One of the many reasons I am such a huge proponent of Alternative Finance is the opportunity for innovation, change, disruption and greater efficiencies – all of which means greater returns it brings to venture capital, angel investing and crowdfunding. We are in the middle of the single biggest change opportunity to traditional financial markets in decades.
General solicitation and general advertising were prohibited for the last 30 years. The significance of this single event cannot be easily measured. The simplicity afforded by crowdfunding, whether it be for a “mini-ipo” or Regulation A+ equity raise or a Regulation D lower threshold raise are somewhat monumental. The wide range of new players whether they be the 1,250 new crowdfunding platforms, the analytics and research companies, consultancies or communications companies such as ourselves – which all come with new ideas, new mindsets, new technology visions all add up to an investors dream. What can we expect to see from these masses in the future?
At this point it seems not a day goes by that proof-of-concept is not obvious. Yesterday on Shark Tank there was a product that all the Sharks had some sort of interest in, however, they all landed on the fact the concept needed proof. Consider five years ago trying to prove the concept of a consumer product and compare it to the cost of a crowdfunding campaign today! This is efficiency, innovation and change creating opportunity. In fact, it may not be long before we see a Shark Tank Crowdfunding venture where instead of a handful of products allowed by a one hour television show, thousands of products can be “show cased” or “market tested” before graduating to the television series. Hey Mr. Wonderful, there is an idea. Can we make a royalty deal?
But all kidding aside more and more I see comfort in the marketplace with the convergence of venture capital, angel investing and crowdfunding under what is a relatively new definition of the term, Alternate Financing. In the past Alternative Financial Services referred to non-bank financial services provided to the un-banked and financially underserved and in some cases came with some negative connotations. Not anymore. It still opens previously closed doors to the underserved and emerging markets but it has taken the high road and if the trends continue and I am betting it will, the road will become more and more regulated, managed and mainstream.
But the point of this article is not to suggest another billion dollar idea to a group of Sharks or discuss the Wikipedia definition of Alternative Finance but rather to point out that a very substantial opportunity has come from the global trend we fondly know as crowdfunding. And I know there are those that have an issue with raising money from “crowds” and my question is why paint the entire process as being subject to investment from many unknown sources. From sources that may not be educated investors. I can take a company public on a traditional stock exchange and look to raise money from many, including those uneducated investors that will throw money at anything, or have my offering pre-sold to a select few. I can do the very same with crowdfunding and get an added bonus, a piece of shelve space in the front window of a store to the masses. Think of it this way: anyone looking to test a concept, raise awareness, or raising capital through any type of investment, from friends and family to angel investors, venture capitalists and even private equity can also get a spot in the front window on 5th Avenue, New York!