The Era of Crowdfunding 2.0
Thank you for taking a moment of your time to read this article, if you have stumbled upon it then you are probably somebody who is interested in alternative finance or investment opportunities; yes TaoDust does offer a platform for both but that’s not what brought you here. We hope that this article should serve as a primer to an overview of why Equity Crowdfunding is on the rise and how you can take advantage of it as a funding vehicle or investment opportunity — Let’s examine the rise of Crowdfunding Equity!
Why People Look to Crowdfunding for Capital
When a person or a new company without a lot of history needs to raise money, there are not a lot of options. As any entrepreneur knows, outside of big corporations it is nearly impossible to sell equity in your organization to the average person on the street. Although you may have the next technological wonder or life-saving medicine to develop, there are typically many costly hurdles to go over when attempting to raise startup capital.
There is an obvious problem in that system which finances this type of capital through a network of stock markets, financial institutions, and brokers who interact with non accredited investors. For many early-stage companies, this is just simply too complex and expensive of a process to undertake.
Many who found themselves unable or unwilling to go through the process of traditional funding also found that the global network of investors, venture capitalist, and peer-to-peer fundraising activity on the internet was the best opportunity to meeting their startup capital needs through a direct connection to once isolated economies.
Crowdfunding on the internet grew to become a hybrid solution for international investors and startups seeking funding while also cutting through international red-tape. Subsequently, the industry splintered into 3 main categories; Reward, Charitable, and Equity Crowdfunding.
In most cases, a type of IOU or good-faith agreement was issued to a backer which agreed to repay the funding as a loan or with an asset upon the success of the venture. In the event that the venture failed, sometimes the backers of these projects could even write the expense off as a charitable donation…There were obviously a few drawbacks to this approach as a viable investment model.
Waiting Periods and Risk of Failure
In the case of traditional crowdfunding, project backers typically are funding the development of a finished product and have to wait to see if the project can deliver on its mission and obligations before seeing any form of return.
Liquidity
When an asset does become available to sell there may not always be a market for it. The lack of access from a well known and reputable exchange to act as a buffer against bad actors and unworthy offerings makes these investments extremely volatile.
Volatility
Due to the inconsistent demand for these types of investments, the buyer typically has an advantage causing the market price of the asset to fluctuate dramatically. The more risk, the more of a discount early stage securities often pay to investors. It is common for ~25% difference in bidding price from each buyer.
But this was only the initial stage of Equity Crowdfunding and most of these offerings issued assets were widely under-regulated and not qualified as securities.
Alternative Finance and the Birth of Cryptocurrency
In 2008, the world stopped and took notice of a technological oddity which was both controversial and ingenious due to its disruptive impact in the world on its heels in the midst of the global financial crisis; the decentralized financial instrument Bitcoin. When cryptocurrencies emerged, they took the benefits of the blockchain which Bitcoin had popularized and changed its model of a payment system and transaction network into something revolutionary — Digital assets became programmable!
What this meant for crowdfunding is that any organization could issue a token on the blockchain in exchange for early-stage funding through other cryptocurrencies like Bitcoin and Ethereum. Those once hard to sell assets were tokenized or converted into digital stores of wealth, which could then be distributed to investors and exchanged on a global secondary market.
In the era of Equity Crowdfunding 2.0, TaoDust approaches issuing tokenized assets by embedding the regulatory compliance and equity rights into the smart-contract which issues the tokenized asset. What this means is that by holding a Token issued on TaoDust, its owner is granted the rights within the organization — For the first time giving crowdfunding backers actual ownership of a tokenized asset, the potential rights to vote, and the ability to participate in dividends.
Stay Connected!
To learn more about the TaoDust tokenized crowdfunding platform please visit our website. We also encourage you to follow us here at Medium!
If you wish to chat with the team about your questions please visit our telegram channel
For general updates about the platform, please follow us on Twitter.
press and partnership request email: info@taodust.com
