Introducing Web3 Crowdfunding
The New Fundraising Model
Crowdfunding (raising capital using securities exemptions) has become a popular option for companies looking to fund and drive growth from their own customers and fans in tandem with institutional investors and venture capitalists. This is partly because exempt offerings enable a broader audience to participate in these alternative investments.
From July 2020 through June 2021, nearly twice as much money was raised in exempt offerings as through public offerings, and the industry has grown 33.7% in 2021 alone — a trend that’s expected to increase by ~$240 billion from 2021 to 2026, at a CAGR of 16.81%. This double-digit growth is just part of what’s driving companies to crowdfund.
Why Companies Crowdfund
80% of retail investors agree that being a shareholder in a brand would make them more likely to buy from that company.
— Tiicker / Harris Survey, October 2020
Simply put, raising from your customers builds loyalty and turns them into valuable shareholders that are more likely to talk positively about your brand. Not only do you gain super-investors and super-advocates, but crowdfunding has also been shown to increase customer weekly spend by 30–40% (over a 3–6 month period).
Our Web3 Crowdfunding solution takes the standard crowdfunding platform features, and adds Securitize’s tokenization-first approach to deliver a Web3-focused investor experience. This solution allows you to easily invite your customers and fans to participate in your offering, compliantly onboard them as investors through KYC and AML protocols, sign all documentation and invest in your fundraise — all from within their digital wallet.
A Web3-Focused Solution
With Web3-based crowdfunding, companies issue “digital asset securities,” which are digital representations of traditional financial products, such as equity, debt or real estate. The ownership rights of these assets are registered on the blockchain — a process called tokenization — which allows investors to hold their digital asset securities in their own crypto wallet, enabling true, immutable ownership.
Beyond registering ownership rights on the blockchain, Web3 also gives investors control over their personal data by facilitating on-chain identity. For example, Securitize iD enables on-chain identity for verified users that have linked a wallet to their account. These investors can connect their wallet to third party applications, such as DeFi protocols or exchanges that have integrated Securitize iD, and gain direct access to use their application, without the need to onboard and share personal data with this service or product.
How It Works
As a Web3 Crowdfunding client, you have access to built-in communication tools to assist you with promotional campaigns targeted at your customers and fans, and our very own global investor base of over 450,000 members. Once you have promoted your raise and invited your customers and fans to invest, they can easily participate in your raise via Securitize’s Web3 Crowdfunding portal. To get started, investors will be redirected to Securitize iD where they’ll have to pass a 4-step KYC process if they haven’t already done so. Once their accounts are verified, they gain access to participate in the fundraise.
After investors sign the subscription agreement with their wallet, they can simply exchange USDC (also referred to as USD Coin or US Dollar Coin) for a token that represents their investment. What’s more, our solution is compatible with over 100 wallets.
The initial token represents a SAFT until the fundraise is complete, at which point it becomes an official security token of the investor’s ownership rights in the company, and may be subject to a lockup period of up to one year. All of the conditions and investors’ rights are predefined using smart contracts so the entire process is automatically executed per the agreed upon conditions of your team.
Using Securitize Transfer, the issuing company can keep track of their cap table in real time, manage communications with investors, and easily execute distributions and payouts.
The Securitize Difference
Securitize Markets is the leading blockchain-based marketplace for investing in and trading digital asset securities, fully consistent with U.S. regulations. Securitize fully-digital, all-in-one platform enables businesses to raise capital, manage shareholders and provide the potential for shareholder liquidity.
