In the USA, small and medium-sized businesses (SMBs) comprise $8T of the annual GDP — 44% of the national total. In Europe, SMBs make up another $5T. Despite their combined value, these areas of the economy, and their potential for growth are significantly underserved in the capital markets. (Bureau of Labor Statistics)
Meanwhile, 50% of loan applications submitted by SMBs are underfunded or denied. ( “2015 Small Business Credit Survey,” Federal Reserve, March 2016)
- Why SMBs Are Not Able to Get Loans
Banking consolidation has removed the local banks and long-term relationships between bankers and business owners. Interestingly German SMBs don’t have the same problem because they have 1000’s of small banks scattered across the country in communities. Since banks have kept the volume of funds available to SMBs at the 1995 level, there are more businesses competing for loans and banks are only selecting the best of the best.
2. What Is DIPO?
An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors. However, public companies have to meet other rules and regulations that are monitored by the Securities and Exchange Commission (SEC). More importantly, especially for smaller companies, is that the cost of complying with regulatory requirements can be very high.
That’s why LiveTrade brings an economical time-saving alternative of IPOs to businesses, especially SMEs. As compliance with SEC (Reg D), DIPOs, known as Digital Initial Private Offerings, is another smart option for businesses to get access to an array of trustworthy investors to raise their needed fund for business expansion.
3. How to Define DIPOs?
IPOs, known as Initial Public Offerings while DIPOs stand for Digital Initial Private Offerings.
Why Private, not Public?
DIPOs seem to have the same responsibility as IPOs that is helping businesses to raise their needed funds but DIPOs bring fewer difficulties to SMEs.
Especially, SMEs can offer shares to the public in a new stock issuance, but not for everyone as DIPOs is compliance with SEC’s rules. As a result, the quality of investors in DIPOs can be assured.
What Does “D” in “DIPO” Mean?
✔ Decentralized
Traditionally, institutions that get to participate in the initial public offering often do a lot of business with the brokers underwriting the deal. The reality is your broker perceives individual investors as poor. Instead, management, employees, friends and families of the company going public may be offered the chance to buy shares at the IPO price in addition to investment banks, hedge funds and institutions. DIPO helps businesses raise capital quickly by reaching a large number of investors, including individual and constitutional without discrimination. It means even a regular person has an equal opportunity to buy shares as a top trader.
✔ Direct
DPOs primarily help small to medium size companies and nonprofits who want to raise capital directly from their own community rather than from financial institutions like banks and venture capital firms.
It is often viewed as a type of investment crowdfunding; but unlike the offerings made under crowdfunding exemptions (Title III of the federal JOBS Act or similar state laws), DPOs are typically registered at the state level and undergo some degree of regulatory scrutiny. DPOs also generally offer more flexibility in marketing and soliciting investors for the offering than exempt crowdfunding offerings.
✔ Decimal
This offers you much greater precision — essentially, you are not limited to trading the equivalent of a cent ($0.01 for example), you can go much, much lower. It means you can actually own and have full control of a very small portion of a whole Ether. In case the trade value rises dramatically, you would still be able to buy, own and use the system, without any changes.
✔ Digitized
Buying shares with crypto is possible as shares/bonds of SMBs will be digitalized. Right! All kinds of assets such as metal, real estate or even patents can be digitalized. This allows investors to take full of advantages of trading digitalized assets such as high liquidity, democratized asset ownership and no more costly and unproductive intermediaries.
4. Objectives
- Provide affordable capital to small and medium-sized businesses (SMBs)
- Provide Investors with a new capital market
- Leverage technology to reduce cost and time
- Settle trades into investors bank accounts within minutes
- Comply with existing rules and regulations
Take a look at the different models below and compare the pros and cons of each.
Visit our website at www.livetrade.io or email us at info@livetrade.io.
