In this document we will outline what we stand for, our focus and goals, what are some of the features of the platform, how do we plan to incentivize investors, highlight core team members and briefly describe our next steps. This is not a white paper or a detailed business plan. This is a working document that we’ll update and change during the development phase of the business, if and when we deem it necessary.
Who we are
TokenizEU is developed and operated by Comistar Estonia, a company which is an official partner of the Estonian e-Residency program. Comistar has provided advisory and compliance services for blockchain companies since 2017, and moving on to become a one stop shop (i.e adding the tech platform) is a natural step forward for the legal advisory business. TokenizEU is a platform for European companies (or European Special Purpose Vehicles – SPVs) to issue security tokens and raise capital through regulated offerings in the European Union. Our goal is to provide a simple, transparent and easy to use platform for both issuers and investors. Our name, TokenizEU stands for “Tokenize European Union”. Due to the way we’ve decided to write it, some people pronounce it as “Tokenize You” instead of “Tokenize EU”. The latter is the correct one, or at least the one we would like people to use. TokenizEU is currently bootsrapped, though it probably won’t stay that way.
To avoid any misunderstandings – TokenizEU is open for North-American and Asian companies, as long as the companies have a track-record, a credible management team and a workable product. And they can prove it. We will enable these companies an access to the European investors by creating SPVs in the European Union. This also means we’re looking for local partners in Asia and North-America who are capable of bringing in leads and doing a proper due diligence on the projects that pass the first stage review on the platform.
How it works (issuers)
Companies can, after being reviewed by the TokenizEU team, register on the platform and launch their token offerings. Currently, TokenizEU helps companies with legal compliance and advisory to launch the STOs in the EU. However, in the long-term, TokenizEU will become only a technology platform provider and a custodian. Legal compliance will be provided only by the third-party law firms, which the companies can access through the platform partner marketplace section. As part of our efforts to make the STOs available for smaller companies, we are creating concrete, workable (legal) models and frameworks for different types (debt instrument or equity) of offerings which companies can follow. This will bring down the legal costs for the issuers and will make the STO as a fundraising method more efficient.
The second crucial part of the platform is the investor. The platform works only if both parties exist. This means creating incentives for the investors, which as with every platform, is not an easy feat. We would even say it’s notoriously difficult. Currently, there’s definitely a substantial interest from funds, but for the retail investor, we are not sure how strong the interest is. Hence, we have been internally asking this question – is the investor interest there, and if it isn’t (yet), then what are the reasons? Though it’s a complex question to answer as there’s no surveys or data to rely on, some of the possible reasons are:
-It’s an early market. Security token offerings are just getting started.
-There’s no liquidty and secondary markets.
-Not enough interesting projects.
-2018 was a bear market for the cryptocurrencies, and ICO projects didn’t do well. A lot of investors have left the market.
All of these explanations are actually positive and provide easy solutions. There will be security token exchanges and enough liquidity. There will be more and better projects, and investors will get the optimism back at some point. But there are more complex questions, for example, if security tokens represent shares or debt instruments of stable, profit making quality companies, then by nature, these tokens are not speculative assets (at least compared to the “utility” tokens). If there’s no quick 10 000x gains and lambos, will that sort of investment proposal attract the hordes of investors as we saw in the ICO market? Why wouldn’t they just buy stocks? Are the investors ready to substitute the hunger for massive gains for certainty and stable return? This one is more difficult to answer, and it depends on the investor. We believe that on-boarding right companies is the key. Quality, growth-stage companies can still produce excellent returns, more so than listed public companies.
Do we even want the ICO investors? Again, it depends. Some we want, some we don’t. The expectations of certain type of investors are not feasible (the bs taking place in Telegram groups of almost every ICO is nuts). And as we saw, the ICO market was not sustainable. So the question is how we can get the traditional investors and the better part of the new (crypto) investors to take part of the investing rounds of STOs on the TokenizEU platform? There have to be incentives. Again, one of the keys lies in the thorough filtering process of the issuers. The more interesting and better quality projects and offerings, the more people will become part of our platform. This alone isn’t sufficient. Focus on marketing is a must (we can’t lay-out our marketing plan publicly), and, we have to create distinct incentives for the investors. We’ve looked into several options to create incentive structure, and it seems that currently, TokenizEU will be following the model which is used or even pioneered by Neufund and Neumark, with slight differences. Briefly described, TokenizEU will have it’s own token, which will not be listed or traded anywhere outside of the platform itself. All the investors that commit capital on the platform will receive TokenizEU token proportionally to the size of the committed capital. The received token amount also depends when the capital was committed. Early birds are rewarded for their seemingly bigger risk, though we do not think the risk is bigger (we can’t dismiss the human psychology, hence, rewarding the first in investors is necessary). The capital which is committed won’t be used by TokenizEU, nor it will be controlled by us. It will be controlled by the investor, and all the investment decisions with that capital are done by the investor. A 1,5% fee in the form of issued tokens of the each token offering launched on the platform will be contributing to the value of the TokenizEU token. Any payments, dividends, revenue share or any other benefits that these security tokens generate will make up the TokenizEU token value, and these benefits will be distributed to the TokenizEU token holders. As the market evolves and more offerings are done, the value of the token will increase accordingly. More projects, more revenues shared, more dividends equals more payments to the TokenizEU token holders.
Another direction we’re actively working on is transcontinental investment opportunities. European investors, in general, are not investing into Asian companies. Unless you’re already a stock investor, you’re also not investing into North-American companies either. And even if you are investing into public companies, you do not have an access to early-stage companies that can provide the biggest returns. We see it as an interesting opportunity – to help these companies to raise capital in Europe, thus giving a wider investment opportunities from different continents to the investment community here.
Quality over quantity
We are not looking to make hundreds of offerings per year. We’re looking to find quality companies with workable products who we can help to raise capital for the next phase of growth. Due to the lack of quality projects in the ICO market, we see the quality-first- approach as the only viable approach the STO platform can have. Today, we still feel there are too many low-quality projects attempting to do STOs and take advantage of the inexperienced investors and the speculative nature of the cryptocurrency markets.
The quality-first-approach manifests itself in our own business development efforts as well. We believe we first have to improve our processes. Improvement allows us to innovate, as innovation requires capital which is generated through better and improved processes. Finally, innovation allows us to grow the company. Currently, we are working on our basic processes to improve the experience for both the issuers and investors, to be able to contribute to the ecosystem which is developing around us, and try to create and be part of the movement which in chemistry is labeled as “autocatalysis”. Here’s how Charlie Munger describes this idea:
“If you get a certain kind of process going in chemistry, it speeds up on its own. So you get this marveolous boost in what you’re trying to do that runs on and on. Now, the laws of physics are such that it doesn’t run on forever. But it runs on for a goodly while. So you get a huge boost. You accomomplish A – and, all of a sudden, you’re getting A+B+C for a while.
Disney is an amazing example of autocatalysis..They had all those movies in the can. They owned the copyright. And just as Coke could prosper when refrigeneration came, when the videocassette was invented, Disney didn’t have to invent anything or do anything except take the thing out of the can and stick it on the cassette.
The way we see it, the security token industry is very much at the same stage as was Disney before the videocassette was invented. The “autocatalysis” for TokenizEU and other parties of the ecosystem is created through the development of the necessary infrastructure where all required pieces come together. The issuance platforms, exchanges, regulations, and investors. The potential of the digital securities is so big, that everyone who will execute their part well, will also be greatly rewarded for their efforts.
We don’t think that security token industry is a sprint-business as is (was) the ICO industry. Compliance and regulated markets require thorough analysis at each step. Hence, though we’re looking to develop the business in a rapid pace, we’re focused on building a good product and service, rather than being the first to the market (it’s late for that anyway). This doesn’t mean that we aren’t aggressively working to meet our internal deadlines, because we are.
Here are the main milestones for us in 2019:
To finalize the core team.
To have a workable product in Q2 2019.
To obtain the custodian license in the EU by Q4 2019.
To have 3 offerings executed on our platform by the end of 2019.
To have at least 10 000 registered investors by the end of 2019.
On a very high-level, these are the goals we’re targeting. 10 000 users does not sound much, but the (quality) user acquisition is tricky.
The biggest struggle thus far has been the technology side. As the reader can understand, in a tech business, that’s a pretty big problem. As our initial tech team only wanted to build on Etherum blockchain, we had to cancel our plans with them (we’re building on Ravencoin and Stellar blockchain). This means the whole development cycle has been delayed. However, today, we’ve agreed the partnership with the new tech team, and are positive that we will hit our goal of getting the platform ready by the Q2 of 2019.
Mikk Maal – Linkedin (https://www.linkedin.com/in/mikkmaal/ )
Yin Cao – LinkedIn (https://www.linkedin.com/in/caoyin/ )
Paul Christensen – LinkedIn (https://www.linkedin.com/in/paul-gerhard-christensen/ )
We have hired personnel to work on:
Partnerships with funds
Partnerships with law firms and financial advisories
We are still looking to add more good people to the team. So if you’re interested, please do send your resume and LinkedIn profile to our e-mail at firstname.lastname@example.org. Be it sales, legal, marketing, or development, we will read all resumes and respond.
Stay tuned for more updates by signing up on our webpage at www.tokenizeu.com