Equity
crowdfunding has a large and growing base of global supporters and advocates.
Every few months we see new developments in securities-related legislation, and
activity kicking off in countries around the world that are advancing
crowdfunding for businesses.
On
the flip side, equity crowdfunding has also had a host of angry or concerned
detractors- some of which are in the angel establishment.
As
the CEO of Crowdfunder, and a significant participant in the JOBS Act
legislation effort over the last 2 years, as well as a catalyst for the growing
equity crowdfunding movement in Mexico and other global markets… I’ve heard,
and considered both sides.
In
hearing how wide the perspectives vary on crowdfunding, I’m reminded of a great
pearl of wisdom about human behavior and history, from the German Philosopher
Arthur Schopenhauer:
All
truths pass through three stages. First, it is ridiculed. Second, it is
violently opposed. Third, it is accepted as being self-evident.
Is
Equity Crowdfunding Coming To Mexico?
Crowdfunding's
Future: Local Online Ecosystems
Investing
online, and a more collaborative means of funding early stage ventures, is an
idea whose time has come. And it’s not surprising that crowdfunding, as a new
and disruptive way of fundraising for businesses, has been evolving in the
public eye through this process Schopenhauer described.
If
you recall, crowdfunding was ridiculed by a vocal few since the first Bill that
would enable it was introduced in the U.S. House of Representatives in November
of 2011, and subsequent to that we’ve seen some opposition.
Today,
the opposition to crowdfunding, and more broadly investment online, appears to
have subsided significantly. Two recent No Action Letters from the SEC have
also set a precedent for crowdfunding with accredited investors, and with that,
there are already investment offerings currently being represented online to
accredited investors behind the walls of private communities/networks like
Crowdfunder.
As
more and more deals close through online networks with accredited investors…
I’m confident we’re nearing the point of it being self-evident that investing
online is shaping the future process for early stage venture investing as a
whole.
*Important
definition: By crowdfunding, I mean investing facilitated via an online network
with a collaborative and social process. While some hard-nosed formalists
strictly define crowdfunding to mean investing exclusively with non-accredited
investors, crowdfunding to me and most in the industry, means any investment
done through an online network, whether with accredited or non-accredited
investors.
Tapping
Angels In The Crowdfunding Process
Experienced
angel investors and angel groups have a key leadership role to play in
crowdfunding. One that can be a big strategic win, if they play their cards
right.
Some
angels and angel groups get what that opportunity is. Some don’t, and they’re
still stuck thinking that their established process is the only game in town.
I
think the latter groups of angels are in for a big surprise over the next 6-18
months, and beyond, as software continues to eat the world, and with
crowdfunding starting to eat the world of early stage venture finance.
Now,
it may sound like I’m throwing angels under the bus here. But I’m not. I
believe angels can play one of the most critical roles in the process of
investment fundraising and crowdfunding online.
Here’s
how…
(By
the way, to pay attribution here where it is due, some foundational inspiration
for the thinking and process below came from angels I’ve been speaking and
working with in recent months, most notably Brian Cohen, Chairman of the New
York Angels and author or What Every Angel Investor Wants You to Know: An
Insider Reveals How to Get Smart Funding for Your Billion Dollar Idea.)
At
present, companies can connect with Accredited Investors online to further
their investment fundraising goals. The top 10 crowdfunding sites like
Crowdfunder.com, AngelList and CircleUp are already allowing these kinds of
introductions and connections to be formed, helping startups and small
businesses close their deals.
Some
of the fears or concerns of crowdfunding opponents have been that people will
lose money, have a hard time doing diligence and “picking winners.”
That’s
precisely where angels and angel groups come in.
In
the future, many of the best crowdfunding rounds of investment can and will be
“led” by an angel, an angel group, or a seed stage fund. Meaning… the needed
screening and due diligence to decide which company warrants investment by
others, and across a funding platform can and is being done, in part, by
experienced investors themselves.
Not
only does this make for a potentially better quality ‘filter’ for which deals
are to be crowdfunded, but it can also yield strategic benefits for the angels
who decide to get in the game, including easier syndication of deals.
While
some in the investing world have thought of crowdfunding as the “wild west,”
where anyone will be able to go out and try to raise funding online, that’s not
the world we’re seeing and not what we’re doing at Crowdfunder.
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