Valentina Assenova, Jason Best, Mike Cagney, Douglas Ellenoff, Kate Karas, Jay Moon, Sherwood Neiss, Ron Suber, and Olav Sorenson
Assenova: Thank you for agreeing to participate in this forum. Let me begin with a bit of a challenge: Is crowdfunding merely a fad? If not, how does it represent a “revolution” in finance?
Karas: It’s a little bit of a false dichotomy. All funding is essentially crowdfunding. Hedge funds are crowdfunded -- it’s just from a different kind of investor. The idea of crowdfunding is to take that same model to retail investors. So, I don’t think it’s at all a fad, it’s an expansion of a well-worn -- and frankly, a very successful -- idea.
Ellenoff: I would suggest that securities crowdfunding is no more a fad than online trading was with e-Trade. It was timely then and not even an interesting conversation now, just commonplace. I would characterize it to be more of an appropriate evolutionary response in the age of the Internet.
Suber: I will be bold enough to say that I promise you that it’s not a fad: it’s a mega trend. The amount of benefit that borrowers and investors are receiving is unprecedented in financial history.
Moon: Equity crowdfunding is revolutionary because it can dramatically open up access to both investors and entrepreneurs. Entrepreneurs who had no or little access to capital all of the sudden have access to deep pools of capital and other resources. On the other side, investors can discover investment opportunities that were very hard to access at scale. Currently, there’s almost $300 million in open investment opportunities on CircleUp, and this represents just a fraction of what it could be.
Neiss: Access to capital has always been a challenge, so this is providing an alternative solution to getting that money that was not there before. I don’t think it’s going away. The data show that this space is evolving rapidly and continues to evolve. It represents a revolution in finance because we have finally allowed securities laws to catch up with the way in which we live our lives today, which is online and in the Internet age.
Karas: The revolution comes from figuring out how to let retail investors participate both in the “feel good” aspect and in the financial aspect. One thing that crowdfunding offers that traditional funding does not is that the companies that go through crowdfunding want to reward the people who have supported their businesses and to create a community. There’s the added element of investing in your local coffee shop and investing for more than a return. You see this at places like Kickstarter and Indiegogo. I think that crowdfunding combines those two aspects: your money is put to work, but you are also investing for returns other than the economics.
Best: We have just about seven years of experience now in crowdfunding [in the United States], including equity and debt, and about four years in the United Kingdom. And we have, by some estimates, $33 billion worth of funding across equity, debt, and rewards crowdfunding. So, if that’s a fad, then it’s a fairly large fad, and a fairly long-running one. My own belief is that it is not a fad, but that it is a fundamental way in which the financial markets will function going forward.
Cagney: But I think we’re in the very nascent stages of crowdfunding, in terms of what it can be used for and how it works, or how it could work. There’s been a lot of enthusiasm about the JOBS Act, that it would democratize finance and really open up the opportunity for crowdfunding. That hasn’t happened yet as the JOBS Act has been hamstrung on so many dimensions. It’s too early to say how crowdfunding will actually pan out, but at this stage in particular it has had a lot of hindrances from a regulatory standpoint.
End of excerpt. Please read the full article online.
Valentina Assenovais a Ph.D. Candidate in Management at Yale University. Her current research focuses on the ways in which inter-organizational relationships affect market dynamics.
Jason Best is Principal of Crowdfund Capital Advisors (CCA) based in San Francisco, CA and Miami, FL. CCA works with The World Bank, professional investors, governments, development organizations, professional services firms and entrepreneurs globally to create policy and business strategies to leverage the power of crowdfund investing.
Mike Cagney is CEO, Chairman, and Co- Founder of SoFi, a leader in marketplace lending with over $4 billion in loans issued to date, where Mr. Cagney leads corporate strategy and development. Mr. Cagney is also a co-founder and a managing member of Cabezon Investment Group, a global macro hedge fund, and non-executive Chairman of ReFlow.
Douglas Ellenoffis a corporate and securities attorney with a specialty in business transactions and corporate financings, and a partner of the New York law firm Ellenoff, Grossman and Schole LLP. He has represented hundreds of public companies in connection with their initial public offerings, secondary public offerings, regulatory compliance and general corporate governance matters.
Kate Karasis Associate General Counsel at Lending Club, the world's largest online credit marketplace. Prior to this role, she was Senior Director of Legal Affairs and Deputy General Counsel at SecondMarket, Inc., the largest secondary market for alternative investments.
Jay Moon is Director of Marketing at CircleUp, the largest private equity marketplace for investing in innovative consumer and retail companies. They've helped over 115 companies raise more than $135 million in growth capital.
Sherwood Neiss is also a Principal of Crowdfund Capital Advisors (CCA).
Ron Suber is President of Prosper Marketplace, America's first peer-to-peer lending marketplace, with more than two million members and over $4 billion in funded loans.
Olav Sorenson is the Frederick Frank ’54 and Mary C. Tanner Professor of Management at the Yale School of Management, where he co-directs the Initiative on Leadership and Organization.
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