How Startups Can Use NFTs to Raise Funds in Web3

The 7 nations of the East African Community (EAC) are set to launch a common regional bank in 2023, part of a road-map to having a single currency in the next 4 years.

East Africa Community (EAC) to set up regional central bank in 2023.

The Central Bank of East Africa will be key to implementing a single currency for the region in about 3 years pic.twitter.com/dPvEXkNoJy

— BitKE (@BitcoinKE) January 16, 2023

This is according to EAC Secretary-General, Dr Peter Mathuki, who said ministers from the respective nations are meeting to discuss the location of the East African Monetary Institute – the Central Bank of East Africa

“The EAMI will be in place this year in what will allow us to harmonize member states’ fiscal and monetary policies, then in about three years we will have a common currency in place.” – Secretary General, EAC

EAC has long envisioned creating the common currency to boost trade and movement of persons in the community and has already established a customs union and the common market protocol.

The organization, headquartered in Arusha, Tanzania, has also announced that trade within the region was increasing standing at US$10.17 billion by September 2022.

Here is the list of EAC member nations:

• Kenya
• Uganda
• Tanzania
• Rwanda
• Burundi
• South Sudan
• Democratic Republic of Congo (DRC)

“The intra-EAC trade, accounting for imports and exports in the 7 EAC Partner States, grew from 13% in 2019 at a value of $7.1 billion to 15 % in 2021 at a value of $9.5 billion. By September 2022, the EAC trade value was recorded at $10.17 billion representing a 20% share of Intra-trade to global trade.”

Dr. Mathuki disclosed that EAC’s total trade with the rest of the world stood at $62 billion, adding that there was still room for improvement.

In April 2021, the community secretariat indicated that it was consulting on the feasibility of a CBDC as it sought enhancements for the upgrade of the East Africa Payments System (EAPS).

The potential for a CBDC is expected to end reluctance by the member countries to trade in each others’ currencies given that the goal for a singe currency was expected in 2024 but experienced challenges in implementation.

On the EAC Political Federation, Dr. Mathuki said that national consultations for the EAC Political Confederation have so far been held for the Republics of Burundi and the Republic of Uganda.

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While the era of NFT’s exchanging hands for expensive fees seems like a different time now, the NFT technology has always been attractive for more than one reason.

NFTs are cryptographic assets that hold metadata and identification codes hosted on a blockchain. Unlike fungible tokens, NFTs cannot be exchanged or used for commercial transactions, and cannot be replicated.

As such, NFTs can represent anything from the physical world on the blockchain, with examples such as individual identity, property rights, artwork, and real estate.

However, besides trading and speculation, the NFT sector remains a promising sector experiencing a wave of innovation from all corners of the world.

The idea lends itself to many interesting use cases:

NFTs in Equity Fundraising

One of the major innovations when it comes to Non-Fungible tokens (NFTs) is the use of purchasing stocks at companies, or in the same way venture capitalists acquire equity and invest in startups.

An example of this in action is by Orbeon Protocol which has built a kind of blockchain investment platform. This lets startups raise capital from investors rapidly whilst also connecting with the Web3 world where users can access other services, including a decentralized exchange.

Startups seeking to raise funds can use such protocols to mint fractionalized, equity-backed NFTs as a form of investment and these NFTs can be purchased from as low as $1.

For the start-up companies in question, using NFTs in this way significantly reduces fundraising costs and it allows them to be in direct contact with their backers.

How it Works

Let’s say a start-up company wants to raise $100K.

They will use a service that offers NFT fundraising which will then mint 10,000 equity-backed fractionalized NFTs, each representing a $10 investment in the start-up. These NFTs can then be bought, sold, and even staked on decentralized platforms by other crypto users and on exchanges. 

In the case that a start-up does not meet its funding goals within a pre-agreed timeframe, investors can get a full refund, depending on the platform they are using  This practice is devised to take guesswork out of the equation and enables investors to only invest in solid companies that receive sufficient backing.

Bottomline

The application of NFTs in startup investing is a relatively novel idea that has yet to pick up pace.

However, after the decline in sales of traded NFTs in 2022, people may begin to take more interest in the other ways to apply NFTs besides just purchasing art pics.

Using NFTs in startup investing is therefore one of the more interesting applications with the potential to truly democratize and revolutionize how we invest in companies.

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