Crowd for Angels, a London-based crowdfunding platform, recently listed the first STO backed by sports sponsorship assets. The security token issuer, Sports Investor Coin, claims that most of the funds raised via the sale of its tokens will be used to purchase sports sponsorship assets, thus creating token value for investors and providing sports organizations with liquidity borrowed against future sales of their brand assets.
Sports sponsorship assets are used to promote other businesses and their brands. Examples of these assets include the decal space on a race car, the naming rights to a stadium, and team partnership agreements (e.g. ‘official sports drink’).
Sports Investor Coin tokens will be sold through existing sports sponsorship asset networks at first, and through token exchanges later. A percentage of profits will be returned to token holders as dividends issued via smart contracts.
A regulated platform for selling equity, debt, and tokens
Crowd for Angels funded its own launch via a March 2018 ICO to become the UK’s first regulated crowdfunding platform for both private and public companies selling equity, debt, and crypto tokens. Crowd for Angels is authorized and regulated by the UK’s Financial Conduct Authority (FCA). Companies looking to raise capital can create, build, and manage what is termed a “pitch” on the CrowdForAngels.com website.
Investments are made and capital is raised by way of the sale of equity shares, debt bonds, and crypto tokens.
Most share sales on Crowd for Angels offer generous tax deduction benefits provided by the government to help high-risk, early-stage companies raise equity finance. Crowd for Angels does the paperwork to ensure investors can claim the full amount of tax deductions allowed by law.
Founders selling bonds on Crowd for Angels maintain full ownership of their company. A simple obligation to repay the money borrowed is created according to agreed terms, after which the relationship with the lenders ends. Lenders enjoy high interest rates, while founders benefit from easy to forecast expensing on loan payments that do not fluctuate.
Bonds sold on Crowd for Angels are “high-yield” debt securities issued by companies with no credit rating. Though the convertible loan notes are secured against company assets, this does not guarantee repayment of interest or principal. Bonds listed for sale on Crowd for Angels also carry an illiquidity premium because there is no right to early cash-in as there is no secondary market on which to sell them.
Token sale pitches
Crowd for Angels enables founders and investors to participate in an ICO on a UK-regulated crowdfunding platform. Startups can try to jumpstart and scale their project while paying fees only if their ICO is successful.
How to invest
Individuals and institutions must first register and be authorized as investors on Crowd for Angels. They can then browse pitches, click the pitch summary box to see the minimum and maximum funding targets, the funds raised to date, the pitch’s remaining days, company financials, and team bios.
With equity pitches, the investor can view share price, the number of shares offered, and tax relief eligibility. With debt pitches, investors can view the interest rate, conversion date (repayment schedule), and term.
Once an investor chooses a product, they click “Invest in this pitch” and link a bank account. This procedure acts as only a commitment until the pitch reaches its minimum target.
Investors use their Crowd for Angels dashboard to follow company updates, ask questions of the company and fellow investors on the pitch’s discussion board, and gain private access to the company once fundraising is complete. Investors can monitor their investment performance through the “My Portfolio” tab on their dashboard, including conversion, dividends, and interest payments notices.
How to list
Creating a pitch on Crowd for Angels is a fully online process with no upfront fees. The company creating the pitch fills out an application form with company details, the desired raise amount or range, and details on how the funds will be used. Crowd for Angels reviews the application and replies within two business days.
An approved company the writes the pitch, embeds a video, add team bios, and upload investors documents. Once a pitch reaches its target raise, Crowd for Angels creates the subscription agreement and then collects and delivers the funds.
Crowd for Angels has so far raised several million euros for pitch companies with a combination of equity and debt offerings. It now aims to leverage its regulated status to eventually offer tokenized shares and bonds via a UK-sanctioned STO platform.