Optimizing Your Whitepaper: Business & Legal Due Diligence

A whitepaper serves multiple goals: it is your roadmap, it highlights your team, it details your project, and it outlines your vision.

The whitepaper is a document that will be combed through carefully by investors, partners, and the SEC. This is why it is important to have two distinct bodies review this document.

Business Review

This is the review from a digital securities advisor or another associate you trust. They will review the business plan to ensure that it makes sense. If at all possible, you should have someone review the whitepaper who is familiar with your industry. For example, if you are launching an autonomous vehicle, having someone from Tesla (TSLA ) or Alphabet’s (GOOGL ) Waymo review the whitepaper makes the most sense.

You want the person reviewing the whitepaper to be ruthlessly honest about potential assumptions, omissions, mistakes, lack of clarity, technical errors, etc. You want to catch all potential issues early. This will enhance the whitepaper and save your team money.

The whitepaper should always serve first and foremost as a business plan. The technology should always be secondary to the business. The exception to this is if it is a very technology-focused business, where the entire business landscape and success are based on the viability of the technology.

What investors want to know is the following:

• Why does the market need your product or service?
• Why now? Are you too late or too early for the market?
• Do you understand the competition? How will you overtake it?
• If it is fractionalization of real estate, venture funds, etc., how will the real estate/funds be managed?
• Specifics are important. We have reviewed many whitepapers for companies tokenizing real estate, and there is often a failure to discuss the type of property, location of properties, expected holding period, etc. Just because real estate investors are buying a tokenized fund does not mean that they are not first and foremost viewing this from a real estate investor mindset.
• Unrealistic projections. Telling us the market size, but not disclosing actual competition, marketing budget, etc., just makes the entire project look amateurish.
• Sell your team. If they went to Ivy League schools, disclose that information. Also, disclose any other business they have been involved in.
• Presentation is important. Hire someone to format the information with crisp graphics and charts. The difference this makes in how your company is perceived is monumental compared to the initial cost.

Legal Review

The most important thing that should be reviewed is that no false promises are made. Never promise specific returns. Remember, while the whitepaper may serve as a marketing tool, in a court of law it also serves as a piece of evidence.

There is no going back and editing the whitepaper once it is posted online, as a version of it will always exist somewhere. It needs to be fully legally compliant prior to publication.

You should hire a law firm that is familiar with the tokenization of securities and that has a track record of working with different issuers. Research the clients the law firm has worked with to ensure that you are working with a credible entity.

Legal is one aspect of your business where you should not try to save money by hiring a low-rent firm. Hiring the right legal team will save you money and future grief.

Since this website does not dispense legal advice, we urge you to contact an STO attorney in the space. If there is anything that you should take from this article, it is that you should absolutely have a licensed attorney review your whitepaper prior to publication or the launch of the offering.