Following three decades as an entrepreneur and eight or so years specialising in equity crowdfunding, today’s guest Oscar Jofre explains why he firmly believes 2019 will be the year of the Security Token.
Along the way, he discusses his own lightbulb moment about the democratisation of capital during a speech given by former vice chairman of NASDAQ David Weild.
He talks about the paradigm shift crowdfunding brought about in opening-up investment to those previously excluded - and then putting this on the internet.
And about the work his own platform, KoreConx, is doing in bringing trust and compliance between all parties, as businesses - both new and established – turn to tokenisation to raise funds.
As Oscar rightly says, crowdfunding was the start of all this. It allowed everyday people around the world the opportunity to participate in an early stage start-up; suddenly you didn’t have to be a high-net-worth individual paying huge fees to investment houses. He himself specialised in equity and debt crowdfunding as offering the most opportunity for disruption.
Now, Oscar believes, tokenisation is going to take this to a new level. Whereas previously start-ups only thought friends and family would get involved, now it’s just as likely to be someone the other side of the world who likes your project.
Blockchain as technology adds the trust element, so that when somebody makes an investment in a company, they know that what they’ve been provided in the transaction is rightfully theirs. And, moreover can offer the chance for trading that security on the secondary markets.
In the world today there is over $500 trillion sitting in private companies, not able to move. How groundbreaking would it be if you were able to make that money move, to be used in other securities, to have that money actually moving to keep business flowing?
KoreConx itself is a platform where companies can manage all of their capital market activity and stakeholder communications in one place, on the internet, without charge. And where for a fee, companies can also design and launch their own security token, tapping into the expert legal and marketing advice the platform offers, and using introductions via the trusted partner broker network to trade in different jurisdictions.
And the exciting thing this offers is that established companies looking to raise funds no longer have to agonise about whether it’s the right time to sell, or to go public; now they can release funds by tokenising shares, which can themselves be traded without affecting the core business itself.
His closing thought is that we are now, for the first time, seeing the most disruptive opportunity in the democratisation of capital. For the first time there’s the chance to raise capital through tokenisation, which itself offers investors the trust that when they own something, it is theirs; and they can go on to trade without any restriction, within local rules and regulations. And it further offers the chance for small-time investors to get involved through the fractionalisation of assets and businesses.
This is a very disruptive and exciting time, of a type we’ve never seen before in financial Capital markets. 2019 will truly be a Happy New Year!
- The European Union is about to publish a report outlining that in the early days, 88% of all tokenisation was fraudulent, with $30+ billion wiped from investors’ money.
- Capital might be global, as are tokens, and the internet certainly is. But laws and financial regulation are set locally, and you need an expert local footprint to guide investment in different regions.
- It has been proven that technology can solve this capital liquidity problem, but you still need the expertise about local regulation, you need to be speaking to the regulators.
- KoreConx has over 55,000 companies on its platform, and offers end-to-end support to issue clients’ tokens in a compliant manner in whatever country they want to sell, including secondary trading.
- KoreConx offers a system to introduce over 30 broker-dealers into any deal, knowing that potential investors are suspicious of tokens offered through a project’s own website, whereas using trusted partners and lawyers all around the world helps investors make safer decisions.
- For the last two years nobody was protecting investors - some were even joking about the amount of money they made out of them – but KoreConx are resolute about protecting the investor.
- Your token does not end with its issue; you need constant communications and reporting to your shareholders.
- Even in crowdfunding you need capital to cover legal fees and marketing.
- In blockchain, the technology is not infallible, but it is immutable, therefore offering the potential of disruption to the capital market.
- The UK became the global leader in crowdfunding mainly because of Companies House giving interested parties the ability to see everything about a company. There is no other country in the world that offers anything close to that.
- If companies are not digitised they are going nowhere - you need to start organising your information and make everything more available.
- Businesses need to be able to offer shareholders a tokenised certificate which they can then take to a secondary trading exchange without affecting the company itself.
- We will see this more and more secondary trading of tokens around the world, and it will be fully regulated by security regulators.
- People ask whether they need to tokenise to raise funds; they don’t have to, of course, but it offers investors an additional opportunity to participate and a new exit strategy, without affecting the core business.
- The sector that benefited most from crowdfunding was real estate. People are often stuck in a real estate deal for many years, but this way investors can enjoy owning a fractional element and be able to trade it without affecting the core business.
- A traditional secondary shares trade will usually take 6 to 8 weeks and only work for huge sums; now with tokenisation it can be done in seconds, validating ownership of tokens and completing the trade.
- Investment in trading can be as low as $10 and transaction fee is 1%-3% and lower.