What Is tZero?
Let me explain tZero Group Inc. directly: it's a registered broker-dealer that leverages blockchain technology to securitize interests in companies looking for private equity. You can use it for trading and investing services. Originally, tZero was built as a cryptocurrency exchange to create a trading platform for security tokens from companies seeking funding, aiming to add legitimacy and oversight to initial coin offerings (ICOs).
tZero spun out from Overstock in 2021, and it shut down its crypto exchange services in March 2023. Now, the company focuses on providing private equity blockchain and security token services for businesses raising capital from private equity, accredited, and retail investors.
Key Takeaways
Here's what you need to know: tZero operates as a private equity firm offering blockchain tokenization services for companies raising capital or modernizing their capital structures. It began as a cryptocurrency exchange but reorganized into a private equity services firm and exchange in 2023. One of its main goals is to democratize access to private equity, which is a growing trend as smaller investors get pushed out by institutions and large venture capital funds.
tZero History
tZero originated from Overstock.com's efforts to develop a blockchain technology called Medici, starting in 2014. This was meant for Overstock and other businesses to sell cryptocurrencies, but it was abandoned in 2018. In December 2017, tZero started selling Simple Agreements for Future Equity (SAFEs) to accredited investors—these are convertible instruments that let companies raise capital outside traditional markets, with features like convertible notes. According to its SEC filing, tZero aimed to raise $250 million.
tZero built a cryptocurrency exchange for trading securitized tokens and got approved by the SEC as an Alternative Trading System (ATS), which is a regulated exchange matching buy and sell orders via computer. Companies could use its blockchain platform to raise funds, and investors could find opportunities there. After regulatory challenges, tZero shifted to become a facilitator for democratized private equity, shutting down the crypto exchange in March 2023.
Private Equity Issues
Startups often struggle to source funds and turn to venture capital or private equity firms. The market is dominated by large firms and wealthy individuals, leading to issues like capital centralization—businesses that don't fit specific criteria miss out on funding. Smaller investors also get crowded out of good deals by bigger players. To counter this, smaller firms have started pooling resources to compete, giving rise to democratized private equity. tZero developed its system and blockchain to tackle these problems directly.
Blockchain and Private Equity
tZero's blockchain system securitizes interests in startups or other companies seeking capital and offers them on a platform for anyone to invest. This gives companies access to pooled capital through security tokens, bypassing strict requirements from venture capitalists, like board seats and decision-making rights. tZero provides tokenization services for businesses and runs a digital security trading platform for individual and accredited investors, linking investors with funding-seeking companies via blockchain.
The Future of tZero
tZero's services target investors wanting access to early-stage or private funding businesses, which are often cornered by those with massive capital and influence. Private funding is crucial for growth, but not all businesses appeal to large venture firms. Smaller investors are pooling funds and raising awareness, and tZero's model simplifies connections, bypassing the centralized private equity system. We'll see how it plays out, but tZero is addressing a key gap with its trading platform and tokenization services.
What Blockchain Is tZero on?
tZero lets companies choose the blockchain for tokenization—you have options like Ethereum, Tezos, Algorand, and others.
Is tZero Owned by Overstock?
tZero spun out from Overstock in 2018 and is now part of its parent company, tZero Group Inc.
Can You Invest in tZero?
As a broker, tZero offers blockchain and trading services to invest in other companies. Its parent, tZero Group Inc., trades in over-the-counter markets.
The Bottom Line
tZero is a blockchain services company with a trading platform that connects investors and companies of various types. You can use it to offer digital shares of your company via blockchain or to invest in and trade digital securities on its platform.
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