Step 22: 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.

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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

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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.

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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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