And Why Your Company Should Consider it Too
It seems like today, everyone is talking about tokenized securities, i.e. security tokens, as the “next big thing” in crypto. And I would agree, especially when it comes to tokenized equity.
But there are good reasons behind all this buzz about tokenized securities (and tokenized equity). Most important among these, in my belief, is that tokenization enables the democratization of assets.
Tokenization and Democratization
For years, equity has been how we represent ownership in a company, with founders and investors typically maintaining a large majority of this ownership. If and when a company proves to be successful, company owners stand to make the largest financial returns. Yet, company owners are not necessarily the primary creators of value in an enterprise. Often, it’s the employees, contractors, or partners, buyers and sellers in a marketplace, that create this value.
At Izzy Care, we’re a direct-to-consumer, personalized healthcare membership. Through our platform, members have unlimited access to their own dedicated care teams, consisting of a Family Medicine physician, a psychotherapist, and a nutrition & wellness coach. [We also do some pretty cool things with A.I. and blockchain to support our clinicians and patients.]
As such, our clinicians are the primary creators of value for our service, much in the same way that drivers are the primary creators of value for services like Uber or Lyft. Without them, our service, our platform, and our company as a whole would be nothing like what it is today. That is why we’ve made the decision to award equity to all of our clinicians — family medicine physicians, psychotherapists, nutrition and wellness coaches — for all of the incredible, invaluable work they do.
Airbnb recently announced they are interested in offering equity to hosts, who like our clinicians and Uber/Lyft’s drivers, are the primary value creators of the service. We believe that all services of this nature should think critically about how they are rewarding their primary value creators.
As we see it, the easiest (and arguably the best) way to enable this issuance of equity is through tokenization. By tokenizing our equity we will be able to seamlessly award equity to our clinicians for their participation in our platform, and enable our clinicians to become part of the booming tokenized securities market.
How We’re Making this Work in Practice — A Two Token Model
IZST, “Izzy Stock” or “Izzy Security Token”, will be created on Polymath, as we’re confident in the ability of the platform to support our needs, and after speaking with both current and former members of the Polymath team, we are confident in the people behind the platform as well.
We’re also using Polymath for ZERO55.vc, our recently announced tokenized fund for investing in under-represented founders. [Please note: I have no financial stake in Polymath. I merely think it’s an awesome platform and team.]
IZST will represent equity shares in Izzy Care LLC, and as mentioned, be issued to all clinicians on the Izzy Care platform. Tokenizing our equity also affords us the opportunity to do a security token offering (STO) further down the road.
IZZY, on the other hand, has been and will remain the ERC-20 compliant utility token of the Izzy Care platform.
Leveraging smart contracts and healthcare IoT data, we are enabling patients (on an opt-in basis) to earn, or “mine”, IZZY when they 1) meet their own personal health and wellness goals, or 2) securely share their anonymized data with us (to support precision medicine and population-level health insights) or other healthcare institutions (for medical research, pharma, biotech, and more).
IZZY can be used to pay for the Izzy Care membership at a discounted rate, or donated to support life-saving non-profit initiatives like those by our friends at Project HEAL, a non-profit working to fund treatment and support surrounding eating disorders, the mental illness with the highest global mortality rate.
In the near future, IZZY will be used for governance, allowing token holders to vote for protocol changes, helping us eliminate top-down decision-making by healthcare executives, and giving power to the patients and providers who drive the network.
Should Your Startup Tokenize Its Equity?
Think for a moment about who are the primary value creators in the service, product or ecosystem you’re building. Here’s a hint: it’s probably not you, your co-founder, your early hires or your investors.
If you’re like anything like the examples thus far (Uber, Lyft, Airbnb), anything like us, or anything like hundreds of other companies you could name that we haven’t mentioned (freelancing sites like UpWork, marketplaces like Etsy, etc.), there are probably dozens, if not hundreds or thousands, of drivers, hosts, doctors, freelancers, and creatives powering your platform and creating the value in your enterprise.
Think about how you’re rewarding these value creators for their time, knowledge, and expertise. Are you truly compensating them proportionally to the financial returns they’re generating for your company? If you’re honest with yourself, the answer is: probably not.
I’d urge you to tokenizing your equity, and enabling the value creators in your ecosystem to earn equity ownership in your company. Democratize the financial gains across your entire organization — from the founders, to the executives, to the engineers, to the people who truly make the service work.
If you need help figuring out how an equity token model can make sense for your organization, I’m more than happy to help — connect with me on LinkedIn, or shoot me an email. When you’re ready to create your security token, reach out to the team at Polymath!