Lowering the Barrier of Entry for Startups with TaoDust

Raising capital for your business is never an easy process. For many entrepreneurs the road to funding often begins by pitching your friends and family, selling the idea to random strangers everywhere you go or writing IOU's for your future product offering to anyone charitable enough to contribute to your cause.

Once the credit card bills come in and the numbers get crunched, how long can personal funding sustain your organization's mission? How long until your debt obligations leave you over-leveraged and underfunded?

Historically the problem with raising capital with IPO’s is that becoming a fully reporting public company is too large of a financial burden that only a very few large companies can afford. Even if you are lucky to have a connection or two who can get your startup a meeting with a Venture Capital firm willing to listen, writing proposals and other investor materials, determining fair-termed loans, and doing general due diligence can be an overwhelming process.

In the end, a company needing to expand operations eventually must turn to outside sources of capital to give themselves a runway to create a profitable business model; where that funding comes from and how it must be the terms must be examined with the greatest amount of scrutiny.

Investors and Entrepreneurs are always looking for new alternatives to traditional startup-funding bottlenecks:

In other words, friends and family usually don’t qualify to get in on these early-stage investment opportunities, leaving them without anything tangible for their funding.

Fortunately for startups, there is another method for entrepreneurs who are seeking open access to capital. The companies raising capital through the TaoDust platform are private but use tokenization for more direct access to secondary markets, allow for the raising of capital from the public. In essence, equity crowdfunding gives startups a more democratized way to offer private equity to the crowd — through the sale of securities!

The TaoDust era of Equity Crowdfunding 2.0

The key difference between TaoDust and a traditional equity crowdfunding platform is what is actually being sold. With equity crowdfunding, startups sell securities, which can be in the form of equity in the company, debt, revenue share, convertible note, and more. Equity crowdfunding gives the ability to get into early-stage investment opportunities which had not existed before.

TaoDust takes a step forward from traditional equity crowdfunding by tokenizing that equity and issuing it on the ethereum blockchain as a security token. By programming in the terms of the offering, the entire process of raising startup capital is streamlined into a simple format.

Giving entrepreneurs and startups the ability to lower the cost and headache of going to traditional finance markets through blockchain technology has meant the dawn of the era of equity crowdfunding 2.0.

Smart-contracts replace the middlemen and lower the barrier for startups

Smart-contracts on the Ethereum blockchain can be programmed by a startup to control what to sell, how much to sell, and what price to issue the security at; giving more power to the issuer than ever before.

Issuing the crowdfunding-backers a digital security token means that shares are now being offered where only IOUs had existed before. This innovation transforms backers into investors who held stocks and convertible notes, bonds, or even dividends, in a private company.

By having a more direct to public markets, the entrepreneur is now free to bypass the middlemen of the funding process and quickly turn that additional liquidity created by more secondary market investors into the needed startup capital needed to keep their organization running smoothly.

This allows for a more flexible method of raising funds for early to midstage companies by setting the campaign’s desired funding minimum and maximums; If the company does not reach its minimum funding goal then investors can get their initial funding returned.

By tokenizing this process on TaoDust, the valuations of tokenized asset and equity offerings are more likely to be reasonably analyzed. Because the VC firms can be replaced through the tokenization of assets on Taodust through smart-contracts, these valuations are priced to put the capital raised through Security Token Offering into work, and into the company’s accounts; not to priced to make the people behind the offering a hefty commission.

Summary

Early stage startups have needs which often leads them to seek alternative funding from traditional methods. Often entrepreneurs would find offers There are many advantages to this emerging market of tokenized security offerings issued through the TaoDust Platform, including:

• Liquidity
• Fungibility
• Smart-contract automation
• An easier path to regulation
• Transparent auditing on the blockchain
• Lower fees than crowdfunding and traditional finance
• More market participants with ATS, OTC, and Cryptocurrency markets

More Information

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