RCO: Recurrent Coin Offering
A better model for funding companies
“Our revenue is going to rise 3x in 6 months! By the way, we’re selling 90% of our shares.”
Sounds weird? Well, that’s what the founders are doing with ICO’s. They’re either selling too early or misleading investors.
Let’s put aside the obvious fraudsters and talk about the founders who actually work on their products.
In order to deliver, the founders need to pay expenses (employees, office, servers) for a certain amount of time. However, these expenses are recurrent in nature: they need to pay wages & rent every month. Which means they need only a small amount of money every month in order to survive and continue building. They really don’t need to raise a lump sum of money and sit on it for years.
The reason that founders used to raise lump sums of money was efficiency. It used to be more efficient to persuade a small amount of investors to part with large sums of money. But with investing becoming mainstream, it becomes increasingly more efficient to persuade a large amount of investors to part with small sums of money.
Which brings us to a new model of investing: the Recurrent Coin Offering, a model that is better suited for founders who really believe in their products.
Recurrent Coin Offering model
- Founders issue tokens to themselves.
- Founders list the tokens on exchanges.
- Founders place small sell orders at progressively higher prices.
- Investors buy for a total they’re willing to invest.
- When founders need more money, they simply place more sell orders.
- Founders are incentivized to continue working on the company, because they hold the majority of the tokens.
- Founders can focus on building, without switching to fundraising.
- Investors can enter & exit anytime.
- Founders can “exit scam” by selling off their remaining tokens through the orderbook. However, this is no different from a regular ICO exit scam where they simply shut down the company. In fact, the sell-off is better for prudent investors who protect their positions with stop-losses.
Stealth launch + Limited supply = Higher pumps
With LeverEX, we’ll be employing the Recurrent Coin Offering model by listing our LEX tokens on decentralized exchanges. If you want to invest — stay tuned! We’ll add links to the markets after the listing process is complete.