As equity crowdfunding has started to take shape in the past few years and new legislation Regulation A+ was just passed, the equity crowdfunding market is ripe for explosion. The potential that this new asset class brings to the retail investor is unclear and depends mostly on how well the platforms will be able to successfully navigate and adapt to the new legislation. It will also depend on how well the public receives this asset class and starts to invest in it.
One indication that is worthwhile to look at is where is the “smart money” going. People regularly look to see what stocks investment gurus or hedge funds are investing in and they use this as a gauge for their own investment ideas. I would like to tweak that approach a bit and to take a look at an article written by Sherwood Neiss a partner at Crowdfund Capital Advisors, an expert in the industry and consider one of the “founding fathers” of Title III of the JOBS Act.
Ness, documents the investments that VC’s are making into the crowdfunding industry in terms of funding the various platforms that exist and seed funding for new platforms. Although he looks at the overall trend of investments both within rewards based crowdfunding and equity based crowdfunding, I want to really look at the equity based platform investments. This is what Ness had to say:
More than seven equity crowdfunding platforms have received over $180 million in financing, with the oldest among them being only four-years old. This too shows validation for a business model of which one of the two models (Title III, crowdfunding for all) has yet to go into effect. We anticipate equity crowdfunding to blossom in the next 36 months, with a majority of venture capital flowing into this space as early movers are proving the model, the media is covering it with more interest, and the global appetite for this sector expands significantly.
So even though this isn’t opened up for the retail investor as of yet, you can see that the smart investor are already pouring money into this industry. This should be a good indication of what the future holds for equity crowdfunding.
Click here to read the entire article on VentureBeat.com