The Republic Note is a first of its kind profit-sharing token that allows holders to share in Republic Core’s profits when startups and private equities in our ecosystem succeed. It will be available for accredited investors to purchase starting July 16 in an open token sale that capitalizes on Republic’s existing 700,000 members.
The Republic Note, which will launch on Algorand, pays holders when startups and private equities funded through certain Republic investment platforms get acquired or go public. We intend to make payment in stablecoin proportional to how many Republic Notes a holder owns. Beyond payouts, we intend for Republic Note holders to receive investor perks including investment vouchers, waitlist priorities, and other platform benefits across the Republic ecosystem.
Expanding access to private markets
Private markets have been an essential vehicle for wealth creation. Global private equity net asset value has grown 7.5X since 2002, more than double the public markets in that time. But these markets lock out most people -- including over 92% of U.S. households. The reason private equities outperform public markets is simple: high growth starts early. By the time promising startups reach the IPO stage and open the door to retail investors, the exponential growth phase is often largely over. We want to change this by offering a digital security that lets people share in the upside of our success. We aim to make Republic Notes available to retail investors by working to qualify an offering of Republic Notes Reg A+.
How the Republic Note profit-sharing token works
Profit-sharing has long been a goal of many projects in the crypto space, and each shares profits differently. For example, Binance buys back and burns BNB -- thereby limiting supply -- every quarter based on a percentage of revenue. Compound shares its profits by “giving away” a stake in its governance token COMP.
The Republic Note shares profits by tapping into part of the Republic ecosystem’s revenue streams. Republic Core, the issuer of the Republic Note, is the technology company that powers Republic’s private and public investment platforms. In return, Republic Core has the right to receive 100% and 25% of realized proceeds that Republic’s public and private investment platforms (respectively) receive from their upside or securities commissions that they receive in the companies they raise capital for. Once Republic Core receives at least $2 million in related proceeds, we intend to pay out a pro-rata distribution in stablecoins to Republic Note holders. Notably, the Republic Note profit-sharing token is only feasible on Algorand because its low transaction fees and high throughput affordably allow for distributions of any size to a large number of token holders.
To issue this type of digital security we need to ensure we can track and act on Republic Note ownership in order to provide basic remedies to investors as well as mint, clawback, and burn tokens as needed to address a range of regulated situations. The Republic Note framework, using Algorand’s “administrator” capabilities, will afford us the ability to do these things and make sure only those who are permitted to trade the asset can do so.
Making good on the promises of digital securities
Digital securities once promised to turn everyone into a private investor, opening up new asset classes and giving rise to efficient new markets. Initial efforts largely fell flat, but the interest they stirred up underscored a clear market need that was going unfulfilled. The Republic Note aims to capitalize on this opportunity by delivering on some of the core benefits of digital assets. The Republic Note (i) is a true alternative asset not otherwise broadly available, (ii) will be made widely available to the extent feasible, (iii) is structured so as to increase the network effects and incentives contributing to the Republic platform as a whole, and (iv) will live in the open finance ecosystem.
While wealthy venture capitalists and angel investors may have sufficient cash to wait 7-10 years for private investments to become liquid, most people don’t have that luxury. If profit-sharing tokens can shorten the time horizon for retail investor rewards, shared ownership becomes more valuable for everyone. Plus, but the potential for profit distributions itself acts as a strong incentive for investors to evangelize projects and the platform as a whole. In this way, profit-sharing tokens are particularly compelling for revenue-intensive businesses seeking to leverage non-native network effects amongst its customer community.
Already, we have seen a strong response to the Republic Note among institutional investors. Republic Core has pre-sold more than $12 million of Republic Note tokens to industry leaders including Binance, Passport Capital, the Algorand Foundation, Blockchain Ventures, ZhenFund, and FBG Capital. We look forward to continuing this momentum with the opening of the Republic Note sale.
Find out more about the Republic Note here.
Republic Core LLC (“Core”) provides technology and support services to OpenDeal Inc. and its affiliates (collectively, the “Republic Ecosystem”). Republic Note holders and as well as users of the site and services maintained by the Republic Ecosystem, regardless of and their activities on or relating to the Republic Ecosystem, are subject to the applicable terms of service, in their entirety.
Core is currently conducting an offering of Republic Notes under Rule 506(c) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) to persons who are accredited investors, as that term is defined in Rule 501. Only accredited investors are eligible to participate in the Rule 506(c) offering. Accredited investors who wish to participate in the Rule 506(c) offering should receive and review carefully the Private Placement Memorandum pertaining to that offering, as it contains important information for potential investors to consider prior to making an investment decision. Accredited investors who wish to participate in the Rule 506(c) offering will be required to (i) complete a subscription agreement, (ii) acknowledge that they have received and read the Private Placement Memorandum, and (iii) provide information verifying their status as accredited investors.
Core is also “testing the waters” with respect to the sale of Republic Notes under Regulation A of the Securities Act. The “testing the waters” process allows companies to determine whether there may be interest in an eventual offering of its securities to qualified purchasers under Regulation A. Core is not under any obligation to make an offering under Regulation A. No money or other consideration is being solicited for an offering under Regulation A at this time and, if sent, it will not be accepted.
Core may choose to make an offering to some, but not all, of the people who indicate an interest in investing, and that offering may or may not be made under Regulation A. For example, Core may choose to proceed with its offering under Rule 506(c) without ever conducting a Regulation A offering, in which case only accredited investors within the meaning of Rule 501 will be able to buy Republic Notes.
If and when Core conducts an offering under Regulation A of the Act, it will do so only once (i) it has filed an offering statement with the Securities and Exchange Commission (“SEC”), (ii) the SEC has qualified such offering statement and (iii) investors have subscribed to the offering in the manner provided for in the offering statement. The information in the offering statement will be more complete than any test-the-waters materials and could differ in important ways. Prospective investors who are interested in participating in the Regulation A offering must read the offering statement filed with the SEC, when that offering statement becomes publicly available.
No money or other consideration is being solicited at this time in connection with any potential Regulation A offering and, if tendered, will not be accepted. No offer to buy securities in a Regulation A offering can be accepted and no part of the purchase price can be received until an offering statement is qualified with the SEC. Any offer to buy securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance is given after the qualification date. Any indication of interest in Core’s offering involves no obligation or commitment of any kind.