This article is the last part of our ‘Launch an STO’ series. If you haven’t read the previous two posts of the series, you can read them here:
In the last few months there has been a lot of air coming up from the security token industry. Various big firms have come up to invest in this field. Securities-backed tokens are different from pure utility tokens. The utility tokens remain unregulated and unregistered securities and this new breed of security tokens is rising which is fully SEC compliant and is backed by real world assets.
Here we will look at a few points that make up the core areas while planning a marketing strategy for a security token:
Identify the Target Customer (Geographically and Demographically)
Selling your security tokens is not an easy task if we look at the regulations that exist as roadblocks. Only a few of the token sellers/issuers take the path of full registration with SEC. The full SEC registration is legally, financially and logically right. But it is also true that taking this path is not easy. To lower this hectic work, firms must choose an exemption offered by SEC. The most common exemption chosen by the firms is Regulation D exemption. Regulation D forbids the non – accredited investors to invest in the projects.
Another exemption offered by SEC is Regulation A. The issuance of regulation A+ offering generally takes more time and costs more as compared to other options. It allows the creator of the security token to sell the SEC approved security to non – accredited investors, if the firm is willing to do some extra paper-work.
Security token industry is at a pretty nascent stage right now. Marketing a security token means marketing to a mix of accredited and non-U.S. investors. Accredited investors are generally either institutions or individuals with a net worth of $1 million or higher. Successful security token sales generally target their marketing for this income group.
Optimizing the product for different investors
Security tokens are termed as the future of traditional investing. Security tokens are backed by real world assets unlike utility tokens.
When you are looking to market your security token for investing. The security tokens market can interest a wide range of accredited investors. The thing that interest these traditional investors is the increased liquidity and lowered administrative costs while they simultaneously feel assured of the investor protections, regulatory compliance and owning real-world assets.
Apart from reaching out to the traditional investors, the one market which projects sometimes ignore is the “crypto enthusiast” guy. These are diligent investors in cryptocurrencies who are always looking to diversify their portfolios to invest in some safe bets. These are the investors who want to stick to the crypto and blockchain field and don’t want to go through the path of traditional investment methods. Security token market is the perfect ladder for them to connect with traditional investing.
Build the Trust
Now this is one of the most common and necessary thing to do. You understand that you are offering a security token. The market at the moment is quite bullish for security tokens but investors will still not invest in your token blindly (it is not an ICO of a random coin, you are selling a real world asset.) We all have come across poorly designed scam ICOs that collect a ton of cash with only a flashy website and airdrop campaigns. Securities-token purchasers aren’t going to fall for that. The diligent security token investor will focus more on the executive team of the project or well detailed token economics, whitepaper or technical paper etc.
The most basic thing to build trust is through networking. Companies offering security tokens need to give a shout out for their product whenever possible. Networking can simply be done by attending crypto events, meeting movers and shakers and participating in the crypto community activities. Including people who are well respected in the crypto or finance worlds and have a big following in your team is a common practice. It might work out on many occasions but if you are planning to do something similar, just keep in mind that in this case, your marketing campaign will lean on this point heavily. The dependence of marketing of your project on that person might just complicate things on a few occasions.
Using a Tokenization Platform
This step might be optional but the benefit is by using a professional platform to assure the tokenization of your company or assets, you will get enough time to focus on the non-repeatable parts of your business, such as your core operations, marketing, relationship building with investors and other stakeholders that will take you to your success.
But before partnering with a tokenization platform make sure that the issuance platform has a reputable name in the market is trusted by investors. The platform must be able to handle the technical challenges of a token sale. You don’t want your partner firm to spoil your marketing game.
Partnering With an Exchange
Buying and Selling security tokens on an exchange is not simple. They are not like normal utility token which can be sold and bought by anyone. The kick with security tokens is that while changing ownership of a token on an exchange, tokens must remain compliant as they change hands. This gives rise to an ever-lasting KYC/AML process throughout the token’s lifecycle.
Also Read: Top 5 Security Token Exchanges
The SEC has declared that all exchanges who wish to list security tokens must register as securities brokers. There are various projects like tZERO, OpenFinace etc. who wish to provide the desired liquidity and a proper platform where security tokens could be traded just like normal tokens while also being regulatory compliant.
So, partner with an exchange after having a proper analysis and going through all the required documents. Don’t forget to use the fame/name of the exchange for your benefit also.
The tsunami of security tokens is just knocking at the door. There will probably be a lot of regulation changes that will come up in near future . The marketing strategies will also change with time accordingly but the core root will always remain the same!