Yuser: Funding Startup Growth with Token Issuance?

Yuser Inc. (Yuser) was a young Canadian start-up based in London, Ontario, and focused on developing a gamified media sharing mobile application to help connect businesses with influencers. Yuser’s co-founders had released a marketable version of their app at the end of 2019, and in 2020, the company had nearly exhausted its seed funding. Yuser’s top priority at this time was to secure outside funding to grow the company fast without breaking it. The available options for funding consisted primarily of three sources: venture capital, equity crowdfunding, and token issuance. As each funding option had its own benefits and drawbacks, Yuser’s co-founders had to determine which option or combination of options would work best for their company.

This case is appropriate for advanced undergraduate-level courses and introductory or advanced graduate-level courses in entrepreneurial finance, strategy, and digital business models. It introduces students to the challenges and opportunities of acquiring funding for a start-up. Students must evaluate several funding options for a start-up—traditional venture capital funding, equity crowdfunding, and cryptographic token issuance—analyze how issuing both utility and security tokens adds value, and determine which type might be best suited for a particular company’s business model; and finally, understand how a start-up can respond strategically to regulatory uncertainty around token issuance. After working through the case and assignment questions, students will be able to do the following:<ul><li>Outline the value of funding start-ups through token issuance, which may fill a void in traditional methods of start-up funding such as venture capital funding and banking loans.</li><li>Identify the benefits and costs of three different funding options for start-ups. </li><li>Consider the fit between a start-up’s strategy and its choice of funding options to determine whether one funding mode better meets its strategic orientation and business situation than others.</li><li>Describe key considerations for entrepreneurs issuing tokens for funding, and explain how a start-up’s token issuance can be implemented and how regulatory uncertainty around token issuance should be addressed.</li><ul>

• token issuance
• cryptocurrency
• blockchain
• venture capital
• entrepreneurial finance