Tokenize This: Week 71 ~ Tokenized Investment Portals

Another layer of investment exposure without raising a fund.

One of the common project types we advise on and see at **Security Token Advisors** is the investment portal. Aside from facilitating security token offerings for our clients, we also strategize around infrastructure when it comes to clients who want to develop tokenization-as-a-service within their respective industries.

An investment portal is a site and interface that allows for the hosting of deals and offerings. These can be limited to internal use only (i.e. a company will develop a portal to lst its own projects) or may be open externally (i.e. the company with the portal may host both their own deals and third-party deals0.

The third-party deals usually come with an added fee or some sort of compensation for using the investment portal, thus creating a whole business model around the portal. Naturally, since we are always thinking about tokenization, let’s figure out where security tokens fit into this model in today’s edition of *Tokenize This*.

This week’s edition is brought to you by the one and only Security Token Market. To view all pertinent details about the STM Crowdfund, click **here**.

Value Adds:

• Greater upside for the platform host
• Alternative financing ability to the host for expansion and growth purposes
• Agnostic or targeted bets to investors and other users of the investment portal

An investment portal, simply put, is a FINRA-compliant landing page and website that enables investors across varying spectrums to find and invest in active deals. The types of investors allowed range from retail to accredited to institutional and international, although there is likely no one-size-fits-all solution. This enables room for new entrants to the market like Securitize, ChainRaise, Dalmore Group, and more.

The investment portal is an interesting blend between an investment fund, like SPiCE VC, and one-off private deals, such as the Security Token Market crowdfund. It provides unique benefits and flexibility to both the portal host itself and investors. An investment fund is more likely to go scour the earth for deals that match its investment thesis and criteria, making it potentially more specialized. An investment portal may be industry agnostic or specialty (i.e. FinTech startups only, real estate, biotech companies, international) and provides a landing page for issuers to find.

Dalmore Group proves the concept of investing through digital portals. (Source)

Now this provides efficiencies to both 1) companies seeking funding (as they may list on an investment portal and attract investors from the crowd under various private placement guidelines) and 2) companies looking to invest in ventures.

Companies in the real estate sector, for example, can take advantage of these API-driven solutions to leverage the existing backend technology and create their own user interface to offer real estate deals to their desired investors. With an active portal, the company can host their own real estate deals and offer investors access and/or offer their existing investors with early liquidity, while also hosting other company’s assets and charging a fee or taking equity interests in the deals.

Now this creates yet another layer in the portal’s capital stack and business model. Not only can the firm begin collecting fees on external deals, but they can even tokenize the entire operation and offer a security token to investors that provides exposure to all hosted deals or select deals. In short, let’s say there are 10 properties hosted on a portal. The host company can secure 10% equity in each property, bundle that equity into a security token, and offer the token to investors. Now, the portal is:

• Running business as usual (hosting deals)
• Offering a security token to finance new and expansionary opportunities
• Enabling users to invest in individual deals or the general portfolio via the token offering

This is something that the Security Token Advisors team helped develop for **BlokHaus**, in fact, and is a business model that we’ve been seeing an uptick in demand for.

The Republic Note. (Source)

Active Example:

Built on the Algorand (ALGO) blockchain, the Republic Note known as $R/Note is a profit sharing SAFE offered to investors with the rights to distributions from successful Republic portfolio company exits. Per the PPM from July 2020, Republic planned on issuing these notes over the course of a few years, with around half of the supply being frontloaded in the initial offering. There is a minimum buy-in of $1,000 with a price of $0.12 per note, an initial circulating supply of up to 370 million notes, a max supply of 800 million notes, and the ability to purchase fractional notes.

Dividends will be paid out in $2 million increments (pro rata to investors) based on the portfolio company performances and activity. Investors essentially get upside in the Republic offerings and listings, which Republic invests directly into, without being on the cap tables directly or without even owning equity in Republic itself. This is beneficial to Republic as the issuer, as it may raise capital for expansionary activities or additional investments, and to the investors as they may partake in Republic’s vetting and investment processes. The token is not yet trading since most are locked up until 2023, but will likely trade on an Alternative Trading System (ATS) in the future.

New edition coming next Wednesday 8/24/22!

Disclaimer: This is not financial or investment advice and should not be interpreted as such. Please do your own research on investments and financial decisions before partaking in any ideas or ventures depicted in this publication.