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StartEngine Develops ERC-1450 protocol, While Hosting STO

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StartEngine Develops ERC-1450 protocol, While Hosting STO

StartEngine

StartEngine was founded in 2011, and is headquartered in Los Angeles, California.  They are a company with lofty goals.  StartEngine has indicated that their mission is to ‘empower 5000 companies to raise capital and create 1 million jobs in the next 5 years’.

Tokenizing Assets Everywhere

Wealth can be found everywhere in the world.  Nearly anything can have a monetary value associated with it, whether this be a piece of art, a vehicle, company assets, real estate etc.  Unfortunately, much of this wealth is completely illiquid.  This means that despite someone being wealthy, per say, they may not have the ability to access their own worth.

Through the use of blockchain technology, much of this wealth can be tapped, accessed, and put to use.  By digitally issuing securities, in the form of tokens, we are now able to attain fractionalized ownership of companies and assets, which would not be accessible before.

This is where StartEngine comes in.  To achieve this process of tapping into wealth, we need trusted platforms that will facilitate the process of issuing digital securities, as well as provide the foundation on which these assets will be secured and traded.

ERC-1450

This protocol was developed with a specific purpose in mind by StartEngine – facilitate digital securities in addition to the regulations associated with them.  Based off of the popular ERC-20 protocol, this token standard is both open and easy to adapt.  Through its use, issuers of digital securities are able to ensure adherence to regulations enforced upon the industry.

Simply put, this protocol allows for smart-contracts to be deployed, while providing users the benefits of the security offered through regulations, as well as those from a decentralized environment.

Not only is has SmartEngine utilized this new standard for the issuance of their own security tokens to shareholders, but intend for it to be used by all issuers that make use of their platform.

Security through Record Keeping

Issuers and token holders alike will benefit from increased security due to services offered by StartEngine.  One of the main sources for this increased security is through the use of a registered transfer agent.

A registered transfer agent is a book-keeper that connects token issuers to holders.  They facilitate the distribution process, while maintaining a record of token ownership.  Through the use of a transfer agent, tokens cannot be stolen or lost.  As the tokens cannot be sold or traded without going through them, any individual not documented as the official token owner cannot do anything with these tokens.  If victim to a hack, the official owner simply needs to inform the transfer agent.  The tokens in question will then be nullified, with new replacement tokens reissued to the true owner.

This is simply one example of the benefit of using a transfer agent for platform services.  The number of benefits are, however, many.

Behind the Scenes

StartEngine is the brainchild of both Howard Marks, and Ron Miller.  Under their watch, StartEngine looks like a strong bet to disrupt traditional finance.

Howard Marks – Cofounder / CEO

Ron Miller – Cofounder & Chairman of the Board

STO

StartEngine has already hosted one STO, and is now looking to host another.  In this round of fundraising, the company will be looking to raise $10 million @ $7.50/share.  This round of fundraising is limited to accredited investors only, with full details being available on their website.

 

 

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Joshua Stoner is a multi-faceted working professional. He has a great interest in the revolutionary 'blockchain' technology. In addition to this, he is a licenced Paramedic in Nova Scotia, Canada. As such, he can provide emergency care/medicine to any situation necessitating it.

Crowdfunding

Equity Crowdfunding in North America

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Equity Crowdfunding in North America

Since roughly 2009, crowdfunding in North America has grown steadily.  The continent, however, is a large place, with clear discrepancies in regulatory approaches between Canada and the United States.  The result is that these variances have led to U.S. crowdfunding becoming a runaway market, relative to Canada.

What is it?

As the name implies, crowdfunding is a means of raising capital from a large pool of investors/donators, rather than select venture capitalists.

Crowdfunding started off simple enough – give a wider audience the chance to help young companies out of the gate.  However, when first capturing the attention of many, securities laws prohibited issuers from compensating non-accredited investors/participants with equity in their companies; Meaning that participants weren’t really investors at all, but simply contributing to the growth of a company with the promise of potentially getting a product one day.

Fast forward to 2012, and a group of companies surrounding the industry successfully worked with regulatory bodies in the U.S. to amend existing laws.  These efforts eventually resulted in the formation of, what is known as, the ‘Jumpstart Our Businesses Act’ (JOBs Act).

JOBs Act

What the JOBs Act did was open the gates for the general public to gain exposure to true investment opportunities.  Until it was enacted, securities were only able to be sold and distributed to accredited investors.

The goal of this was primarily to help young companies, as one of the largest obstacles a start-up will face is attaining funding (regardless of potential) for the development of their products and services.

Previously, to attain said funding, regulators required that a detailed prospectus be filed and approved for the sale of any asset deemed a security.  This is a cost prohibitive, and time consuming, undertaking – meaning it is most likely not feasible for a small start-up.  While this undertaking may be inconsequential for a company raising millions upon millions of dollars, start-ups looking for modest amounts may find it a steeper hill to climb.

Naturally, this new act came with restrictions.  In an effort to maintain appropriate levels of investor protection, safeguards were put into place.  The following are only a few examples of these:

  • Capital generation events must be moderated by registered broker/dealers
  • Net-worth based investment limits
  • Generation caps on crowdfunding hosts

While this may sound restrictive, what this did was open the doors, ushering in a time where investment opportunities were no longer restricted to those that were already wealthy.

Lagging Behind

That brings us to the United States’ northern counterpart – Canada.  While crowdfunding exists in Canada, the flexibility and freedom for issuers/investors is simply not the same as it is in the U.S – despite being years removed from the advent of modern crowdfunding.

The main issue is the fact that there is no nationwide ‘rulebook’, similar to the JOBs Act, in Canada.  Each of the various provinces and territories may vary slightly in the structuring of their regulations, making it difficult to comply with all at once.

This segregation among Canadian regulators, means that issuers are often limited in their investor pool, as they are not necessarily eligible to host their offering in all regions – somewhat defeating the purpose of crowdfunding to begin with.

However, with the moves taken by the U.S. government over the past decade widely viewed as a success, the Canadian government has indeed taken notice.  It was announced in early 2019 that they would be reviewing their policies; the goal of which is to eliminate the current segregation among regulators, by creating their own variant of the JOBs Act.

With the Supreme Court of Canada opening the door to the potential national securities regulator in 2018, and plans to develop a national crowdfunding rulebook announced in 2019, the great white north looks primed to play catch-up.

Popular Platforms

With all of this talk about crowdfunding, many in the U.S. may be wondering where access to such investment opportunities are offered.  In an effort to answer these questions, securities.io’s very own, Antoine Tardif, recently penned an opinion article discussing his favourite portals offering equity based opportunities.

Top 5 Equity Crowdfunding Websites

For those in Canada interested in equity crowdfunding, the following are a few of the more notable portals active today.

In Other News

Always striving to adapt and improve with the times, the Securities and Exchange Commission (SEC) has recently announced a proposal which would see access to more traditional investment opportunities become even easier for investors.

This proposal is based upon the restructuring of what defines an accredited investor.  With the vast majority of investment opportunities restricted to those fitting the bill, broadening the definition, to reflect the modern world, will ideally democratize investing to an extent.

SEC Proposes Amendment to Criteria Surrounding ‘Accredited Investors’

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WeFunder Brings Total Raised to over $15 Million with Latest Round

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WeFunder Brings Total Raised to over $15 Million with Latest Round

Raising Funds

WeFunder, one of the most popular crowdfunding platforms around, has recently raised another $5,128,679.  This event, which took place between Dec. 18 and Dec. 13, saw a total of 16 accredited investors participate.

This funding came through the issuance of equity based securities, which were sold to investors.  The amount marks roughly 58% of the shares made available, as sold.

Cumulatively, WeFunder has raised roughly $15 million, to date, through participation from >850 investors.

The Goal

While, at this time, it is unclear what these funds are earmarked for, WeFunder clearly outlines the company’s greater mission and goals.  The following are, simply, a few of what WeFunder lists as their commitments:

  • Democratize access to high-growth start-ups
  • Educate investors
  • Help communities fund local businesses
  • Modernize laws surrounding investors and crowdfunding

Track Record

For anyone curious if WeFunder has been successful in their endeavours thus far, rest assured that the answer is ‘yes.’  The company provides the following figures on their website, demonstrating the scope of their influence and reach within crowdfunding:

  • >324 start-ups
  • >320,000 investors
  • >$115 million raised
    • VCs have invested gone on to invest >$2 billion in WeFunder start-ups

With WeFunder referring to themselves as ‘Kickstarter for investing’, it should come as no surprise that the opportunities that they afford investors vary wildly.  That is part of the beauty in this type of platform – start-ups of any ilk have a chance to shine.  With that in mind, WeFunder elaborated on a few of the industries they have become involved in, in the following video.

The Competition

In their industry, Wefunder views themselves as giants (and rightfully so).  Not only are they responsible for having a hand in the creation of the industry itself, but they indicate that their investment volume equates to more than their top 3 competitors – combined.  Impressive indeed.

We recently took a brief look at a few of their competitors, which include, but are not limited to, the following:

For more information on these competitors, make sure to peruse the following article.  Here, Securities.io CEO, Antoine Tardif, discusses his favourite crowdfunding sites.

Top 5 Equity Crowdfunding Websites

Commentary

On the Wefunder site, a quote is provided by CEO, Nick Tommarello.  Here, he touches on his mindset, which led to the creation of this company.  He states,

I started Wefunder because I wanted to invest in my friends – to help them dream bigger, be the best versions of themselves, and reach their ambition. Seven years later, we do that for the rest of America. So much raw talent is being wasted. The purpose of my life is to fix that, to help tens of thousands “take their shot”.

WeFunder

Operating out of San Francisco, WeFunder is a crowdfunding platform, which was established in 2011.  After successfully aiding in the creation and implementation of the JOBS Act, WeFunder has gone on to be wildly popular within the world of crowdfunding, helping start-ups raise in excess of $115 million to date.

CEO, Nick Tommarello, currently oversees company operations.

In Other News

Whether operating a crowdfunding platform, providing tokenization services, etc., there have been various recent successful raises completed by promising companies.  The following articles are just a few examples of this:

Upvest Secures €7 Million in Successful Series A

Securitize to Expand within Japan after Recent Investment

The Future is Bright for Bison Trails as Series A Nets $25.5M

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Openfinance Seeks to Raise $50 Million

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Openfinance Seeks to Raise $50 Million

The popular security token exchange, Openfinance filed a Form D with the SEC this week. The company seeks to raise $50 million to further development of its secondary trading platform and security token ecosystem. The news demonstrates growing interests in the security token sector, specifically, exchanges that add liquidity to the market.

According to the SEC filing, Openfinance seeks to secure around $50 million to accomplish its new strategy. Interestingly, the company already raised $8.6 million successfully according to executives. Notably, this initial funding came from a variety of international investors. In total, 19 different investors participated in the first stage of the crowdfunding event so far.

Openfinance

The Openfinance exchange is no stranger to headlines. The platform became one of the first regulated security token exchanges in operation back in August 2018. Since that time, the platform continued to develop its tokenization capabilities. Recently, the company saw heavy coverage for its tokenization of the media firm, Current Media.

Openfinance via Twitter

Openfinance via Twitter

Openfinance is the dba of Decentralized Securities Depository, LLC. The firm provides a regulated secondary trading market for digital securities. As such, the platform has an alternative trading system (ATS) license. This license allows the platform to service both individual and institutional investors.

Openfinance Partnerships

As part of Openfinance’s strategy, the firm partnered with some of the largest tokenization platforms in the market. According to executives, the company has strategic agreements in place with Securitize, Harbor, and Polymath.

Sageworks Capital

In addition to its valuable partnerships, Openfinance opens and operates a licensed broker-dealer named Sageworks. The company also provides enterprise-level financial analysis and risk management software.

Liquidity is King

While the advantages of security tokens are immediately visible, there are still some concerns that the market lacks liquidity. Platforms such as Openfinance provide the additional liquidity needed to further the development of the sector. Both traditional and non-traditional markets benefit from this newfound liquidity.

For example, Openfinance provides investors with 24-hour trading. Comparingly, traditional securities investors must trade between the regular market hours of 9:30 am and 4:00 pm. While these investors can still match with buyers in the after-hours markets, the entire process is cluttered and leaves investors without many options. Tokenized securities are able to transfer and process at any time, including holidays.

Market Opportunities

Additionally, the platform’s tokenization capabilities allow for the creation of new market opportunities. For example, tokenization allows firms to add liquidity to traditionally nonliquidable assets such as debt-equity. Also, tokenization allows for more streamlined crowdfunding campaigns.

Available Globally

On top of the added features, the platform is available to both US and EU investors. Developers seek to expand the platform’s reach in the coming months. This strategy makes sense when you consider how the EU market continues to show strong security token development.

Openfinance – Moving Forward

It’s easy to see a scenario in which Openfinance becomes one of the most dominate exchanges globally. The firm provides smooth integration between brokers, custodians, transfer agents, and investors. As such, Openfinance plays a critical role in security token adoption.

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