Re-posted from Forbes
By Chance Barnett, CEO of crowdfunder
A revolution in early stage finance is about to take place. But will the revolution succeed?
Thanks to the passage of the JOBS Act, a new market is being born that will revolutionize how early stage investing and fundraising works. It’s called equity-based crowdfunding.
For the first time in our lifetime, every American will have access to investing in startups and small businesses. Amy Cortese, Author of “Locavesting”, put it this way:
“If Americans shifted just 1% of the $30 trillion they hold in long-term investments to small businesses, it would amount to more than 10 times the venture capital invested in all of 2011.”
That’s not a game-changer. That’s a revolution.
Dollars Shifting From Wall St. to Main St.
Once the SEC gives its Rulings on crowdfunding intermediaries, ordinary Americans will be able to collaborate en masse to give small individual amounts of funding to startups and small businesses online, and become shareholders in the process.
When this happens, will we see money shift from Wall Street to Main Street?
Main Street has all of its money tied up in eight major Wall Street banks. These financial heavyweights control more than 80% of the deposits in this country, which means Wall Street gets to pick and choose where to make its investments. But when people begin to pull from their large bank savings and mutual fund accounts in order to put their money to work in their own communities, crowdfunding has the power to change how Americans from all income levels make decisions about where to put their money.
Crowdfunding isn’t a new way of investing, but how we see ourselves as participants and investors in companies. This year alone, an estimated $3.2 billion dollars is expected to be raised through donation-based crowdfunding platforms like Kickstarter.
Under equity-based crowdfunding, those “donors” contributing to companies could choose to be shareholders- leading to the the birth of a Capital Market that brings new access to capital for deserving entrepreneurs.
To help shape and guide this new investment market, equity crowdfunding platforms like crowdfunder, CircleUp and others are working hard to help ordinary Americans understand how they can participate in the revolution.
As this new breed of equity crowdfunding sites begin to emerge over the next year, their reach and impact could grow quickly- dwarfing the size of today’s donation-based crowdfunding market. Further into the future, the equity crowdfunding market has the potential to grow larger than the existing $30 billion U.S. venture capital market.
SEC & The Regulatory Timeline For Equity Crowdfunding
On July 13, Crowdfunder and other leading regulatory advocates for the crowdfunding industry came together to host an information-sharing Symposium in DC. This event was the first time that the SEC, FINRA and the Congressional leaders who sponsored crowdfunding legislation sat together in the same room since the law was passed.
Here’s some inside scoop on the timeline of the SEC crowdfunding Rulings.
The Symposium ignited a vibrant discussion among key lawmakers, regulators, entrepreneurs and investors about the rules that will eventually govern equity crowdfunding. The Securities Exchange Commission is scheduled to give its Rulings on non-accredited solicitation (true crowdfunding) on December 31st.
The SEC already missed its first scheduled deadline of July 5th when it was to give Rulings on crowdfunding solicitation to Accredited Investors.
Given all this, what do you think? Are the first missed Rulings a sign of things to come? Will crowdfunding for businesses succeed or fail?