For a very long time, technology startups have had two main exit strategies: Initial Public Offerings (IPOs) and mergers & acquisitions (M&A). However, according to Balaji Srinivasan, the former chief technology officer (CTO) of crypto exchange Coinbase, the crypto world and blockchain technology have opened a new frontier – Security Token Offerings (STOs).
In a post on X (formerly Twitter), Srinivasan explained that at its peak in 1996, there were approximately 8,000 publicly traded companies. Today, that number has nearly halved to around 4,642. This was mainly due to regulatory policies. As IPOs became more challenging, M&A became the preferred route for tech startups seeking liquidity.
From IPO and M&A to crypto?
The tech M&A era may be ending.
But the crypto era could be just beginning.Because the combined effect of new policies is to make it much harder for startups to IPO or M&A, but much easier to sell equity-backed security tokens on the Internet.
Let… pic.twitter.com/t748t1wc9K
— Balaji (@balajis) February 19, 2025
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Regulatory Crackdowns May Boost STO Appeal
This led to high-profile acquisitions like Instagram ($1 billion), Oculus ($2 billion), and WhatsApp ($19 billion), explained Srinivasan. Yet, the regulatory climate has shifted again, with the recent collapse of Adobe’s $20 billion acquisition of Figma due to regulatory intervention.
The justification behind these crackdowns is that limiting M&A promotes competition. But, as Srinivasan countered, blocking large buyouts destabilizes the startup ecosystem by eliminating one of its primary funding mechanisms. The capital that would have been reinvested into new ventures is now being restricted.
STOs: Faster Liquidity & Less Red Tape for Startups – Crypto’s Advantage
Unlike conventional IPOs, STOs allow companies to issue equity-backed digital tokens that can be traded on blockchain-based markets. These offerings provide liquidity while bypassing the restrictive regulatory policies. Srinivasan explained that the current US administration is more open to digital assets which could result in a massive shift in authorities’ stance on crypto.
The former Coinbase executive further revealed:
“So, to my tech friends: yes, the tech IPO and M&A windows may be closed. But the tech STO window could be thrown wide open.”
STOs: The Next Big Financial Instrument?
He believes that if unbacked meme coins can thrive, fully compliant, equity-backed STOs could become the next big financial instrument. Moreover, STOs align with the government’s emerging financial philosophy.
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Plus, STOs provide massive benefits, including cost reduction compared to IPOs, global accessibility, transparency, and allow smaller businesses, not just large tech firms, to raise capital efficiently.
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
