Equity Based Crowdfunding is Here

Equity Based Crowdfunding is Here

If here is the Netherlands.  A Dutch company, Symbid, has launched its equity crowdfunding site and its pretty cool.  It allows people to invest in companies from all over the world although most of the companies looking for investment are European.  

So where are the Americans?  We’re mired in SEC squabbles and disorganization.  There have been three heads of the SEC in the past year, Mary Shapiro, Elisse Walter, and Mary Jo White.  

 The Feds passed the Jobs Act last spring.  The SEC will not meet its deadline to release the crowdfunding regulations.   They are now saying Summer 2013.   I would say Fall. Forbes is saying that crowdfunding won’t happen this year. .  

Crowdfunding will happen in the US.  The sentiment is leaning that way.  Why not?  It is our money.  Shouldn’t we be able to spend and invest as we want.   The government is worried about rampant fraud.  Really?  It’s an excuse.  They don’t want the competition.  If the government were worried about fraud, then half the bankers on Wall Street would be in Sing Sing.   Guys like Jon Corzine remain free despite stealing billions.   

According to Forbes, Americans spend $45 billion a year on lottery tickets.  The odds of winning the lottery are 1 in 175 million.   You’ve got a better chance at making a good return by plunking down $1,000 bucks on a few geeky ventures, perhaps the next facebook.   Does wall street really want that competition as well?  Don’t they want your money wrapped in their mutual funds?   

Several insiders have suggested that the SEC will announce the new regulations soon, like this summer.  However, the regulations will be so burdensome and costly that it won’t make sense for most start up to pursue.   These regs will be a boon for and you guessed it, lawyers.  

A small company can get listed on the OTC, but you have to spend $50k or more to get listed.  Who’s got that kind of money laying around to take that chance?  One of the main premises of crowdfunding is to keep the cost of acquiring capital low.   You can list a project on the donation crowdfunding site kickstarter today  virtually for free today.  Start ups like Pebble spent a few thousand dollars and a lot of manhours, but raised $10 million in 30 days.  That’s fantastic.  Not every project is like that.  That is the essence of crowdfunding.   It should not take legions of lawyers and battalions of accountants and squads of PR people to launch your campaign.  That defeats the whole purpose.    This is a common man’s IPO.   It should be done on the cheap, because you want to preserve as much capital to fund the operations of the business.   An Old Man and the Sea scenario is not sustainable.   We will see if the sharks win.  In the meantime, the Dutch will test the equity crowdfunding waters.  

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