(This post was updated April 27, 2020 to reflect coronavirus)
This past decade witnessed the inception and rollout of the JOBS Act, which opened the door for ordinary people to become equity investors in the same early stage startups that seem to make rich people richer. Separate from the traditional stock market, equity crowdfunding puts ordinary people in the driver’s seat of their own online investing and wealth building (*even more critical today with the economic devastation precipitated by the pandemic). As the dawn of 2020 approaches, crowdfunding is broadly predicted to continue gaining momentum and offering opportunities for both investors and entrepreneurs (*both are right!). We predict equity crowdfunding will do the following:
Widen the investor pool
Wall Street “might have been the moon” to Troy Prince, the founder of Wall Street Bound and Bronx resident, who grew up only 13 miles away from the glittery financial hub. If only opportunity spread through proximity and osmosis, more kids like Troy would be sitting inside the glossy marble office towers lining the famous street in Manhattan. There are many talented, hungry young people who are desperate for their shot at the ‘so-called’ American Dream. **With the coronavirus devastating small businesses and bailouts directed at big corporations, crowdfunding is one of the only practical routes to generating startup funding and building wealth for the 99%.
Catch the VC industry’s eye
This decade witnessed WeWork’s valuation fall off a cliff (*wtf Adam Neumann), one commercial dropping Peleton’s stock by more than $1B and damaging its upcoming IPO, and Uber’s underwhelming public performance, to only name a few of the greatest hits. As the bodies of these giants fill up the expensive real estate in the VC graveyard, investors will likely begin to look elsewhere (*they since have). When venture capitalists eventually grow tired of wasting money (*coronavirus turned that tap way down), they’ll likely notice the less volatile pastures in the crowdfunding ecosystem. Compared to venture capital return rates, equity crowdfunding’s stability and mass appeal would be the logical next step for affluent professional investors. However, once they realize what everyday people understand about value-based investing, venture capitalists will likely turn their attention and wallets towards crowdfunding. **The SEC is seeking to increase the cap for Reg CF from $1.07M to $5M. This is huge!
The chapter is closing on 2019, and 2020 onward is expected to bring an approximate 15% increase in crowdfunding. This ecosystem is expected to flourish given the lackluster results pouring in from the venture capital community over the past decade, and intensifying this year (*and in this economy VCs can’t afford to waste money anymore). With poor VC performance apparently becoming the regular, a new, more prudent normal is likely to emerge – in the form of your own damn equity portfolio.