Accountants, lawyers, bankers, bookkeepers, and VC firms: these are just some of the intermediaries and support staff that are needed to allow private startup companies to take on private investment in their early stages (Pre IPO). This incurs a lot of overhead and lead time, and can completely price out some types of investor from getting in on the ground floor of the next Uber or Palantir technologies. Even platforms like Kickstarter fail to give anything close to the amount of legal protection to the investor that legit private investment should offer.
This results in a situation where nascent companies have limited access to cash and investors have limited access to promising investments. The only people profiting from this setup are the middlemen who tick the bureaucratic boxes for high fees.
A new blockchain startup, OnPlace, is building a platform to use the transparency, security, and details of decentralized blockchains to eliminate the need for manual input and allow more people to privately invest in more companies.
Protocols for investment
OnPlace uses their PATS token to power their system and grants complete and legally binding shares of a company to investors. The token “will allow the community of investors to make decisions in a decentralized manner in regards to the further distribution and motion of tokenized assets. The use of the protocol will mean that each decision in connection to transactions over tokens will be recorded in a network with its own blockchain and will not be subject to change,” according to their whitepaper.
The importance of a fluid market
The lack of a marketplace where startups can access private funding easily is of great detriment to the industry. By virtue of power-law dynamics, only a small percentage become successful, making a diversified portfolio important for investors. As the OnPlace team said:
“The reasons for these are simple – the same economic laws operate in a world of crypto-currency venture investments just as in the sphere of traditional classic startups: 90% of all beginnings are going to be closed because of a number of reasons such as; lack of financing, absence of necessary experience and skills in the team, while sometimes just the irrelevance of the product or service in the market.”
But if there is access to fewer companies, there will be less opportunity to diversify. So the OnPlace market could change investing completely – imagine being able to buy private shares as easily as buying Fortune 500 stocks? This is only possible with automation and digitization of shares.
The team elaborated on the life cycle of an investment project, wherein their token is “a protocol created by the OnPlace team, which allows investors (the holders of issued tokens) to monitor and control operations over tokenized assets. After completing the project selection stage OnPlace legislates legal preparations
and develops an agreement, within the limits of which property rights over a part of private company shares (an underlying asset of a token) are transferred to future holders of the created tokens.”
The PATS token sale is currently underway.