The outlook for debt and equity crowdfunding in 2014

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Venture Beat | Coastal Shows | Jan 14, 2014

Coastal shows and CFIRA eventCrowdfunding leaders converge at the industry’s main event: the Crowdfund Global Expo, Jan. 30-Jan. 31 at the San Diego Convention Center.

The securities crowdfunding industry is leading the charge for huge changes to capital formation, wealth building, and investing. In September, the Securities and Exchange Commission implemented rules governing Title II of the Jumpstart Our Business Startups (JOBS) Act, which permits companies to advertise their private securities offerings to accredited investors. Following that, the SEC announced two months later at its Forum on Small Business Capital Formation that more than 300 companies sent filings to the SEC and raised some $2.2 billion in capital via general solicitation.

Crowdfunding is no longer a trendy buzzword — it’s a movement with active participants, proven financial potential, and maturing seemingly by the month.

Equity-based crowdfunding is on the horizon as the next definitive step for investors hoping to secure a stake in both early-stage ventures and more established companies. On Oct. 23, the SEC released a 500-plus page document detailing the proposed rules and regulations for Title III of the JOBS Act, the piece of legislation that will legalize equity crowdfunding for unaccredited (aka everyday) investors.

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The 90-day comment period for these proposed rules will end Feb. 3, and global professionals from traditional institutions such as banks and real estate development companies are poised to enter the sector. As the industry matures and offers cutting-edge user interfaces and access to higher-quality deal flow, online private securities offerings across the board will naturally increase.

The Crowdfund Global Expo presents the leaders of the investment and crowdfunding industries. Dr. Richard Swart, who heads the Crowdfunding Research Program at the University of California, Berkeley, has cited several experts who project that the size of the securities crowdfunding market will range from “$3.98 billion (Nest, Neiss, Stralser & Fleming 2013) to as much as $300 billion over the coming years depending on the level of enabling regulation adopted by governments.”

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Finance, real estate, and legal professionals are not only working to disrupt the investment landscape but are also creating new methods for financing small-business loans, debt transactions, and even participating in high-end real estate buyouts.

“No one knows exactly what crowdfund investing performance numbers will look like a year from now. What we do know is that real estate as an asset class has enormous potential,” says Todd Lippiatt, the managing principal of Aristone Realty Capital and CEO of Propellr. “There’s $1 trillion in the 506 market of securities offerings alone. That’s the same size as last year’s entire IPO market. Accredited investors have already shown they’re ready. Our own investors have earned, on average, more than 22 percent return on an annual basis.”

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