The Security Token Offering (STO) market is growing incredibly quickly and is projected to take over the traditional IPO trading within the next decade. Therefore, some companies that have a plan to register as an IPO stock have already considered transitioning to STO. Instead of tying a company’s value to traditional capital such as traditional currencies, an STO trader uses tokens instead.
These tokens are typically funded by the crowd in the form of cryptocurrencies such as Bitcoin, Ethereum or others. If you’re planning to put your business on the STO market, here are some important considerations you have to keep in mind:
Prioritize positive valuation
To launch and maintain successful funding for an STO, your business needs a positive appraisal. The higher the turnover and profit the business is able to generate, the higher potential for valuation your company will have, which will incur a major pay off when it comes to the capital you’re able to get back. For this reason, it’s crucial that a company that aims to register an STO be as international as possible, as that will make it possible to raise more capital in a much shorter time frame.
Putting your business as an STO often comes with a considerable amount of risk, as when the crowdfunding stops coming in, your company will start to lose money very quickly. Therefore, you should find a way to connect your current market base to a larger one and find a way to scale up consistently. Since the STO market functions similarly to crowdfunding, an STO-registered business that doesn’t grow will stop receiving funding incredibly quickly. This is especially for STOs that unlock funds per milestones reached.
You need to set up a strategy that allows for rapid short-term growth and a sustainable long-term plan. You need to focus on markets with high spending powers such as Germany, China, South Korea, and others, as these locations have the resources to help you grow in the future.
Make sure your business is liquid
STO can be listed on trading platforms that offer a high degree of liquidity, meaning that each token can be bought and sold quickly without having a significant effect on the overall market. The risk factor will be much higher for a company that depends greatly on the assets and capital provided by its stakeholders.
This is because it will be difficult to advance without involving the stakeholders in every decision, which will lead to your company’s growth being stunted. As mentioned earlier, you need to make sure that your company can grow consistently when you’re planning to establish an STO, as that will ensure that the funds keep coming. Therefore, you need to make sure that your business is as liquid as possible to ensure that you can consistently find new stakeholders.
Being able to juggle between different funding groups will allow you to gain more consistent funding. While this may sound like a lot more work than traditional shareholdings, it will enable a company to take control of their own finances more effectively. If you’re planning to invest in the STO market, STO Filter is the best place to learn more. Get in touch with us today to see how we can help.
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