In our last post in the series we covered how crowdfunding will grow overseas, in markets other than UK, US and China, and how equity crowdfunding will likely be the major growth driver in the US as well.
We’ll now cover the likely impact on other types of industries.
As equity crowdfunding can now be advertised, Venture Capital companies have alternative ways of raising funds. They can now spread the word about specific projects to a number of both accredited and non-accredited investors.
2016 will be a year of great opportunity and also peril to traditional VC companies. Their fund raising has become easier and less costly than before. But they will also have more competition from equity crowdfunding portals that are being born right now.
Also, VC companies usually show a lot of scrutiny on which projects to fund, discarding lots of them, many of them good. Now much of this scrutiny will be in charge of the investor himself. In the beginning, we can see a number of bad projects being highlighted and funded, which can mean a blow to backers’ finances and portal reputations as well.
Limitations on portal recommendations can be a problem, but they can be overcome by traditional VC companies featuring themselves as backers of some projects, so other investors can be sure they are in good professional company.
As rewards-based crowdfunding portals consolidate, we can expect to see a number of initiatives in the equity crowdfunding scene, in order to take advantage of new legislation. That’s already happening in 2015 but will intensify in 2016 as legislation consolidates, not only in the US.
We can expect major rewards-based portals migrating to equity crowdfunding, but a trend that’s likely to intensify are company-specific crowdfunding portals, especially in the equity area, raising funds directly from the public, without any other portal intermediating the operation.
That’s a natural move because most of the work on equity crowdfunding, from checking accredited investor status to issuing securities, is done by the company raising fund. Plus, company brand is important for this and, as there are a number of white-label crowdfunding portals already available, that trend is likely to grow.