Part 2: An Interview with Chris Rawlings: Father of the STO

The idea for the Security Token Offering (STO) started in the same place as many others: In a bar. On one fateful Tequila Friday, Chris Rawlings and his fellow 500 Startups “batchmates” were about to begin a rolllercoaster ride  that ended in the successful launch of the world’s first equity-backed security token, 22x – direct from the heart of Silicon Valley.

Chris is a serial entrepreneur and the CEO of the logistics and marketing startup JudoLaunch. He’s taken JudoLaunch through 500 Startups,  Chinaccelerator, and a successful VC capital raise.


Richard: It’s incredible how quickly you did all this. I’m aware of the complexities – all this governance you were talking about, was that in smart contracts? Would you normally have a management company do all of that for the distributions and governance?

Chris: That was one of the toughest things. We knew as founders that we would have to eventually remove ourselves from the management and administration of the fund because there is a conflict of interest. As we represented the equity inside the basket, we also were in charge of the fund and had a fiduciary responsibility to the investors. That is a misalignment of incentives and it could get us into trouble, so we knew we needed a third party – and we went through a wild ride trying to establish that.

We talked to a lot of individuals, funds, companies, and ICO advisory firms until we finally decided to partner with Securitize. They were just starting up, and by the time we approached them it was September or October. They were (and are) building a platform for issuing security token offerings.

We were one of their first; they had four pilot projects. There was, two others, and us. Secuiritze was a platform which people used to issue and take part in security token offerings and automate the payouts and administration.

So we handed over all the responsibilities to them. Now myself, Jake, Sweeney, Justin, Nawar, Kyle, Aziz, and Ruth (the founding team members) handed off the baton, and now we have no ability to control the destiny of 22x at all. Now my official involvement with 22x really just boils down to my company, JudoLaunches, which is one of the companies in the portfolio.

This is from a legal standpoint, but you know of course between then and now we were on a road show – I was in ICO conferences in Miami, Seoul, Tokyo, Hong Kong, Shanghai – all over the place in order to sell this thing and push it… But right now it’s all been securitized back.

Richard: So about the pitching, that leads me to my next question: As you’ve done all this legal compliance, you’ve tokenized the equity, everything so that you can sell this token, how did you actually raise money? Was it ICO investors, was it traditional VC, Angels…Who actually bought it?

Chris: So this is where things went afoul. Let me just ruin the story for a minute and say the punchline first, and then I’ll rewind. So we were targeting a thirty-five million dollar raise for thirty companies, figuring one million per company, and an additional five to cover consultants and fees. This was the concept via the security token offering.

So every company is putting in up to 10% of their equity (assuming a ten million dollar valuation) for a million dollars. That was the original concept. Now fast forward to the future, the fund has closed. Officially it’s done. The amount that we actually raised is close to four and a half.

That is not what you would normally call a success. It went through, but it was nowhere near the amount we targeted. We did push hard on our Securitize platform, we were tracking daily sign-ups and new commitments. Two, three, four hundred new sign-ups every single day and some portion of those committing capital. We had twenty-six million committed at one point.

To answer your question about getting the word out, the main way was through media outlets. It was my first experience for a big PR push. We got mentioned in BuzzFeed, Entrepreneur magazine, and Inc.

Really big publications were starting to write about us and the word was getting out. We were getting registrations from all over the world, three-quarters of which were outside the U.S. One of the things I was in charge of was tracking and following up with the investor base. We had an intern calling every single person who may have committed to help them make their contribution.

What we found was that a majority of them were not traditional Angel investors. We had some, but not a lot. Most of it was from Crypto investors. We got a lot of interest from Japan, so we did a roadshow there. Jake and Kyle went out with our adviser Adam from BreadWallet.

I would say that these road shows are definitely really important, but I don’t think we played it right. It was also very difficult for security tokens. People were scared of them. We fell in this middle road, some Crypto investors viewed us as low-growth because everyone is living in this fantasy world. The future of the new global economy is yet to be determined. Many of these Crypto investors viewed us as too slow growth, too traditional, too boring, and it’s funny because the rest of the world would view seed stage capital as the riskiest investment – but to them, it was too tame. It was too safe.

They wanted to invest in tokens that would – I don’t know, put every apple grown on the blockchain so that “Apple Coin” is going to be the token representing all the apples in the world. They wanted something like that, and we were just regular old equity? There was that, and the Angel investors in the DC world viewed us as too risky because it was completely new. When we were researching to find out who else can we talk to, they didn’t exist. 

Blockchain Capital (Brock Pierce) raised ten million, and they encountered a lot of problems along the way. I think they did theirs the same way we did ours, A Reg D/ Reg S offering. There was also Science Accelerator, which was just launching their ICO while we were forming, and it didn’t look like it was doing too well at the time.

There were just a couple others that Securitize was helping along, was one, but it was really just a handful, like four or five. We were in that group and security tokens were just not a “thing”. People didn’t even use the term. I think we could have done a lot more pitching on what a security token is before offering. In retrospect, that may have helped to do what you’re doing.

The Chris Rawlings, 22x Series


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