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Security Tokens: Some Words of Caution

Last Updated: May 24, 2018 04:12PM CDT

Security Token Offerings can be very attractive for investors and businesses alike – when the business fits the security token paradigm of relatively predictable (timing and magnitude) high gross margin revenues.

 

Many companies that are good candidates for venture capital investment don’t fit that paradigm, and investors and entrepreneurs alike should be careful not to let the attractions of the security tokens – primarily more rapid liquidity, direct periodic monetary distributions, a lack of any equity interest and related pressure for an “exit” event for the entrepreneur – color their analysis of the future performance of the business in terms of size, magnitude and timing of future high margin revenues and profits.

 

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