Top 5 (+1) crowd funding industry trends.
I recently completed a study about crowd funding in collaboration with Barattolo. A 120 pages collection of well-categorized information about the state of the crowd funding industry in the UK.
Working on this project, I had the chance to talk to some of the most important players in the industry and these are the main insights I obtained:
- EQUITY CROWD FUNDING NEEDS BETTER RULES
It is only a matter of size, but equity crowd funding is a tiny version of an IPO and it could be extremely dangerous for both investors and startup managers. All crowd funding platforms should be FCA regulated at least.
2. COMMERCIAL BANKS WILL FACE A NEW LEVEL OF COMPETITION
I already wrote abut this point in a post called “who killed the commercial banks”.
The point is that crowd funding is offering in a smart way what the financial intermediaries are supposed to offer: to connect profit and non-profit companies in need of capital with capital providers.
3. ALMOST EVERY ASSET CAN BE “CROWD FUNDED”
From art to real estate, green certificates or wine, I’ve seen a platform for almost any kind of asset. The scheme is always the same: the assets are owned by a vehicle (ltd or similar) and the investors can buy shares in that company; the limit seems to be imagination.
4. CROWD FUNDING IS GOING TO BE THE TOOL FOR ALTERNATIVE ASSET MANAGERS
I know a couple of startups, one of them that I love particularly (invest up) that are working on aggregating different crowd funding platforms, both equity and debt, under the same umbrella. Their vision is to create a one stop shop from which to manage your portfolio.
5. POINTS 3–4 COMBINED ARE A HUGE OPPORTUNITY
Smart investors now have enough differentiation in terms of assets to invest in (short-term debt, mortgages, equity, equity vehicles for a special asset class, syndicates). And the tools to manage their investments as professional asset allocators do.
6. CASH IS KING. IT IS ALWAYS TRUE.
The issue crowd funding now has to face is how to create liquidity. I have seen different projects that aim to generate a secondary market. Some solutions are really exotic, but this challenge is the frontier where crowd funding has now arrived.
Feel free to contact me simone@cimminelli.com | @cimminelli
