traditional finance with the decentralized world accentuates the vast potential inherent in blockchain. With the confluence of Web2 and DeFi, the Startup IPO serves as a harmonious connector, bridging these two dynamic realms.
Key Readings about Arcton:
1. Gitbook
