Security Token Offerings are all the rage now in the blockchain industry, and while this fundraising method is quite new, there’s plenty of speculation on where the industry is going. One thing that’s clear is that pulling one off will be much more complicated than an ICO. Due to this complexity, it’s anticipated that a huge number of STO consulting firms are bound to spring up. An STO requires a massive amount of expertise in a variety of different fields, to the extent that most firms won’t be able to handle all of it internally. A successful STO will require extensive knowledge in law, finance, technology, marketing, etc. Since most companies likely won’t be able to handle all of these functions, it’s likely that STO consulting firms will rise up to fill in the gaps.
The Blockchain Consulting Industry
The growth of the blockchain industry gave rise to the emergence of thousands of service companies built to maintain and support its growth. These companies provided ICOs and blockchain companies with support in terms of PR, consulting, advertising, fundraising, and technology development. This helped to further drive the rise of the ICO model and blockchain technology into the mainstream. Since 2016 some of these companies have experienced massive growth, going from often under 10 employees to in the hundreds. Some examples of these are Wachsmann and Amazix, now known worldwide for their expertise in PR and Community Management respectively.
Blockchain consulting firms were some of the most prevalent types of businesses set up during the ICO boom. Those with expertise in fields like marketing, law, and development were able to apply their skills in this booming industry to great effect. Since they were usually crypto investors themselves, they were also able to accept cryptocurrency as payment, which gave the ICOs and blockchain companies the ability to afford more services. It also served to align the goals of the service provider and the ICO.
Of course, just like with the ICOs themselves, a massive amount of scammers also set-up shop to try to get a piece of the blockchain pie. It got to the point that nearly every 10th message in an ICOs Telegram group was asking to speak to an admin with an offer to advertise on their Youtube channel or translate their whitepaper. With the recent consolidation in the market, it’s begun to slow down. Luckily, due to the complexity involved with STO consulting, it’s unlikely that these types of scammers will be able to flourish in the same manner.
So what makes a good STO Consulting Firm?
Since the industry is still in its nascent stages, it’s difficult to answer this. However, judging from the requirements of an STO, it’s easy to identify a few key areas that will be absolutely essential for STO Consulting.
This is ultimately the most important part of a successful STO. Failure to adhere to regulations will quickly spell the death of any STO. This is even more difficult than it sounds and depends heavily on where you plan on selling your offering. To sell securities, they must be registered with the financial regulators of every jurisdiction you plan on selling them in.
While there are exemptions for these registrations, they are different in each jurisdiction. If you plan to use an STO consulting or Blockchain Consulting firm to meet your legal needs ensure that they have expertise in each of the jurisdictions that your are planning to launch your offering in.
Even if the consultants you hire are not directly responsible for your projects compliance, they should be aware of the legal restrictions surrounding the process to avoid any potential pitfalls.
A Strong Investor Network
A successful STO is heavily dependent on the investor network that it is capable of reaching. While the team behind the project might have a strong network, founders often rely on the networks of consultants, advisors, brokers, and fundraisers to reach the right people. This is particularly important for STOs as compared to ICOs, as they often make use of regulatory exemptions that prevent them from selling to the public.
The ideal STO consulting firm should be able to connect projects directly with potential investors through their network. A firm with these capability will likely need to conduct some due diligence on your project before they present it to their network. If the firm doesn’t take an in-depth look at the project and readily accepts anything that comes their way that should be a red flag.
A Niche or Focus
A common trend among Blockchain consulting firms was that many of them claimed to be handle almost any aspect of the ICO launch process. For me personally, seeing that a company with less than 50 employees claims to cover legal, worldwide marketing, tech development, and fundraising is a bit disconcerting. In these cases its obvious that a lot of the work being done by these has to be outsourced.
An STO consulting firm should be laser focused on a few different areas, unless they are at the scale where they truly can provide that wide range of services. While this might mean dealing with a few different consultants to get everything off the ground, it will almost certainly lead to a better result.
Take Chainplus as an example. We focus specifically on Mainland China for Marketing, PR, and Fundraising. We make no claims to be legal experts or techies. We’ll happily point you in the direction of some of our partners who handle those areas, but we’ll never take on projects looking for those services ourselves.
Creative Problem-Solving Skills
This is the most important quality for a consultant regardless of what industry of field that they operate in. The beauty of hiring a consultant is that they are essentially an outsider with a different perspective. This allows them to be impartial and remained unbiased in their assessments/suggestions. They must also be agile and quick to come to conclusions especially in a new industry.
The only way to determine if a consultant has these qualities is to look at their track record. STO consulting firms should have a solid record in which they can demonstrate their quick thinking/expertise. Since this industry is so new, it will be tough for firms to demonstrate their track record with this specific area. However, experience with ICOs, IPOs, and the launch of other financial products can be considered relevant.