Conference Presentation, Panel
Crowd Capital and Online Finance
- Big banks, institutional investors, and the general public are increasingly utilizing online platforms for capital access, with online lending expected to continue providing billions of dollars to borrowers and driving exponential growth in the sector.
- The current decade is predicted to be defined by the "decade of funding," encompassing a shift toward perks-based, donation-based, and equity-based crowdfunding, the banking of the unbanked, and social credit scores, with the crowdfunding ecosystem expected to fundamentally alter how money flows into investments by the decade's end.
- Corporations such as Google, Philips, and Marvell Technologies are expected to increasingly use crowdfunding platforms to market-validate products, while the model is anticipated to become highly profitable with lower costs and mitigated risks compared to traditional methods.
- The transition from traditional funding to online models is predicted to become a "tidal wave" driven by generational shifts in consumer behavior that are expected to be irreversible, potentially flooding markets with liquidity.
- Equity crowdfunding under Title III of the JOBS Act is anticipated to allow the general public to invest for profit, though current rules are viewed as "tricky" with risks of "adverse selection" and liability that may cause top startups to prefer accredited investors over crowd investing.
- The SEC is actively working on regulations for Title III and Title IV (Reg A+), with Title III expected to preempt state laws regarding crowd investing, while Reg A+ is projected to allow raising up to $50 million from the general public with state preemption for Tier 2 offerings.
- The number of startups is expected to "explode" due to collapsing technology costs and smartphone adoption, creating a gap for angel investors as venture capitalists retreat to Series B and C rounds.
- Investor tools are expected to evolve to include filtering by valuation, location, and lead investor involvement by the end of the year, alongside automated investment baskets and structured dashboards for real-time portfolio tracking.
- Institutional investors and family offices are predicted to increasingly adopt online platforms to access a broad variety of deals, moving away from bank-gatekept proprietary relationships, though this change is expected to be slow in the institutional market.
- Online lending platforms are expected to see massive growth as consumers seek to consolidate high-variable-rate credit card debt into lower fixed-rate terms, with retirement money projected to flood diversified pools of consumer credit.
- The industry is expected to evolve into a "proliferation of the ecosystem" with "app store" features for cross-platform borrowing, a secondary market for loans, and tools allowing investors to passively allocate capital across specific credit grades and borrower profiles.
- Private market investments are predicted to continue outperforming public markets, with significant growth in peer-to-peer lending cited at $3 billion in the previous year and expectations to expand into venture capital, charity, and private offerings.
- Regulatory impediments and the "symbiotic relationship" between fund managers and investment banks are expected to fail as the view of keeping investors exclusive becomes obsolete, similar to the failure of banks to prevent retail use of online platforms like E-Trade.
- "High HR" borrower segments will be assigned specific letter grades and interest rates to inform investor decisions, while education, awareness, and understanding are identified as the primary impediments to broader growth.
- Indiegogo is expected to grow well over 1,000% independent of equity crowdfunding, while the donation and perks-based model is projected to become a multi-multi-billion dollar industry.
- The crowdfunding ecosystem is expected to enable anyone to create venture capital funds "on the fly," with AngelList potentially indexing top syndicates, allowing for efficient deal matching and diversification.
- Traditional financial players in Washington are expected to claim the industry is dangerous to spook investors, despite historical data suggesting the industry has not faced significant issues with fraud or investor protection.
- Local real estate opportunities are expected to become available to the public via the internet, and venture capital models involving syndicated investments in high-tech companies like Pebble Watch and Oculus will move online.
- While the SEC may struggle to create "fraud-proof" rules without causing adverse selection, the US government is expected to eventually allow democratic investment access, though pessimism is viewed as a hindrance to innovation.