by Alex Broudy, Technical & Financial Writer
Jul 6, 2022
Web3 Crowdfunding is a new pathway for raising capital. This includes everything from fundraising to managing and offering shareholder liquidity.
One of the most interesting examples of crowdfunding in the last year was the $75 million that Exodus raised from its own customers and fans. As successful and novel as that raise was, the process is set to become even easier as Web3 comes online, including new benefits like direct asset ownership and greater transparency into trades. This article explores how Web3 and crowdfunding are beginning to work together to give investors more control over their assets.
Let’s start with stocks. Before the internet, there was paper. And the speed at which paper contracts could be produced, ported, signed, countersigned, stamped and dated dictated the speed at which businesses could operate. If you were lucky, the process could take just days to complete – but more likely, weeks. And, for the most part, things haven’t changed much since.
In the 30-plus years since the introduction of the internet and the development of digitization, paper has remained a sticky business standard for issuing and managing stock. Even as the issuance of shares has moved from paper certificates to electronic spreadsheets, identifying share ownership and trading activity remains an inefficient process that has not changed in decades. The slick interfaces that investors see on websites and apps are often just digital façades over disjointed backends that rely on outdated technology. Bringing shares onto the blockchain is a fundamental evolution in the digitization of finance.
For the latest generation of adults who grew up with the internet in the palm of their hand, these hurdles just don’t make sense. Everything should be digital and easily accessible online.
As noted above, before the internet there was paper – and before the internet as we know it today, there was Web1. These were the early days of mass adoption: dial-up internet via 14.4K modems, point-to-point communication, and minimal interactivity or community apart from static message boards. This was the read-only web: no ecommerce, no social networking, no concept of usernames or passwords or ownership of your data.
As platforms like America Online brought the internet to the masses, new technologies rapidly emerged enabling online sales and communities, and credentialed relationships between users and service providers. The Web2 era had arrived.
And this is how most of us have only ever known the web: a neighborhood of centralized storefronts and data centers: Amazon, Bank of America, Facebook, Google, Shopify, and so on – each with its own set of login credentials and control over your data.
Web3 combines the best of Web1 and Web2 – from point-to-point communication to interactive communities – by using blockchain technology to empower individuals to interact more directly and securely online without the need for intermediaries. Web3 gives people more control over their assets as well as increased transparency. As with Web1 and Web2, there will be many benefits of the Web3 evolution, including how people can invest and manage their money. Here’s how it’s beginning to evolve.
One area where Web3 and finance are already working together to produce benefits is with crowdfunding.
Crowdfunding has grown from a $741 million corner of the financial industry in 2018 to over $1.12 billion in 2021, and is projected to be a nearly $200 billion market by 20253. While crowdfunding is already a way for serious businesses to raise serious capital, newer technologies are coming together to make it even better for businesses and investors. These technologies provide a bridge between the classical web and decentralized financial services running on the blockchain. They enable new avenues for fully digital commerce, investment, and business.
In Web3, data ownership is largely up to the individual, with digital wallets at the center of the action. Applications range from decentralized social media services – where users own their content and can monetize it as well – to online collectives which pool resources together to accomplish a specific goal. Web3 Crowdfunding is another promising use case: a legitimate avenue for raising serious capital using Regulation Crowdfunding (Reg CF) and Reg A+. This includes everything from issuing and managing digital asset securities on the blockchain to offering potential shareholder liquidity.
By seamlessly connecting digital wallets, blockchain technology, and digitally verified identity, Securitize is able to help businesses raise capital from investors faster. Now, people can make investments in private businesses and alternative assets in minutes, not days.
In a case study, Security Token Market measured interest in their next capital raise and captured $6.2 million in intent to invest, surpassing their desired goal within 13 hours. This oversubscribed Test-the-Waters campaign demonstrates the power and effectiveness of raising capital using Web3 Crowdfunding.
With Web3 Crowdfunding, financial control is personal. Verified identity, digital wallets and smart contracts all work together in Web3 Crowdfunding to help build bridges from the old way of issuing and managing stock to fully digital crowdfunding on the blockchain.
Taking ownership of digital asset securities is made possible by using digital wallets which connect investors whose identities have been KYC/AML verified. Once your identity is verified, your wallet is added to a whitelist where you can trade with other verified wallet owners without needing to reauthenticate. This reduces the operational costs for businesses and makes it possible for investors to take direct ownership of digital asset securities, all while remaining consistent with regulatory standards.
Web3 Crowdfunding opens the door to fully digital investing and fundraising. Through the integration of verified credentials and blockchains like Avalanche, businesses are now able to design Web3 Crowdfunding campaigns that fulfill the ambitions of their tokenized raise with low costs across key lifecycle events like issuance and dividend distribution. To learn more about Web3 Crowdfunding and how to get started with using digital wallets, subscribe for updates below.
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