Preparing a Security Token Offering? Here’s Your Marketing Playbook.

Preparing a Security Token Offering? Here’s Your Marketing Playbook.

As the SEC comes closer and closer to a crackdown on the “utility” tokens that function as unregistered securities, a new breed of token is emerging: the security token, backed by real-world assets, and fully SEC-compliant. As a crypto marketer, I’ve seen more and more of these companies launch advertising campaigns. Here, most companies go with the Regulation D exemption, which generally forbids sales to non-accredited U.S. investors. Securities group Tripoint Global is a strong contender to become the first company approved to offer securities-backed tokens under Regulation A, which means it can sell to non-accredited U.S. investors -- if it's willing to do some extra paperwork. But for the time being, marketing a securities token means marketing to a mix of accredited and non-U.S. investors. Utility tokens offer investor liquidity (quick access to cash via exchanges) and a dynamic investor community. Picking your partner exchanges carefully One of securities tokens’ biggest selling points is that they bring liquidity to traditionally illiquid markets. The SEC has decreed that all exchanges listing security tokens must register as securities brokers. That’s why trust is paramount for securities token purchasers. We’re likely to see the regulations surrounding these investment products change, but I think that these principles for marketing securities tokens will change less than you’d think.

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You can’t get potential token-buyers to trust you overnight. As the old saying goes, trust is earned.

Preparing a Security Token Offering? Here's Your Marketing Playbook.

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As the SEC comes closer and closer to a crackdown on the “utility” tokens that function as unregistered securities, a new breed of token is emerging: the security token, backed by real-world assets, and fully SEC-compliant.

Securities-backed tokens are different from pure utility tokens, such as Ether, or true value storage tokens, such as Bitcoin. As a crypto marketer, I’ve seen more and more of these companies launch advertising campaigns. Here’s what helps them succeed:

Knowing your target consumer

Token sellers can seek full registration with the SEC, but few companies choose that path (and it’s hard to blame them for it): Full SEC registration is a logistical, legal and financial quagmire. To skip that move, though, companies must choose an SEC exemption. Here, most companies go with the Regulation D exemption, which generally forbids sales to non-accredited U.S. investors.

Then there’s the Regulation A exemption. Securities group Tripoint Global is a strong contender to become the first company approved to offer securities-backed tokens under Regulation A, which means it can sell to non-accredited U.S. investors — if it’s willing to do some extra paperwork.

But for the time being, marketing a securities token means marketing to a mix of accredited and non-U.S. investors. Accredited investors are generally either institutions or individuals with a net worth of $1 million or higher. Successful securities token sales target their marketing for this income group.

Tailoring marketing for both crypto natives and finance natives

Security tokens hit a marketing sweet spot between forward-thinking (but often risky) ICO tokens and conservative, SEC-sanctioned products backed by real-world assets.

Rohit Kulkarni, managing drector of SharesPost, argued in a guest contribution to the Nasdaq blog, for example, that security tokens represent a perfect mix of utility tokens and venture capital. Venture capital boasts: issue-investor alignment (with everyone incentivized to help the venture succeed); access to expert networks; KYC-AML compliance (which protects investors and companies from fraud and money-laundering); and regulatory oversight. Utility tokens offer investor liquidity (quick access to cash via exchanges) and a dynamic investor community. Security tokens offer the whole shebang.

These tokens can appeal to a wide range of accredited investors when companies reach out to them properly. Traditional investors will respond to…

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