There has been a tremendous amount of hype, confusion, controversy, and lest we forget- tons of real money- swirling around the whole ICO phenomenon. It seems a foregone conclusion that additional SEC scrutiny and regulation is forthcoming. So for those of us who are still committed to the incredible potential and possibilities of ICOs as a democratized fundraising mechanism, and who happen to have already built a promising real product with real users, what’s the best way to proceed? With ZEN’s just launched pre-ICO equity crowdfunding campaign we think we’ve come up with an answer that will not only work for us, but might represent a viable model for other startups to follow.
As far as we know, the ZEN pre-ICO is the first of its kind. It’s an equity crowdfunding campaign where investors purchase convertible debt that can convert to equity like a typical note or convert to our future ZEN native cryptocurrency (ZNX) at big discounts up to 50%. The idea is to appeal to two types of people: those who are primarily motivated by getting their hands on ZNX at a discount and securing the benefits of early liquidity at our ICO, and investors who find our business compelling but are more comfortable with equity. And it’s truly optional by design, investors can wait to decide whether to convert to ZNX or preferred shares depending on how things play out.
We think this is a powerful way of financing our ICO process that leverages the still very new SEC equity crowdfunding regulations to build a broad-based stakeholder community of shareholders and ZNX stakeholders. This unique approach borrows quite a bit from the SAFT popularized by FileCoin, Kik, and others, and necessitated working closely with our attorney Marty Tate and the fine folks at StartEngine to create the hybrid convertible note agreement and make it all happen.
Like I said, no one’s done this before, but so far the results look good.