Via A. Pomp’s newsletter…
The first well known crypto project has finally filed for a regulated token sale to unaccredited investors via Regulation A+.
Blockstack, an internet for decentralized applications, has been building their company for 5+ years and is backed by Union Square Ventures, Lux Capital, Foundation Capital, and many other high profile investors. As the company has continued to gain traction, they have used a number of unique fundraising methods to finance their operations, while trying to remain regulatory compliant.
The most recent financing strategy revolved around two separate buckets of $50M investments. The first bucket was contributed by venture capital funds and professional, accredited investors. These investors bought a token through a Regulation D exemption offering, which looks similar to how many regulatory compliant ICO or SAFT sales were executed.
The second bucket of $50M investment was spoken for by unaccredited investors. Due to regulations, Blockstack couldn’t collect any money from these investors without violating the rules, so the company chose to do something forward thinking. Rather than collect dollars, the company collected interest to invest of a certain dollar amount and gave investors a voucher to potentially lock-in their investment interest. This allowed investors to lock-in their investment interest, while also preventing Blockstack from violating any rules. The vouchers were non-binding, but Blockstack plans to honor them.
This voucher model is proving to have been a smart move for the company. For the last 9 months, Blockstack has been filing private applications with the SEC for a Regulation A+ offering (to the voucher holders). The SEC has then shared private comments/feedback about the application multiple times, allowing Blockstack to continue iterating their work. Finally, the company has reached a point where they believe they can satisfy all of the SEC’s concerns, so they have chosen to publicly file the Regulation A+ token offering application today (~500 page document).
Historically, reputable companies only file the public application once there is a high likelihood that they will gain approval from the regulatory body. If Blockstack is successful here, they will become the first token issuer to conduct a token sale in a compliant manner under the Reg A+ exemption.
When I asked Muneeb Ali, a cofounder at Blockstack, why they took the nuanced approach they did, he said something very interesting — they believed they could iterate their technology to conform with the existing laws faster than regulators could iterate laws to conform to new technology. In hindsight, this perspective seems obvious, but not many companies appear to have been this thoughtful.
You can read Blockstack’s public filing here.
There is no promise that Blockstack will be successful in this endeavor, but every day we are moving closer to a world where regulators, technologists, entrepreneurs, and investors are able to accomplish their goals in a mutually beneficial way.