While the regulators in the United States and Canada continue to doddle along in coming up with a simple and workable regulatory framework for equity crowd funding (it’s been over 2 years now), it is apparent that both the population and the market are more than ready for it.
Earlier this year, Kickstarter, the popular reward based crowdfunding site announced that it had passed the $1 billion dollar mark in terms of funded projects, all of which are for rewards only. Of this amount, over $660,000,000.00 came from US supporters, and over $44,000,000.00 came from Canadian supporters. More than half was pledged in the most recent year, showing a strong growth trend.
Successful Kickstarter reward campaigns entail work and good strategies to be successful. They are however most often speculative, often very creative and very early stage, with project organizers not always having the best business backgrounds. Nevertheless, many get funded without the funders having any real sort of guarantee that they will reap any reward.
Against this backdrop we strongly believe that it’s safe to say that people financially supporting crowdfunding initiatives are aware of the risks involved and are still prepared to take them, for a wide variety of reasons. That being the case, it is also safe to say that the general population and the market will also be comfortable financing equity crowdfunding initiatives, where there will be a much higher degree of due diligence prior to funding and also the opportunity to gain financially over a longer period.
So here is the anomaly. . . In mulling over what could be a complex framework for equity crowdfunding, the regulators profess to be acting on behalf of the investing public, protecting them from bad deals, bad judgment, or both. If the rules are too onerous, the regulators will indirectly (but very much so) encourage project organizers to create reward-only based campaigns. The organizers don’t have to be nearly as forthcoming, don’t give up any equity, and face very limited sanctions (if any) if unsuccessful. The Kickstarter numbers show that North Americans are still prepared to fund even in this unpredictable regime. Isn’t it then obvious then that the general population will be even more interested to fund in a more structured environment where, in addition to having the pleasure of supporting an exciting new business venture, they may reap a nice financial reward in the future?
The market is clearly ready. It’s time for North American regulators to now implement a regime that recognizes these realities, and allows businesses and the general public to get on with it. It’s going to be quite the ride.