We’ve recently sat down with Jeremi Jak, Communications Manager at Neufund, to find out how the platform works for investors and startups alike, the similarities and the differences between ETOs and STOs, the possible scenarios post-ETO and much more. Neufund is building a blockchain-based and investor-directed platform which bridges the world of cryptocurrency and equity. In July 2018, they partnered with Binance and Malta Stock Exchange to create the world’s first fully-regulated decentralized stock exchange.
OCC: How does Neufund work for investors eager to investin startups they truly believe in? How does it work for startups?
Jeremi: Neufund provides both of these groups with a platform that connects them. From one side, companies can tokenize equity through our set of protocols for enhanced ownership, and from the other side investors can buy those tokens. Such equity tokens bring a number of different advantages over paper-based equity tokens. First, they are programmable which means they can execute the rights of token holders and carry additional utility functions. Second, they carry a promise of much higher liquidity as they can be traded on exchanges with access to global pool of investors. Third, one share in a company can be represented by a huge number of tokens which effectively lowers the level of entry for new investors. The benefit for companies is being able to address global pool of investors with the offering and easier governance model at a later stage.
OCC: What are the 2 main barriers that Neufund tries to solve in today’s innovative startup world?
Jeremi: We make it easier for entrepreneurs to fund their projects through enabling them to address a global pool of investors with legally enforceable token representing the equity. Through lowering the level for entry we also make it more accessible for anyone to invest into startups at an early stage.
OCC: Is an equity token offering (ETO) similar to a security token offering (STO)? What are the differences between these two?
Jeremi: Equity token is a type of a security token. Security tokens can represent different kind of securities, equity is just one of them. However Neufund’s set of protocols enables to build a legally enforceable bridge between the real-world asset and its representation in form of a token, it doesn’t necessarily have to be a security.
OCC: How many companies have joined Neufund so far?
Jeremi: More than 10 companies have decided to conduct their ETO with us. For now, we have disclosed the names of 7 of them, but we are soon to reveal more.
OCC: What are the possible scenarios post-ETO?
Jeremi: The companies and token holders will always gain access to governance system, which will enable them to stay in close touch after the ETO. Such governance system includes information distribution, voting mechanism or dividends distribution. Depending on the case and the company they might also enable tradability of their tokens on secondary markets, which will enable investors to trade their tokens.
OCC: Despite being the new kid on the blockchain block, the use of ETO’s, unlike the ICO, has been made completely legal in Germany. What made that possible?
Jeremi: Equity Token Offering isn’t really anything new in the market. It’s just a technologically improved hybrid of a VC round and an IPO. Giving equity a representation in form of a token on Blockchain and enabling it to be offered through a public offering is a subject to regulation that’s already in place.
OCC: What rights/ value do ETO tokens give their holders?
Jeremi: The rights of equity token holders are equal to the rights of typical shareholders in companies.