Expanding the Utilization of Initial Coin Offerings in the AgTech Sector

Expanding the Utilization of Initial Coin Offerings in the AgTech Sector

In recent months, Initial Coin Offerings (“ICOs”) have grown to account for more startup funding in blockchain-based companies. Rather than seeking funding from traditional angel or venture investors to pledge capital for equity, companies are now looking toward the cryptocurrency sphere to crowdsource the sale and use of their own tokens in an ICO.

ICOs are similar in some ways to a crowdfunding campaign, but one major difference is market value. When a product is introduced on crowdfunding platforms, investors and buyers are aware of what to expect when the product is complete. In contrast, it is very difficult to predict the outcome of an ICO and token purchasers usually only have the company’s white paper as a source of information. That being said, ICOs are gaining popularity because startups are able to create liquidity and growth without giving up equity (in most cases).

Overview

An ICO is a fundraising tool where companies sell digital tokens for the purpose of obtaining public capital to fund software development, business operations, business development, community management, and other related enterprises. A token is a cryptographically secured digital representation of a set of rights. The rights assigned to these tokens will vary depending on the company’s type of business, but can include the right to access and use a network or software application, the right to exchange the token at a later time for another form of currency or a good, the right to share in future earnings of the company, the right to vote on the company’s decisions, and more.

Prior to these token sales, companies issue white papers describing their plans, mission statement, timeframe of the company’s development plans, technical information regarding the utility of the tokens, the underlying technology, information regarding the company’s key players, and how the proceeds from the ICO will be used to meet the company’s goals.

Expansion of ICOs

ICOs are being utilized in multiple industries as a means of raising funds for financial investments, commodity trading platforms, educational services, technology licensing, and much more. One potential application is creating a platform for agricultural and AgTech companies to be paired with investors seeking to invest in that particular industry. For example, a company may be able to tokenize agricultural assets. This could be realized through an online platform where vetted agricultural companies obtain funding by pledging their agricultural assets for tokens.

Using this type of platform and offering would allow agriculture companies to obtain capital to implement and utilize new agricultural technologies to increase yield and profit, and in return for their investments, token holders would receive a share of the company’s profits. Such a platform could assist agricultural companies in embracing the benefits of crowdfunding systems like ICOs.

Furthermore, investors could obtain a reliable assessment of the true condition of the agricultural assets from a technical point of view by developing a set of solutions for an automated and objective determination of the agricultural asset. For example, employing drones, specialized ground-based unmanned vehicles, software for agricultural management, detailed video recording and analysis with geotagging, and online broadcasting will provide token holders with the most objective and complete information about the assets’ condition before and during their investment period.

Conclusion

ICO offerings paired with this type of platform may eliminate the barriers for investors worldwide and provide companies with a unique opportunity to implement new and beneficial agriculture technologies and innovations. The use of ICOs may be exactly what is required to achieve sustainable development and advancement in the AgTech sector and may lead to sustainable global agricultural output.

Disclaimer: This blog and website are public sources of general information concerning our firm and its lawyers, as well as the information presented. They are intended, but not promised or guaranteed, to be correct, complete, and up-to-date as of the date posted. This blog and website are not intended to be, and are not, sources of legal opinion or advice. The materials, information, and communications on this blog and website do not apply to any particular person, entity, or situation, and do not apply to you or to your specific situation. You will need to consult with an attorney and/or other appropriate professional about your specific situation. Thank you.
Jennifer Han
jhan@rroyselaw.com

Jennifer Han received her LL.M. in Taxation from the University of San Francisco School of Law in 2015. She received her J.D. from McGeorge School of Law in 2013. Her areas of focus within the tax practice include corporate transactions, business structure planning, deferred compensation, and federal and state tax compliance. Ms. Han also assists the estate planning team with domestic and international tax planning research. Read My Full Bio

X