Part 2 (Small Cap & Startups) - Tokenizing Stocks: Why the Multi‐Trillion‐Dollar Shift Is Happening Now

In Part 1 we walked through how bond tokenization cracked open the door for large‑cap equities. Today we’re zooming in on the seismic impact tokenized stock will have on startups and small‑cap companies.

1. Infrastructure Is Already Here – Bonds Paved the Road

Bonds proved that on‑chain assets work: smart‑contract rails, 24/7 liquidity, compliant custody. Once Congress green‑lit the GENIUS Act, the signal was clear—Washington is finally friendly to crypto rails. That same deregulatory tailwind will push the next bill that matters: full authorization for tokenized equities.

Why this matters to founders: the heavy legal lift (and the seven‑figure bill) that tagged along with a traditional IPO? It’s about to shrink—a lot. As long as you handle KYC/AML and accreditation rules, issuers should be able to mint shares on‑chain at a fraction of today’s cost.

2. Two Irresistible Benefits for Private Companies

• Built‑In Liquidity

Your equity no longer needs a buyout, an acquisition, or NASDAQ listing to trade. Mint tokens, open secondary liquidity, and early investors finally have a clean exit path—years before a formal IPO.

• Revenue From Trading Fees

Here’s the sleeper feature. Tokenized‑equity platforms can route a slice of every secondary trade straight back to the issuer. Virtuals has done an incredible job pioneering this approach. 

Case study – Virtuals:

• Projects keep 70 % of trading fees.

• A $20 M market‑cap token with 5‑7 % daily turnover throws off $7K–$10K per day.

• Annualized, that’s roughly $2.5 M—recurring, non‑dilutive revenue generated purely from investor speculation.

When was the last time a stock exchange paid your startup for the privilege of being traded? Exactly.

3. The Paradigm Shift in Startup Financing

Part of every company’s value is the narrative traders build around it. Historically, exchanges captured 100 % of that speculative flow.

Tokenization flips the script:

• Issuers earn alongside hodlers and traders.

• Early backers get smoother exits and fewer lock‑ups.

• Founders can fund operations without new dilution—just by letting the market trade.

Given even modest regulatory relief, VC term sheets will start to require on‑chain equity. Why leave easy, non‑dilutive cash on the table?

4. What Comes Next

1. Congress finalizes a tokenized‑equity framework.

2. First‑mover platforms (Virtuals, etc.) hit escape velocity.

3. Secondary‑fee revenue becomes a standard KPI in seed decks.

4. Legacy exchanges scramble to bolt on‑chain rails—or get left behind.

Founders, the window is open. Capture that speculative upside before someone else writes it into their cap table.

Stay tuned for Part 3, where we’ll dive into the tactical playbook: legal structure, token design, and go‑to‑market strategy for launching your own on‑chain stocks.