In the STO space in Europe, one new initiative stands out. STOKR is not just a startup, but a full-service platform that connects startups and SME’s to investors. Furthermore, it not only gives these enterprises access to a new source of funding, but also retail investors access to investments that they never had before. We talked to co-founders Arnab Naskar and Tobias Seidl:
Q) What makes STOKR unique in the Securities Token Issuance (STO) space? There are several projects in development that could be loosely described as an STO issuance platform. From what I have understood, you are not only supporting Startups but also Small and Medium Enterprises in fundraising. Please describe how exactly you will assist both the SME’s to fundraise and the Investors the access investment opportunities in these businesses.
It would be wrong to say that we are the only platform or organisation to connect SMEs with the investors for investment opportunities. What distinguishes us is our aim to bring the startups and SMEs to a new capital market, accessible by everyday investors, and not restricting the same for a handful of investors. In the new capital market, both investor education and transparent communication will be highly critical which is the core of STOKR’s value proposition.
99% of the European ventures are SMEs and they have limited access to the traditional capital market. On the other hand, retail investors in Europe have limited opportunities to invest into innovative early stage ventures. We aim to bridge this gap by connecting retail investors with innovative ventures.
On the STOKR interface, investors can invest in the venture of their choice. Investors can choose which industry they want to invest in and can access ventures in that industry. Investments can be made both in Euro and in Ether. In return for their investment, investors get rights in the profits of the venture. These rights are represented in the form of digitalized crypto-assets issued on the Ethereum blockchain.
Q) How is it different from classical crowdfinancing?
STOKR does not fall under the classification of reward-based crowdfinancing but comes under the category of financial-return based crowdfinancing. On STOKR, we will assist ventures to tokenize their profit-sharing rights, an equity instrument by nature. We are making the equity instrument peer-to-peer transferable and traceable on the blockchain. This is not possible with the current equity-based crowdfinancing.
Q) What is your definition of a tokenized asset? How are tokenized assets used on your platform?
On STOKR, ventures tokenize the profit-sharing rights. Tokenization is a process which means that the rights of the investors, in this case right to share profits in a venture, are digitally represented by an Ethereum based token. Our unique token framework, based on Ethereum ERC 20 standard, allows ventures to issue these tokenized securities following the relevant EU legal requirements.
Q) Which markets are you considering entering during your initial phase? Are you also considering entering the US market eventually?
STOKR is based in Luxembourg and we are currently focusing on the European market. We believe that Europe has a robust and accommodative regulatory structure for such financial innovation. Ventures conducting STOs on STOKR will comply with relevant EU legal requirements for issuing tokenized securities.
Q) Do you think there is enough interest in tokenized assets in Europe? What are the trends here?
Tokenization will have tremendous impact in the financial sector. Financial innovation catalyzed by tokenized assets are inevitable. STOKR is only focusing on the venture- financing market and the responses that we are receiving are overwhelming. Imagine what may happen when 99% of European ventures can access the new capital market trigged by tokenization. In the formal economy, the SME funding gap is around 1.5 Trillion USD. We are certain that we will see a massive growth of venture financing through tokenized securities.
Q) Your firm and members of your team have been in the blockchain market for quite some time. How would you describe the current attitude of an average professional or institutional European investor towards tokenized assets, as of the end of 2018? And what about retail investors?
Through SICOS, we have been in the digital token offering space since 2017. We have been involved in various ICO projects like Jeluida (Ignis), ODEM, ORS and many policy-based initiatives in the space. We acknowledge the fact that the utility-based ICO model is feasible for only a handful of projects. Not in every digital token offering, can the tokens have a utility in the ecosystem. A digital token offering can be made simply for investment reasons. Ventures need not hide the same and create a maze of incomprehensible utility token. That is the reason why we believe that the STO is a natural evolution of the cryptocurrency-based crowdfinancing aka digital token offering.
The STO space is quite different when compared to the utility-token based ICOs. Regulations are quite clear in the STO space, as the regulatory grey areas are quite limited. This brings to the discussion that ventures must follow proper disclosure and transparency requirements. They must ensure that the source of the investment is properly identified and that they are in compliance with the existing securities laws. This will boost confidence in the utility-token based ICO space for both the institutional and retail investors which was lost in late 2018.
Q) What kind of retail investors are you targeting? How can they manage their investments on your platform?
STOKR is designed for millennial minded people. We do not want to restrict the interface based upon age, gender or income. We want to develop a network of well-informed educated investors on STOKR. To facilitate this, we are providing various tools for the investors so that they can manage their investments in a very simple but efficient manner.
Q) Many believe that once the tokenization tools are there, the market for tokenized equities in bonds, real estate and art will open up and there will be a rush on these markets. What do you think is needed to ensure a healthy market growth?
Education is the key. Investors must be made aware of both the risks and rewards of such tokenized investment tools. We as a community must ensure that certain best practices are developed and communicated.
Continued dialogue with the regulator is another important aspect. As a community, we must not shy away from discussions with regulators. This is a great opportunity for our generation to re-structure the capital market. We must do it responsibly.
Q) Your presentation states that you are developing your own STO framework. Will it be open source?
We have developed our unique token framework based on Ethereum ERC 20 standard that will allow ventures to issue these tokenized securities following the relevant EU legal requirements. The framework is developed based on the requirement of EU securities law. We will make the code-base open source in coming months before the launch of STOKR.
Q) When are you planning to launch?
In spring 2019, the STOKR will go live.
Q) How are you funding your own business? Are you conducting your own STO?
We have received external funding in the amount of 2 million Euros in October 2018. Before that, STOKR was financed by SICOS. We are not planning to conduct our own STO in the near future.
Q) How can ventures contact you? Are you currently onboarding ventures?
Ventures can reach out to us via the form https://stokr.io/ventures/. Yes, we are currently on boarding projects.