Traditional fundraising mechanisms, such as IPO, venture capital or crowd investing, involve a large number of intermediaries, whose services are expensive. That turns off many projects looking for funding.
Tokenomica's alternative can make fundraising about 10 times less expensive thanks to dramatically cutting the number of intermediaries. Overall, Tokenomica aims to help startups attract funding in strict compliance with the EU legislation.
«What we offer to projects looking for funding is smart securities, which are basically securities — shares, bonds or equities — in the form of tokens,» explains Tokenomica CEO Artem Tolkachev. «This is a legally compliant way to issue assets that are compliant with the EU securities market regulations.»
In addition, Tokenomica runs a crypto exchange, registered in Malta and fully compliant with the European Union’s legislation. The blockchain technology facilitates much faster trading, with automatic order execution as opposed to traditional exchanges where it takes up to two days.
Tokenomica was launched in November 2018 by lawyers who previously worked at Deloitte Blockchain Lab. «Initially, we envisaged developing three products as part of one ecosystem — smart security issuance, a crypto exchange and secondary trading in smart securities», Tolkachev recalls.
«When we launched a beta version, we realized that we need a single product including tools for issuing smart securities and a marketplace enabling investment in companies' tokenized shares,» he adds.
A regulated exchange was also launched, but launching secondary trading turned out to take more time as some issues need to be resolved.
«This is a problem for the entire market — there is no regulation for the secondary market of tokenized security,» says Tolkachev. «You need to either obtain a license or collaborate with a broker. We’re working in both directions.»
«The absence of proper regulation creates barriers for investors and company founders alike,» he adds. «They have to go through KYC and KYB procedures, respectively.»
Currently, Tokenomica has seven corporate customers, which it can’t yet reveal due to confidentiality considerations. One of them, a major metals company and Eurobond issuer, intends to tokenize a 10 million Euro worth of Eurobonds. In 2020, these bonds will be offered on Tokenomica in the form of tokens.
Holding tokenized bonds has some noticeable advantages. Interest is collected on a daily basis, and coupon payments are made every month. By contrast, coupon payments on traditional bonds are made once a year.
For another client, a company that did an ICO a couple years ago, Tokenomica is converting utility tokens into smart security, and the utility-to-security service is expected to be popular as it allows companies to build a compliant «company-shareholder» relationship model, benefiting both parties.
«But we won’t work with just about any ICO project,» Tolkachev says. «We can’t help each project overcome the downfall of ICOs. Regardless of having a successful ICO in the past, a project must have a working business or business revenue model in place, a community of active token holders and also can’t be used as a fuel on the public blockchain.»
Tokenomica’s other clients include a European natural dietary supplements startup, a p2p lending platform and a predictions markets company.
«We are not limiting ourselves to the crypto space,» Tolkachev comments. «What’s important for us is that the company has potential.»
In Tokenomica’s immediate plans is attracting a large number of clients — investors and issuers, alike.
«In the longer run, we’d like to take a niche on the European market, pushing away companies focused on crowd investment,» Tolkachev concludes.