Promoting and advertising security tokens is an intriguing challenge, as your target audience is divided into two categories: highly technical cryptocurrency enthusiasts and rich professionals and institutions with a strong background in finance. Developing a token offering strategy (TOS) for your security token demands a well-crafted strategy to cater to the market. A security token marketing strategy requires you to understand the highly competitive environment by performing in-depth market research to match investors’s preferences.
While mass marketing strategies like amassing large social media followings, developing Telegram communities, or awarding endorsements to influencers work for ICOs, these strategies do not apply to STaos as they are designed strictly for accredited investors. Here’s how to craft successful STO marketing to reach prospective accredited investors.
Understanding Security Token Offerings (STOs)
Security Token Offerings (STOS) are the process of raising capital for blockchain-dependent projects by issuing digital tokens that represent underlying assets like stocks, debts, or even real estate. Unlike ICOs, STOs are designed to adhere to legal and regulatory requirements. These digital assets, also called securities, can represent traditional assets like bonds and are then issued onto the blockchain through tokenization.
Security tokens serve as an alternative for businesses to raise capital in a legalized environment that encourages investors to pool their money into promising projects. Through token fractionalization, investors can buy small portions of a tokenized asset rather than buying the entire property from the comfort of their home. Security token holders provide additional benefits like voting rights, dividends, a portion of tokenized shares, or even profits.
Regulatory Compliance and Legal Considerations
The sales and purchase of STOs are governed by regulatory compliance and legal considerations to guarantee investor protection, legitimacy, and transparency. Security tokens are sold based on a different set of securities laws that token issuers must abide by, and these laws include acquiring the required authorizations and licenses. In addition, legal papers that contain information about the offering and the underlying asset must be accurately presented, and these papers may include prospectuses and offering memoranda.
A prospectus and an offering memorandum are documents designed to raise capital and are given to investors for review and, ideally, funding. Usually, the terms of the offering and the investor’s return on investment are spelled out in the document.
The interaction between the token issuer or organization and potential investors may be restricted based on the selected regulatory route. For instance, Rule 506(b) of Regulation D, the most often used offering exemption under the federal securities laws, forbids using general solicitation to market the securities.
Under Rule 144A, sellers are allowed to rely, on a non-exclusive basis, on information filed with the Commission, as well as information contained in financial statements and other materials filed with any federal, state, local, or federal agency in the United States, as well as any foreign agency or self-regulatory organization. Rule 506(c) allows issuers to advertise and solicit an offering broadly as long as they meet the following requirements:
- All purchasers in the offering are accredited investors.
- The issuer takes reasonable steps to verify purchasers’ accredited investor status and
- Certain other conditions in Regulation D are satisfied.
In an offering made under Rule 506(c), buyers are given “restricted securities.” Within 15 days following the first sale of securities in the offering, a company must file a Form D notice with the Commission. State registration requirements and fees may still be collected by the states, even though Rule 506(c) of the Securities Act grants a federal preemption from state registration and qualification.
Benefits of Marketing Your Security Token Offering (STO)
Retail investors can now buy assets that are listed officially on the public stock exchanges, allowing them to amass equity in privately owned businesses. Before the marketing of security tokens, certain asset types, like early-stage ventures, were solely accessed by accredited investors. Now they are made available to all interested investors and governed by specific SEC regulations to facilitate the flow of capital.
With the ease of tokenization, business owners can attract investors from all around the world and obtain funding for their businesses. Unlike other asset classifications where the sales and purchase of assets were based on who you knew, security token marketing provides a level playing field and equal opportunity for all investors.
How to Prepare for Your Security Token Offering (STO)
To ensure a successful security token offering, token issuers must apply the right strategies to appeal to their prospective investors.
Step 1: Preparation
During this stage, token issuers must assess their token’s value and plan communication with investors. It is essential to meet up with legal advisors and consultants to ensure you adhere to legal compliance. It is essential that your chosen legal advisory team possess technical proficiency in blockchain development and tokenization and also be well-versed in legal marketing before the STO launch.
Step 2. PRE-STO
The next step is token creation and deploying the necessary marketing strategies. The process of token creation entails defining your token’s characteristics, total supply, voting rights, and more. In addition, develop a marketing strategy to outline the contents of the tour token’s whitepaper and communicate these features to your investors.
Step 3. Launching the STO
The process of launching the STO involves setting up a crowdsale to sell these tokens to investors. During this stage, it is essential to maintain transparency, flexibility, and accessibility. Similarly, active community support can impact token sales.
Step 4. Post-STO
This stage involves creating awareness of your STO platform through targeted marketing strategies like leveraging social media and affiliate marketing to attract potential investors.
Market Your Token Effortlessly With PTPWallet
PTPWallet offers pre-made token development services (including stablecoins, utility tokens, and security tokens) for business owners and organizations. Our expert developers ensure security, utility, and stablecoin tokens can be created and managed. We also handle your token’s marketing, establishing your security token goals, and developing the token’s economics while adhering to the necessary regulatory compliance. PTPWallet also handles the token’s marketing and promotion plan by developing a thorough marketing plan to advertise your token offering through community involvement, press releases, and social media.
