A true 2014 retrospective won’t come out until around the end of Q1 2015, and there is a relative vacuum around credible data for equity and debt crowdfunding. So I will make this post short in anticipation of a more thorough post in a couple months.
There are in my opinion, at least three things we need in the US to help augment the growth of crowdfunding while we also ensure reasonable degrees of protection for both investors and entrepreneurs.
- Regulatory clarity. I know what most of you are thinking, We need more laws and regulations like we need another leaky hole in our collective boat. State and federal regulators are not all bad guys, however, and the intent here is to provide clarity around existing regs, not creating new and exciting versions that will, themselves, require future clarity…. There are at least two reasons why we are seeing heated debates around these issues: self-interest of existing financial institutions threatened by changes, and timing to allow what is a relatively complex issue to settle much of the snags out before ink is put to paper.
- Credible Big Data Analysis. There really are no good sources for crowdfunding data in the US and abroad. It is a multibillion dollar industry, and public reporting of monies raised is very limited. I am not suggesting we add this as fuel to the regulatory fire (see leaky holes note above), and yet credible sources are lacking. There are some financial groups and crowd watch organizations that provide infrequent but useful intel. But the investment community needs something more reliable. I am no more supportive of a single source than I am regulated sources, but you get the idea.
- Crowd Education. Two kinds of education are sorely needed and neither have found much of a home yet. We need to educate entrepreneurs how to establish successful crowd funding campaigns (a theme that you will see in some of my Q1 2015 series of posts and future white papers) and we need to educate investors why and how to select crowdfunded companies as viable investments. The fact that worldwide this is a hypergrowth sector does not mitigate the need for education, it exacerbates the exposure. Lots of people are engaging in crowdfunding efforts and this is a good thing. But we need to make sure that they are being educated along the way. We have learned a lot since the dotcom bubble burst and should be wary as we ride this train into our future.
Dr. Rickel is a Senior Advisor at RAZR with executive experience across multiple industries. Member of CFIRA, NLCFA. Todd can be reached at $Doctor@razr.com.