After connecting with many like minded people in the realm of Crowdfunding (people connected to some of the world’s most profound approaches towards Crowdfunding) , I must conclude that the industry is developing at a fast rate. However are we going in the right direction? Of the 200 Crowdfunding sites out there, not one is offering a straightforward equity model to wheel in believers and the necessary investments needed to spark innovation from the bottom up.
And this makes me wonder if Crowdfunding in this form will ever becoming mainstream? I’ve never made a secret of my dislikes towards the banking industry, as we know it nowadays, and their inhibiting effect upon investments made in start-ups and SME’s. These effects are mostly due to the decision criteria banks use in order to assess investment opportunities. With the rise of Crowdfunding a different kind of investor is entering the playing field - the believers. Although they use a more subjective approach towards their investment decision and therefore make more (micro) investments possible. Fact remains that the lack of offering a return on investments is a major hurdle for the industry to overcome. The reasoning behind this remark is simple – Crowdfunding will never be an equal funding opportunity for entrepreneurs if the potential amount of money available by Crowdfunding is too little.
Concluding that if we want Crowdfunding to be a new way of financing, a more subjective approach towards the capital fulfillment of start-ups and SME’s is needed and the industry has to move towards a model that is based upon equity and return on investment. This all to wheel in the main stream audience. Preferably the industry introduces a model were Crowdfunding becomes an alternative stock exchange, were believers can trade their crowdfunded propositions with each other. I’m sure there is a global interest in such an exchange, that no longer makes the “little” man obsolete, as is happening with “normal” exchanges (as they are dominated by the electronic high volume traders). If the industry is able to come up with a solution for solving the problem stipulated above Equity based Crowdfunding will become the new norm.
I’m very interested what your take is on the industry and if you agree to my opinion, that if we want Crowdfunding to become a full alternative for other ways of financing such as banks, angel investors or venture capitalist, the industry has to move to an equity based model.
Ps: Next post will be all about investment decision criteria for believers, so if you are believer in a crowdfund proposition please tell me what your criteria were for investing.