Freitag, 7. Juni 2013

Crowd Diligence Works

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As Americans wait for the SEC to develop final rules and regulations for the JOBS Act, several international crowdfunding platforms have already embraced this innovative financing option for entrepreneurs.  Equity-based crowdfunding allows investors (accredited or non-accredited) to invest in businesses in return for equity or shares. Investment Crowdfunding is currently legal in Australia, the UK, the Netherlands, France, Belgium and Germany.

Across the globe, all forms of crowdfunding raised $2.66 billion in 2012, up from $1.47 billion in 2011 according to a Massolution survey. The same Massolution survey predicts crowdfunding in 2013 will raise $5.1 billion.  Of the total crowdfunding volume, equity crowdfunding accounted for $116 million and grew 30% in 2012.

Currently, there is no Europe-wide regulation in place that focuses specifically on crowdfunding websites. However, there are country-based financial regulators overseeing some of the equity crowdfunding taking place internationally. Two Britain equity crowdfunding sites, Crowdcube and Seedrs have been authorized by the Financial Conduct Authority in Britain.

Crowdcube was founded in 2010 and based in the United Kingdom, Crowdcube has successfully funded over £8.2 million (USD $12.16 Million). The site relies on both non-accredited and accredited investors. Before investing, non-accredited investors must first pass a quiz on the risks involved with private equity investing.

In addition to Crowdcube, there are several other UK-based equity crowdfunding sites. Seedrs, a founding member of the UK Crowdfunding Associaion, launched in July 2012 and surpassed the £1 million funds raised mark within months of their launch.  FundtheGap launched earlier this year and has not disclosed the amount raised so far on their platform but has pledged to invest between £500 and £50,000 in every single business listed on their site. SeedUps is a UK and US based crowdfunding platform that has raised over £33m in funding.

In Australia, the Australian Small Scale Offerings Board (ASSOB) promotes capital raising crowdfunding. On the site, businesses can raise from 50,000 to $5 million. TheASSOB site reports that as of February 2013, the platform has helped raise in excess of $133 million dollars and funded 132 businesses since they were established in 2005.

So what does international equity crowdfunding success mean for the United States? John Callaghan of iCrowd states, “The international crowdfunding success is an indicator of the financing opportunities entrepreneurs will enjoy in the United States once the SEC finalizes regulations.  Internationally, hundreds of businesses have successfully secured funding, enhancing job growth and stimulating local economies.”

Crowd diligence works

Fraud has been one of key concerns voiced about equity crowdfunding. Since 2005, the ASSOB has had zero reports of fraud.  According to Ronald Kleverlaan, co-founder of the European Crowdfunding Network, there has been no fraud reported.  Crowdcube, the leading UK-based crowdfunding platform has also reported zero incidence of fraud. Others voice concern over the risk involved with non-accredited investors investing in start-ups. Powerful networks and online communities have helped enhance investor decision-making in the countries where equity crowdfunding is legal.  Start-ups are put on display for the entire investing crowd to evaluate whether companies warrant investment. 

Investment Crowdfunding has been embraced in several international markets. The lessons are: small businesses find capital from a willing and enthusiastic group of supportive investors; local economies benefit from new capital sources that bolster small business growth; and that the transparency of Investment Crowdfunding has done a good job at mitigating the risk of fraud, which remains principally an abstract fear.


Australia – ASSOB -
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