Technology in capital formation and its synonyms are topics that are receiving a lot of attention in these days. Not only because the technical advances and features transformed (and still transforming) the ways companies get capital to fund their business. Let’s talk more about it.
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What is the role of technology in capital formation?
It is no trade secret that technology has played a pivotal role in transforming everything – from business operations to consumer behavior. And capital formation is no exception to this rule. Capital formation is the net capital accumulation for an entity over an accounting period.
When you think of how technology supports the discovery or improvement of products and services or the process of creating the same, it becomes evident that it has close linkages with capital formation too. The correlation is that technology offers capital formation a boost.
On the other hand, economic progress also creates favorable conditions for the growth and consolidation of technology. As such, they form a win-win relationship that promotes overall development.
Technology’s impact on capital formation
Taking this into consideration, let’s delve into how technology is revolutionizing the process of raising capital online.
In the next topics, we will explore a practical framework regarding the different details that involve this subject.
On that note, here is a look at how technology is transforming online capital formation.
Artificial Intelligence, or AI, is a major catalyst in transforming online capital formation. For starters, AI-powered engines can crunch high volumes of data to perform a 360-degree analysis of potential investment opportunities and personalize the results based on the investor’s goals. Such AI-based data analysts can work with structured and unstructured data or identify patterns that human analysts could miss out on!
Similarly, AI frameworks can predict the estimated cost of capital and the corresponding revenue with nearly 100% accuracy. These predictions remain reliable as every variable is accounted for.
Just like AI, automation is disrupting online capital formation in more ways than one. In manufacturing, automation is the secret ingredient that injects efficiency into processes and increases production value.
For investors, it is the medium for seamless onboarding and document management. Pair it with deductive technology like AI/ML, and you will have a self-sustaining, automated platform to track and manage capital in real-time.
There’s just so much potential here. By adopting automation the entire sector can operate with the assurance it is compliant with securities regulators and transparent with the entire ecosystem supporting online capital formation.
Digital securities or security tokens are blockchain-based financial instruments. They are the digitized form of traditional securities like stocks or bonds and are issued and traded on blockchain networks.
Despite such similarities, digital securities possess greater advantages than their traditional counterparts. They are far more transparent, efficient, and secure. At the same time, they also offer greater liquidity as they can be traded 24/7/365 on the global markets with great ease.
Digital Securities is important to have vibrant private capital markets. Digital Securities allow the opportunity to instantly settle and validate where this process would take weeks and months.
Digital Securities do need to be 100% compliant with the securities regulators if not then there is no value in placing any of the securities on a blockchain technology with the expectation that the investor will be able to transact.
Online Capital Formation Platforms
Online capital formation platforms are offering entrepreneurs the opportunity to connect with the global investor base. As such, it comes as no surprise that crowdfunding platforms have become insanely popular of late, especially since the entrepreneurial drive is currently at its peak.
In addition to granting entrepreneurs access to a larger pool of potential investors, crowdfunding platforms are also emerging as the medium for entrepreneurs to connect with experts. Thus, it is gradually eliminating any barriers for an excellent idea to gain wings.
Digital identity verification
Online capital formation hinges on digital identity verification to ensure that only credible investors gain access to the capital market. At the same time, it also helps establish the accreditation of investment opportunities.
As such, it can make use of specific identity markers to securely and reliably verify details. There are millions of potential investors and if they do not have a passport that is fully compliant and verified by a regulated stakeholder, the friction these investors face will be the major barrier for online investing.