Fairmint, a decentralized finance (DeFi) startup, has launched a platform that lets users invest in startups based on their revenue performance.
The San Francisco-based firm has been developing the platform for over a year and raised a $1.2 million pre-seed round from Boost VC, IDEO CoLab Ventures, TinyVC and others last May.
The platform was designed based on a new fundraising model for startups, named Continuous Securities Offering (CSO), that expands the potential investor pool from founders, VCs, and employees to anyone to give these investors exposure to companies’ future revenues.
“CSO is this new financing model that we are pushing because its much healthier than venture capital or than ICO. ICO was way too founder-friendly. Venture capital is too investor-friendly. So the CSO model is this interesting balance between the two,” said Fairmint CEO and cofounder Thibauld Favre.
How it works
Specifically, a company looking to raise money through a CSO will first commit to putting a certain percentage of its future revenues into a reserve (held in escrow) for a set period. Investors on the Fairmint platform can then buy claims to the reserve, represented by ERC-20 tokens.
The initial price of the tokens will be calculated based on the size of the reserve by an algorithm. Investors can then trade these tokens via decentralized exchange Uniswap and the price will subsequently be determined by market demand. They can also choose to redeem these tokens from the company, and the redemption price will also be calculated based on the reserve and change as the reserve size fluctuates.
Each CSO will last for a period of time set by the company. During the period, investors can continuously trade these tokens based on their confidence in the company and their prediction of its future revenues.