Tokenised Securities are the next- generation of securities, connecting the power of DeFi and AMMs

Tokenised Securities are the next- generation of securities, connecting the power of DeFi and AMMs

My journey as an entrepreneur began in 2001 when I co-founded an alternative advertising company, Mailman Group in Shanghai, since then I have started 8 businesses including a real estate crowdfunding platform in 2015. For me, security tokens represented a unique opportunity to create a system where community ownership and connectivity was the default and allowed for collective distributed ownership on-chain rather than paper.

The private securities market is infinitely bigger than the web3 market because it includes all the real estate, private equity, venture etc that is not publicly traded, a market 5-10x bigger than the size of public markets. In 2017, very few could see the potential of tokenising Real World Assets including securities, fast forward 5 years and the world is finally waking up to the potential of bringing TradFi securities into web3 and DeFi.  

At IX Swap, we understand that the essence of fundraising is sharing equity in exchange for investment. By rolling out the IX Swap Launchpad, it is our goal to increase the power of fundraising both for the company and investors alike.

The IXS Launchpad is IX Swap’s next-generation investment offering that paves the way for start-ups to raise capital through the platform and our partners via a security token offering (STO), which includes access to the governance/platform token in parallel. Usually, when a start-up launches a governance/platform token, VCs get access to the seed round and then the private sale before the token is offered in a public sale accessible by a small set of individuals.

This is the typical scenario of a start-up trying to raise funds, but the fight is always on as the VCs get access to the seed round and private sale, where the token is sold at a significantly lower price, while individual investors can only access the token when the public sale starts.  The token’s price difference from the seed round and private sale round can vary significantly compared to the token’s public sale price, as illustrated below:

The start-up raises equity earlier or later to the above sale, which is typically done in a standard Silicon Valley manner – with a SAFE note, seed round, series A, B, C, and so on.

Investors often receive warrants or special deals in these token sales, effectively getting a two-for-one deal. Hence, they are arguably the most desirable way to invest, with the liquidity of the platform token plus the equity upside of a traditional investment. However, the equity part is often illiquid and unavailable to individual investors. With the IXS Launchpad, we have changed the fundraising game for everyone and now offer investors, big and small, access to invest in start-ups and equity in the form of security token offering (STO) and token warrants.

For startups, this provides tremendous value as it helps the project while selling equity and growing its user base at the same time. To drive home the point, here’s something to think about – would you prefer to have one investor inject $1M USD investment into your start-up or would you rather have 1,000,000 investors, who are also actual users of your platform, help grow your project by investing in it?

This is an extreme scenario, but we want to highlight and push forward the value of democratising access to investments opportunities to investors of all sizes. At the same time, we don’t want to discount the immense value that professional investors like blockchain VCs bring – from leading rounds, doing due diligence, helping with networking and growth, negotiating lead investor terms, and bringing credibility to the whole fundraising process.

Our mission at IXSwap is to use blockchain technology to build infrastructure and liquidity solutions for security tokens, ultimately creating worldwide access to private market assets. Our pioneering DeFi platform enables trading of security tokens through licenced custodians and broker-dealers. We want to democratise access to private market investments and address the illiquidity challenges facing the tokenisation industry. Currently we are working with companies tokenising REITS, equities, Art Fund Vehicles, fractionalising a Bored Ape Yacht club through a company structure, Carbon Credits, and Soho House just to name a few. The goal of our platform is to truly democratise access to investment opportunities for investors of all sizes. In doing so, we increase the value of the pie by bringing more to the table for both start-ups and investors alike.

We are excited for investors to access the best of both worlds. There is no question that start-ups are risky and most do not make it, but with this new structure, start-ups are empowered with more chance of success by giving equity to their user base, elevating their investment in the project from being mere token buyers who are often only in for a short pump-and-dump with no intentions to support, use, and see the platform through, to actual investors with an equity stake in their success.

Julian Kwan

Julian Kwan

Julian Kwan is CEO of IXSwap, a Faculty Capital portfolio company. A serial entrepreneur, Julian has founded 8 businesses in social media, real estate investment, security tokens, and blockchain/DLT.