Crypto Spring: STOs on the Rise?
The strong price increase of bitcoin since the beginning of April has probably officially initiated the end of "crypto winter". While everyone has a story on what triggered the rally, the exact reasons seem to be less evident.
Bitbond, a Berlin-based fintech startup, has recently launched the first BAFIN-approved Security Token Offering (STO) for retail investors. According to Bitbond’s website, the STO has already collected EUR 1.7M. Rumor has it that, more than 150 startups are currently awaiting their BAFIN STO approval.
It remains to be seen whether the many new STOs in Germany (and internationally) will herald a new wave of (equity) crowdfunding. The previous non-token players in this market such as Bergfürst, Companisto, and Seedmatch have found it difficult to establish themselves as a real alternative to traditional VC financing.
So far, the biggest issue in the crowdfunding space has been adverse selection. Startups that can get institutional investors (or at least some business angels) prefer to go with the “smart money”. On the other hand, startups that cannot get VC investors have to turn to crowdfunding as a last resort.
We will see to what extent this adverse selection also applies to STOs or whether we are entering a whole new era of startup financing, in which retail investors compete with institutional investors for the "best" startups.
Meanwhile, Andreessen Horowitz caused a stir in the VC industry: The famous VC firm has changed its regulatory status from a VC firm to a Registered Investment Advisor (RIA). A16Z is now a vertically integrated VC firm and an Investment Bank, ready to directly compete against established Wall Street players. As each stock, bond, currency, and commodity becomes tokenized, there will be very few Wall Street firms that understand how to operate in this new world of native and non-native digital assets. In fact, the technology-enabled venture capital firms are likely to have a competitive advantage in the new world.