Security Token Offerings in the Startup Funding Ecosystem: A Comparison to other Startup Funding Models, and Forecasting STO Adoption

Andras Pal Danyi

Student thesis: Master thesis


The focus of this thesis is exploring the currently emerging startup funding model called Security Token Offering (STO). Startups are becoming increasingly important globally. Often fueling these startups’ growth is external funding, which is available in a variety of forms and sizes. The study is interested in comparing traditional and non-traditional funding models with STOs, and evaluating if primary and secondary data indicate wider adoption of this model in upcoming years. Investigating this question is based on a pragmatic research philosophy, where a mixture of positivist and interpretive philosophies blend. The approach is also mixed, first using a deductive framework to set boundaries for the study, identify what to investigate, compile data and form a hypothesis. Then, a more inductive approach takes over during the primary data collection, analysis, and discussion. The exploratory study follows a case study strategy. Bootstrapping, Angel investments, Venture capital, IPOs, Rewards-based crowdfunding, Equitybased crowdfunding, ICOs, and STOs were identified as important funding models to investigate further in the literature review. After providing summaries on each model, a graph was plotted where STOs were considered to be an ideal funding model for mid-stage startups. Venture capital, Equitybased crowdfunding, ICOs, and IPOs were then identified as potential competitors or substitutes for STOs. These models were compared in a funding model where both startup and investor perspectives were considered, and the hypothesis was formed that STOs appear to be a viable funding model for a large number of mid-stage startups, especially for those who can’t or don’t want to pursue venture capital funding. Primary research was conducted to view stakeholder perspectives in-depth and collect qualitative data which would help forecast later adoption of STOs. The results show a somewhat inconsistent image, yet the general perception is altogether positive. In contrast to academia, more concerns and issues were identified, and STOs were believed to be applicable for a less widespread audience than anticipated, in approximately 2 to 5 years. The study contributes to research by exploring opportunities and concerns relating to STOs from a stakeholder perspective and compares this model to existing ones in a structured way, while also pointing to several areas where future research should be conducted.

EducationsMSc in Business Administration and E-business, (Graduate Programme) Final Thesis
Publication date2020
Number of pages101
SupervisorsMichael Wessel