Get ready! Here it comes! Crowdfunding Will Explode in 2013!
Yes, that headline has three exclamation points. I took some out.
The world of entrepreneurial finance is changing rapidly; we are at a tipping point that will make what seems like a vibrant part of our global economy today seem small in one year’s hindsight.
Whether you are a service provider, social entrepreneur, angel investor, venture capitalist, or one of the millions of people ready to become a small-scale start up financier, it is time to pay attention.
Estimates for annual crowdfunding transactions go as high as $500 billion annually compared to 2011’s $1.5 billion (anticipated to be $3 billion in 2012). If crowdfunding even begins to approach that scale, it will completely change the landscape for start-up financing.
Jason Best and Sherwood Neiss helped lead the successful effort to get crowdfunding approved in the JOBS Act passed earlier this year. Niess explained that the folks as the SEC described themselves as “a reactive and not a proactive organization.” The SEC explained that they needed direction from Congress before they could do anything about crowdfunding equity. “We delivered an act of Congress. They weren’t expecting that.”
The Act gives rulemaking authority to the SEC and FINRA; Best and Neiss are now meeting regularly with regulators to help define the shape of these rules—which could determine the success or failure of the Act.
According to Neiss, regulators approach novelty with a focus on preventing fraud—it’s what they deal with every day. They aren’t in the business of creating jobs—even though that is the legislation’s intent.