The key to understanding, appreciating and then monetizing the art of Regulation Crowdfunding is the realization that it's more art than regulations. What that means is:
- There are no profitable funding portals
- Especially if the funding portals came into existence before 2019
- However, there is a new breed of funding portals that will be profitable by the end of 2021
The art of RegCF is that in order to reach the lofty goal of $5M there isn’t any single route. Yes, there are some guide rails but WHAT you do to raise your goal be it $5M or $50k is the fine art of strategy. HOW you execute that strategy is the dull nature of tactics. Why you care is because if you come from “traditional finance” your disadvantage is the speed at which innovation can occur, does occur and is pursued.
Crowdfunding = Innovation
The sole reason that RegCF exists is because traditional finance and venture capital is broken. If VC funding worked so well, RegCF simply wouldn’t exist. It's not a debate. It's just a simple recognition of the conditions that gave rise to Regulated Crowdfunding. What are those conditions? Venture Capital failed entrepreneurs. Well, it only failed 99.99% of entrepreneurs. VC funding does “work” for the 0.01% of businesses they back.
Innovations in Crowdfunding Since 2016
Since the JOBS Act came into law on May 15, 2016 there have been numerous innovations. For the sake of brevity we’ll limit them to the most key updates to RegCF:
- Testing The Waters (with Walled Gardens this is going to be huge)
- Walled Gardens (I’ll write another article about what those are)
- Blue Sky Rules updates as of March 16, 2021
- Private Portals (see Silicon Prairie, https://sppx.io/ )
- Going Public (They’ve IP that makes investing in RegA+ offerings in real time, on “live TV” possible. True game changer.)
- Mobile Apps (a la MiVenture.com)
- Tokenization (Blockchain enabled fractionalization of ownership)
- NFTs and Revenue Sharing Agreements
- Blockchain enabled Alternative Trading Systems (ATS) / Exchanges
Prior to 2016 none of these innovations existed in traditional venture capital. Now however, innovations in the crowdfunding, FinTech and RegTech space are occurring so quickly that soon, this 5 year old industry will be a roaring, job producing teenaged bit of legislation that is slowly eating VC and Hedge Fund portfolios.
There are numerous innovations coming to the RegCF space. You’ll note SPVs (special purpose vehicles) are not included in the list of current innovations but in all honesty they should be. We’ll circle back to them later. However, the most exciting innovation is Natural Language Processing (NPL) and the American’s with Disabilities Act (ADA) requirement known as the Web Content Accessibility Guidelines WCAG 2.0 AA 2.1 AA, that may mandate all crowdfunding portal webpages to be voice activated/navigable.
Well, what this means in plain English is that every Funding Portal may have to have their offerings be able to be read aloud. Why that is interesting is because that level of Machine Learning and NLP would make it possible for you to say, “Hey Alexa, what crowdfunding deals are on Brite.us?” Followed by Alexa or Siri reading that webpage out loud to you. Okay, I will agree that Alexa reading a webpage isn’t cutting edge. But what is cutting edge is when you will have the ability (as required by the ADA) to say to Alexa, “Hey Alexa, invest $500 into that deal you just read me off of Brite.us.”
And in that moment, magic happens. Alexa can voice ID you (KYC), access your Amazon account (AML) and then place a voice order for $500 worth of X offering. This sets the stage for you to go on KingsCrowd and ask Alexa, “Hey Alexa, what are the current RegCF offerings for food startups?” And then telling Alexa, “Hey Alexa, invest $500 into each of them.”
This will be the next great leap in crowdfunding innovation, as a hearty harvest of verbal commands, communications, speech-to-text will be harvested that can unlock all manners of hereunto unknown possibilities in investment data analytics.
Conclusion - Crowdfunding is Dynamic
Crowdfunding ain’t your grandfather’s capital formation. Its probably more appropriate for your great granddaughters as Crowdfnding will continue to evolve not only from a regulatory / compliance perspective but also from a technology and business perspective. RegCF is now 5, which makes it just old enough to go to Kindergarten. Buckle up! Because when this industry hits 3rd Grade, every VC on the planet will have to ask themselves, “Am I smarter than a 3rd Grader?”
About the Author
Samson Williams is a serial entrepreneur and accidental investor. When not starting business with his enemies (“Entrepreneurship is hard. I only recommend it to my enemies.”), Samson is an Adjunct Professor at Columbia University in NYC and University of New Hampshire School of Law where he teaches on blockchain, cryptocurrencies and the Space Economy. Samson is also President of the Crowdfunding Professional Association and investor into two investment crowdfunding platforms Brite.us - CrowdInvesting Done Brite and GoingPublic.com. For more information on Samson visit www.SamsonWilliams.com and follow him on social @HustleFundBaby.