Companies are always trying to come up with new ways to bring ease and efficiency to raising capital. With regards to blockchain based endeavours, we have seen the ICO, IEO, the STO, and now, what is being called the CSO.
This novel way of raising capital is the brainchild of funding portal, Fairmint – A platform that went live only days ago.
Fairmint describes their solution as “a turnkey cloud-based web application that enables companies to raise funding through a CSO with confidence and minimal effort.”
How does it differ?
The main differentiator between a CSO and an event such as an ICO, are the rights bestowed upon token holders.
For investors that do take part in a CSO through Fairmint, compensation is awarded in the form of a security token. These tokens represent a proportional share to future revenue, generated by the company, and made liquid through the use of a reserve fund.
In order to provide investors with access to future revenue, a company must be forward thinking. This is because they are required to create/generate a reserve of funds, leading up to the CSO. This fund then acts as pool which provides guaranteed buying and selling capabilities.
While companies are required to purchase back tokens after a set period of time, holders have the ability to continuously trade these while the CSO is active.
By tailoring tokens in this manner, Fairmint likens the process to ‘decoupling equity from funding’.
Wrench in the Gears
The reliance on revenue does, potentially, throw a wrench in the gears of would-be applicants. For the model to succeed, a company must have the means of, both, generating a financial reserve, and a clear path towards sustainable revenue.
While some may perceive these requirements as a burden, they do serve as a means for weeding out many projects that don’t necessarily have a bright future – regardless of how intriguing they may be.
Fairmint notes that there are various advantages when capital is raised through a CSO, versus more traditional means. The following are a few short excerpts from Fairmint literature, describing what some of these benefits are.
- Founders get financing without sacrificing ownership of the company. They also get a vehicle to align the company’s wellbeing with their stakeholders and customers.
- Investors get liquidity, so that they can buy and sell whenever they want within the boundaries set by securities law in the applicable jurisdictions
- Stakeholders – such as employees and platform users – get access to a security that lets them participate financially in the company’s growth.
For those intrigued by the potential benefits of a CSO, Fairmint has literature which delves into greater detail than this brief article.
Access to this handbook can be found HERE
Founded in 2019, Fairmint maintains headquarters in San Francisco, California. Above all, the company acts as a funding portal, providing companies with a place to generate capital in a compliant manner.
CEO, Thibauld Favre, currently oversees company operations.
In Other News
As made evident throughout this article, there are various methods which a company can use to generate capital.
In a past contribution to our on-going ‘Thought Leaders’ series, Liza Aizupiete, Managing Director of Fintelum, took the time to elaborate more thoroughly on some of these methods.