STOs: The Quiet Blockchain Revolution


In a galaxy far far away, a space MMO game turned to an STO (Security Token Offering) to raise capital. So far Pixelmatic’s Infinite Fleet has raised USD 7.8m in funding through STOs. While crypto currencies and NFTs have stolen the limelight, STOs quietly promise to revolutionize capital raising for smaller companies.

What is an STO?

Security Token Offerings are the blockchain version of an IPO (Initial Public Offering). Instead of issuing share certificates with records kept by a central registry, companies issue digital tokens with smart contracts, which are stored on a blockchain.


Unlike an ICO where investors receive a crypto coin, with an STO, investors receive a digital financial security. These securities are recognised by a growing number of jurisdictions, including the US, EU, Switzerland, and Singapore. Most Security Tokens provide investors with a share of revenue or profit.

Why STOs? 

IPOs are expensive with underwriting fees in the millions. Then there is the cost and requirements for the prospectus and listing. IPOs also take time to prepare. While preparations typically take around six months, they can drag on much longer.


Given the burden of IPOs, many companies have remained private for longer or have taken the cheaper SPAC route to listing. In 2021, the proceeds from US SPACs reached a record USD 162.5 billion. SPACs (Special Purpose Acquisition Company) are like a backwards IPO. A SPAC creates a listing and raises funds, and then acquires a private company to go with its listing.


However, SPACs are out of the reach of many smaller companies. Until recently, these companies have had to rely on private debt financing or family, friends, and fools.


This all changed under the Obama administration. In 2012, Obama introduced the American JOBS Act, which among many other reforms included an exemption from registration requirements for public offerings (Regulation A) for companies looking to raise USD 75 million or less in a year. Regulation A made STOs possible. Suddenly, small companies could raise capital from individual non-accredited investors.


Apart from cost, STOs also have a number of other advantages over IPOs. They have the transparency of blockchain. The rights of Security Token holders are enforced automatically by smart contracts with no need for a middleman to provide registry services. Security Tokens can also be traded 24/7 and can be traded for crypto currencies using an atomic swap so that the security and funds are exchanged simultaneously. Security Tokens also allow for fractional ownership just like Bitcoin does – no need for stock splits.

What has been their impact to date

In May 2021, the first SEC approved STO was issued along with the first UK FCA approved STO in October 2021. As of September 2022, the market capitalization of all issued STOs was over USD 19 billion. While this is only a fraction of the annual value of IPOs and SPACs, STOs have shown that they are a viable capital raising alternative and will only continue to grow in amount and sophistication.

Case Study: Infinite Fleet

When we say that STOs have opened up capital funding for smaller companies and startups, this includes many companies that traditionally would have struggled to get the attention of big individual and institutional investors. This includes gaming studios.


Pixelmatic is a gaming studio founded in 2011 by industry veteran Samson Mow. Mow had previously worked on titles like Age of empires IV, Assassin’s Creed, and Warhammer 40k: Dawn of War – Dark Crusade.


In March 2021, Pixelmatic released its sci-fi space fleet MMO game Infinite Fleet into alpha release. It is now in beta release. The game is published by Exordium Limited and was created using Unity.


In Infinite Fleet, players take control of a fleet of starships and small AI-controlled fighters to explore a vast procedurally generated galaxy and defend humanity against an invading alien threat, the Atrox. The graphics and gameplay are reminiscent of 1980s anime such as Space Battleship Yamato.


While the initial narrative has been set, players can drive the future narrative through Infinite Fleet’s innovative Directed Narrative feature.


In addition to its gameplay, Infinite Fleet is also pushing the boundaries of innovation on the blockchain front with its in-game crypto currency INF and NFT-based spaceships and mechs. Players don’t need to bother with INF or NFTs to play the game but for those who are interested, players earn INF simply by playing the game and completing missions –  Proof of Participation.


Exordium Limited also decided to use an STO to fund the development of Infinite Fleet and its publishing platform – becoming the first game-project to use an STO. It has issued non-voting equity with profit sharing from its publisher Exordium Limited (ticker “EXO”) using Security tokens registered with the CSSF (Luxembourg) and falling under the SEC Reg D 506c exemption (accredited investors only). So far, it has issued EXO over three separate funding rounds (each oversubscribed) and has raised a total of USD 7.8m.


EXO has attracted some big investors like Charlie Lee, the founder of Litecoin. But it has also connected Infinite Fleet to individual investors looking for something different to the normal stock and also to fans of the game. This is blockchain empowering the player, not just treating them like a cash cow.


“In a world rapidly moving from archaic traditional financial systems to open digital financial systems led by Bitcoin, we believe we are steps ahead in this transition.” Samson Mow.

Final thoughts

STOs open up a whole new universe of investors for companies like Exordiumallowing them to concentrate on what they are best at: creating awesome games. Similar to how the advent of the stock market revolutionized manufacturing and railroads, Security Tokens are going to democratize and revolutionize creative and Web3 companies. It is funding for the blockchain era.

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