Step 21: Selecting the Type of STO Offering

Mandatory

Choosing the right structure for your Security Token Offering (STO) is crucial to aligning your fundraising strategy, investor expectations, and compliance requirements. This step helps issuers determine how the offering will be structured, including whether it will be a continuous sale or have a fixed total raise amount with a set duration. The decision impacts funding goals, investor participation, and liquidity planning. Properly recording these parameters ensures transparency and smooth execution throughout the offering process.

Types of STO Offerings

Continuous Offering (Open-Ended Fundraising Model)

  • The STO remains open for investment over a long period, with no set total cap on funds raised.

  • Investors can purchase tokens at any time within the offering period (e.g., 6 months, 12 months).

  • Ideal for projects that want ongoing capital inflows, such as tokenized funds, real estate projects, or revenue-sharing models.

Total Raise Amount Offering (Fixed Fundraising Model)

  • The STO has a hard cap, meaning it stops once the predefined funding goal is reached.

  • The offering has a set duration (e.g., 1, 3, 6, or 12 months).

  • Well-suited for tokenized equity, fixed-asset investments, or limited-scope projects.

Soft Cap Offering (Milestone-Based Fundraising Model)

  • Funds are raised in stages, with a minimum required soft cap (e.g., $5M must be raised before funds can be used).

  • If the soft cap is not met, funds may be returned to investors or offering terms may be adjusted.

  • Used when issuers need minimum funding milestones to ensure project viability.


Differences Between STO Offering Types

Feature
Continuous Offering
Total Raise Amount Offering
Soft Cap Offering

Fundraising Limit

No fixed cap

Fixed amount

Minimum milestone

Investor Entry

Anytime during the offering period

Until cap is reached

Until soft cap is met

Duration Options

6, 12 months+

1, 3, 6, 12 months

1, 3, 6 months

Best For

Ongoing funding projects

Fixed capital needs

Funding stages with milestones


Why This Step is Important

  • Defines Fundraising Strategy

    • Issuers can plan their capital inflows based on their funding needs and investor demand.

  • Impacts Investor Participation

    • Investors must understand whether they can join anytime (Continuous) or only within a limited window (Total Raise / Soft Cap).

  • Ensures Flexibility or Security

    • Some projects need a steady flow of capital, while others require a fixed upfront amount to launch successfully.

  • Affects Offering Timeline

    • Determines when the offering starts, ends, and if funds are locked.


Actions

  1. Choose the STO Type

    1. Decide if the offering will be Continuous, Total Raise, or Soft Cap based on project needs.

  2. Set the Offering Parameters

    1. Define the total raise amount, duration, and start date.

    2. If using a Soft Cap, specify the minimum amount required before funds are allocated.

  3. Record Offering Details as Metadata

    1. Store the details in the smart contract for transparency and investor reference.


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