Depending on your knowledge of the cryptocurrency/blockchain space, you may have heard the term Security Token Offering start to get thrown around. A security token offering is both similar and vastly different to the initial coin offerings (ICOs) that exploded in popularity in 2017 and 2018. Due to the differences in these types of offerings from a regulatory standpoint, the methods used for both ICO and STO marketing will need to change.
While both offerings use blockchain technology, the actual purpose and use of the tokens created differ greatly. You can learn more about the differences between ICOs and STOs in our blog here:
Why Should An STO Marketing Strategy Be Any Different?
The wild west that was the ICO market saw companies raising funds through essentially crowdsourcing. This made marketing and promotion an essential part of the fundraising process for an ICO, as the more people who knew about your project, the greater the chance you had of hitting your funding goals. Things like telegram communities, large twitter followings, and endorsements from influencers, all helped to convince the mass market to invest in ICOs. However, one important difference between the ICO and STO model makes marketing an STO a completely different animal.
Countries around the world have created policies that limit who can purchase private securities. The U.S. policy’s set out by the SEC are the most commonly looked at for guidance in this area. While some jurisdictions are more lax in terms of their registration processes, the U.S. tends to set the standard when it comes to financial regulations. While STOs are relatively new, there have already been a few that have been completed, and nearly all of them were registered under Regulation D, which among its other restrictions only allows accredited investors to participate. Furthermore, only a specific type of issuance titled Rule 506(b) allows for any type of promotion of the offering to the public.
With only accredited investors allowed to participate in most Security Tokens, the mass market strategy no longer becomes an option. General Solicitation, the formal term for advertising a security issuance, is allowed under these regulations, but that doesn’t mean a massive advertising campaign will allow you to reach your goals. STO marketing should focus specifically on reaching only the accredited investors who are actually capable of participating in the offering. w
Channels for STO Marketing
While Chainplus specializes in marketing specifically to the Chinese market, our team has a diverse background from markets around the world. This blog will focus on the more general channels for STO marketing around the world. We’ll have a follow up blog with a more China focused STO marketing strategy coming out shortly after this one.
As with any marketing strategy, your STO marketing strategy should start with thinking about who your target audience is. While accredited investors already narrows down your target market, you’ll need to think about your ideal investors and what channels you’ll be able to reach them through. Just reaching them isn’t enough though. Since the crypto space has attracted quite a bit of negative publicity you’ll also need to focus on building trust. Security Tokens might be more regulated than ICOs, but they are still what most would consider a risky investment. To entice accredited investors into taking the plunge and investing in your offering you’ll need to demonstrate why they can trust you with their capital. Your STO marketing strategy should focus on both reaching your market, educating them about your project, and building trust in the project’s ability to generate returns for investors.
*As a disclaimer, the methods below are only for offerings that allow general solicitation or advertising to accredited/professional investors. Be sure to check with your legal counsel to ensure that your offering is compliant before attempting any of the following marketing tactics. Also if possible try to mention that this investment opportunity is only for accredited investors, to further ensure you’re in compliance with regulations. Failure to comply with financial regulations concerning the advertisement of securities can result in serious penalties, including harsh fines and even jail time.
1. Events & Networking
Attracting investment from accredited investors often comes down to in-person meetings and utilizing existing relationships. The best place to meet and start building these relationships often happens at industry related events. Careful research should be done on the attendees for each event that your project is planning to attend. Go on Linkedin and search for hashtags related to the event to see if any potential investors are even attending. There’s nothing worse than spending a ton of money on marketing materials, a booth space, and travel expenses to find out that the audience for the event is completely irrelevant to your goals. Try to ensure that there will be a solid number of family office representatives, venture capital funds, and HNWIs to determine whether going all in on an event is worth it.
Also, don’t jump straight into a hard sell if you meet someone who fits your investor profile. It’s a sure fire way to scare the crap out of them and send them running to another booth. Always place yourself in the investors shoes. The average VC receives hundreds of pitches through cold emails, Linkedin, etc. on a monthly basis. It’s due to this that many investors can get quite defensive when founders immediately jump into a hard sales pitch immediately after introducing themselves. Investors usually invest both in a projects prospects and the team behind it. If the investor actually likes you as person you have a much higher chance of closing any type of deal. Take your time, build the relationship, and you’ll have a much better chance at success.
2. Financial Media & Press Releases
Media plays an important role in almost any company’s marketing efforts. It’s an effective method for increasing awareness, building trust, and creating the much desired FOMO effect among investors. However, choosing the media outlets to work with can vary greatly depending on the type of business and the target audience. When it comes to your STO marketing strategy, you’ll need to consider carefully which types of publications you’re ideal investors read on a regular basis. Press Releases, can be useful for building a search engine presence, and ensuring that there’s at least some information out there about you. Blasting out press-releases to irrelevant news outlets provides limited benefit, but selecting the right publications based on your audience can often have a dramatic effect.
Also consider the format for your media publications. A general post simply explaining the nature of your project is quickly glanced over and forgotten. Try various formats to get readers to spend a bit more time than a cursory glance at your articles. While announcements tend to be the most common format, you can try interviews or analysis on market conditions to further build trust and thought leadership.
Social media seems like the type of tool that wouldn’t be effective for marketing directly to accredited investors. However, nowadays even the smallest investment funds or family offices have social media pages for marketing purposes.
Many Venture Capital firms have incredibly active social media pages. This is because they use social media to build trust in the firm by showcasing achievements and posting updates. While this is standard social media maintenance, social media provides other opportunities for reaching out to accredited investors.
Jumping on similar hashtags, commenting on their posts, or participating in communities that your target investors are active in can all be effective methods for building trust and awareness. Don’t go too crazy though as you can appear desperate if they can’t seem to escape you on social media. All in all you social media strategy should be a bit more nuanced with a higher focus on a specific target audience.
One final note with social media should be the inclusion of influencers. This is a part of social media marketing that many get wrong, because they simply assume due to someone’s fame they’ll get the right exposure. As with all marketing initiatives take the time to check out their audience and see if it’s relevant for your STO marketing strategy. Choose people related to finance, investment, crypto, etc. as these people will likely have a strong following of potential investors for your project. Be careful with your budget in this area though as prices for influencer campaigns have been skyrocketing since the 2017.
Check out this blog for a list of the top influencers in finance as a general idea of people to look for.
Fundraisers/Project Advisors & Direct Outreach
Many compare an STO to not only ICOs, but the more widely known form of fundraising, the initial public offering (IPO). During the IPO process the underwriter of the offering uses their network connections to sell the investment opportunity directly. However, IPOs are usually done by highly successful and well-known businesses, meaning that there’s already high demand for these securities and thus, very little marketing is required.
With STOs the situation is quite different. Many of the companies attempting this form of fundraising are still in their seed-funding stage, oftentimes without even a minimum viable product (MVP). Of course this means that very few people have likely even heard of the company, making STO marketing essential. This makes fundraising through direct outreach and email campaigns much more difficult.
This situation has led to the rise of fundraisers and advisors, who stake their own reputations on projects to promote them directly to investors in their network. These individuals/organizations can be crucial to the success of a capital raise through their unique and closely guarded connections.
Many of these companies maintain databases of accredited investors, high net-worth individuals, and funds throughout the world, making their services invaluable. However, soliciting the services of these companies can be difficult, as they only work with projects that they’ve thoroughly vetted and done due diligence on. This is essential for these companies as they depend heavily on their reputations to make these connections time and time again.
Many projects looking to initiate an STO will likely have someone on staff that can take on this role. If they don’t then getting in contact with these professional fundraisers/advisors should be a high priority. Direct outreach to your target investors is likely the most important part of an STO marketing strategy. However, ignoring the rest of these marketing channels will likely result in a very low conversion rate as there will almost certainly be a lack of trust/FOMO around the project.
Marketing Materials: Make sure that pitch deck/leaflet is squeaky clean
Marketing materials might not be the most important part of a campaign in terms of building awareness/trust, doing a poor job of it can certainly have a negative effect. I’ve seen pitch decks that made me want to vomit they were so bad, and my first thought is do you really want this to be a potential investors first impression of you?
You don’t need to hire a top tier design studio or copywriters to create a pitch deck (although it might help a bit). Take the time to quadruple check everything you get made prior to printing it out. I’ve seen so many typos, design errors, and horrible formatting by this point in my career. if you can’t put the extra effort in to get them done right, you probably shouldn’t be handing them out at all.
Everything you create with your brand on it has an impact to your overall brand image. Silly little mistakes make a project look careless and untrustworthy, which can hinder your efforts to build trust with investors.