Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Fintech Opinions
How 3 Generations of Investors can Impact the Future of Regulated Crowdfunding
Huff Post Business | David Drake LDJ Capital | Dec 11, 2015
The recently approved Title III rules of the Jumpstart our Business Startups (JOBS) Act by the Securities and Exchange Commission (SEC), now alternately referred to as Regulated Crowdfunding or Investment Crowdfunding, has been greeted with high expectations in the U.S. crowdfunding industry. Most industry stakeholders - including myself - are envisioning the industry to flourish as a result of a more democratized environment characterized by the participation of non-accredited investors. Nonetheless, I believe that by examining the demographic composition and the age distribution of the U.S. population we can gain insight into, and more accurately predict, its likely impact on the country's capital formation landscape - at least in the near future. The 3 major age groups capable of influencing investment activities in the U.S. are the Boomers, the Gen X and the Millennials.
Representing the individuals born between 1946 and 1964, the 75 million baby boomer generation currently account for about 70% of the total household wealth in the U.S. According to J.P Morgan report, this generation holds non-financial assets, particularly residential properties, that is about two-thirds or 75 percent of total household assets in 2013. Financial assets only account for just one-fifth or 20 percent of total assets. This means that the boomers will need to increase their financial assets in order to sustain the expected increase in their consumption expenditures during retirement.
Online private investing, powered by equity and debt crowdfunding platforms, has recently become the latest trend in capital formation. While thousands of accredited investors have earned decent returns by investing online through crowdfunding platforms, the regulatory environment was not favorable towards millions of non-accredited investors barred from participating in online investing.
A potential industry game changer occurred on the 30th of October 2015 when the SEC released the much anticipated Title III of the JOBS Act which is meant to facilitate the participation of non-accredited investors in crowdfunding.
Thus, the boomers now have access to a democratized means of investing. While the boomers generally control substantial assets, wealth distribution within the generation is highly skewed as more than two-thirds of the generation's wealth is held by the wealthiest 10 percent.
Baby boomers can either increase or share their financial assets by funding a SPPICE (service, product, project, investment, cause or experience) through crowdfunding. Using regulated crowdfunding gives them the privilege of owning equity or stakes in startups and projects. Boomers have, over the years, accumulated most of their financial assets in retirement accounts and pooled investment funds which have earned them decent returns. However, by investing through equity and debt crowdfunding platforms, they can increase their financial assets and earn higher returns at the same time. Most crowdfunding platforms offer returns on investment averaging 10-14 percent, well above the rates in traditional investment vehicles they've been used to.
See:
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Regulators need to heed the rise of crowdfunded ‘techquity’ markets
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NexusCrowd Closes Online Investment Offering for Canadian Real Estate Project
In line with basic economics principles, it is expected that boomers become more risk averse as they approach retirement. They will prefer to place their wealth in less-risky asset classes, and make investments that get the most cash flow rather than capital growth. For this reason, real estate crowdfunding should pique their interest since a substantial part of their assets is presently held in residential properties, with real estate being a less volatile asset class. They should also be more likely to invest in debt deals which are less risky than equity deals. They might be invest more on residential fix and flip properties which guarantee a constant cash flow, rather than commercial properties that offer capital growth.
It t is not surprising that the younger generation (Gen X and the Millennial) have a lesser share of household wealth in relation to the boomers since they are just entering their prime earning years. However, these younger generation fall short of the benchmark set by the boomers when they were at the same age. In essence, at their present rate of wealth accumulation, most of the younger generation will be unable to enter retirement with a high level of acquired assets as that of the boomers. As a result, they need to develop strategies to grow their wealth considering their poorly performing income and low savings growth rate.
Gen X and the Millennials can adopt two strategies to achieve this goal. First, by increasing the returns on their investments or assets. Second,by intergenerational transfer of wealth, from the boomers to the gen X/millennials. Both strategies can be achieved through crowdfunding.
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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more About Us or visit ncfacanada.org.
Fintech Spotlight: A Rant About Crowdfunding- “More Transparency Please”
Finance Magnates | Ron Finberg | Dec 8, 2015
Should equity crowdfunding platforms provide more information about investments to investors?
Finance Magnates' Ron Finberg thinks so.
In this week’s Fintech Spotlight, I share my gripe against the equity crowdfunding industry. Just to put my cards on the table, I happen to be a huge crowdfunding bull. All things being equal, I believe the net gain of retail investors to invest in startups is superior to that of leveraged assets such as forex and CFDs. Both come with tremendous risks, but my belief- and it should be clear that I speak for myself and this isn’t necessarily the view of my employers or colleagues- is that supporting startups and innovation in the world has greater benefits than forex and CFDs.
Why I am telling you all of this? Because I want to be clear that despite my favorable bias towards equity crowdfunding, there is one aspect that worries me about the industry- the way it is marketed.
Conflicting interests
One built-in risk of startup investing is the fear that the founders are defrauding their investors and will run away or misappropriate investments. Investors in equity crowdfunding campaigns similarly face this risk. However, investors can mitigate their risk by diversifying their funds as well as focusing on companies where the founders or the main product has a reliable track record.
What is harder to be careful about are platform providers that knowingly market investments that aren’t in the best interests of their investors. The rationale behind such actions is that most platforms are compensated based on a percentage of the funds raised. Therefore, there is an advantage to bring to market startups with so-called ‘sexier’ businesses that will be easier to pitch to investors.
What are the returns?
The ramifications of the potential conflict of interest between platform providers and their investors is such that rather than only having to conduct due diligence on startups, it is also required of the crowdfunding platform operators.
In terms of analyzing operators, one way is by taking a look at the returns to investors. Unlike stocks which trade daily and profits that can be calculated in real time, with startup investing this is more difficult. However, processes do exist such as publishing returns from exits as well as valuations calculated from further fundraising. One of the best examples is TechStars who shows a very detailed list of the performance of the portfolio from their accelerator investments (list here).
See: Data on Equity crowdfunding performance
While some crowdfunding platforms such as OurCrowd and AngelList have shown that they do a good job of marketing themselves while still disclosing failures and successes, others are limiting the available data. Recent examples, and the impetus of this article, are CrowdCube and iAngels. Both have published this year of successful exits.
In CrowdCube’s case, the firm announced in July that E-Car Club was its first exit after it was acquired by Europcar Labs. However, investor returns on the deal were withheld. Subsequent queries to E-Car Club, Europcar Labs and CrowdCube drew either ‘no comments’ or silence. In a contributor article from Rob Murray Brown of the blog Fantasy Equity Crowdfunding, he provided whisper estimates of investors realizing 3X returns on their equity.
Similarly being silent was iAngels. The firm announced that portfolio companies Flayvr and Big Blue Parrot were acquired by AVG and Playtika respectively. However, in both cases iAngels withheld requests for disclosure on how investors made out in the deal.
Transparency
The point of this post isn’t specifically to be picking on iAngels and CrowdCube. Many startups have raised funds to help them build great products and grow their firms. Along with other crowdfunding platforms, they also operate in a capitalistic market that requires them to generate revenues and profits to survive.
That being said, the reality of this new industry, and one that I personally am rooting for, is that it still needs to prove itself. Part of that process is transparency. An example would be easy to understand scoreboards that mimic that of other retail facing asset classes to help them understand past performance and just how risky startups as an asset class are. Firms should also provide existing returns on exited businesses to portray to investors what a success really is.
See:
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Equity crowdfunding will soon be legal in Canada. Should you jump in?
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Final form of Crowdfunding Regime in Ontario and other participating Jurisdictions
Beyond the platforms, transparency should also arrive in the form of operational updates from startups along with financial filings. While such information could hamstring their competitive position by revealing too much to the public, it is an important proxy used to provide ongoing valuations. This becomes especially important as secondary markets for private company shares aren’t far behind and will offer needed liquidity to investors.
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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more About Us or visit ncfacanada.org.
Early Bird Registration for CCS2016 Now OPEN! (Limited Discounted Tickets)
New Capital Raising Rules for Canadians
Crowd Capital by Sandi Gilbert | November 14, 2015
It has been a few weeks now since our securities regulators announced a myriad of capital raising regulations for private companies in Canada. For my friends south of the border, we don’t have one regulator that issues national regulations (the SEC); we have 13 different regulators that implement regulations they feel best suit the business and investor environment in their province. When possible, they harmonize these regulations with other jurisdictions, but in many cases, small jurisdictional differences become exceptions in their regulations. It is a bit cumbersome, but technologies like SeedUps and OfferingPoint help manage what investors can access and how much they can invest in particular capital offerings.
View:
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Regulators including OSC Publish Crowdfunding Exemption and Registration Framework for Funding Portals
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ASC and Nunavut Securities Office Publish Proposed Start-up Business Exemption for Comment
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New “Start-up” Crowdfunding Exemptions Adopted in Some Canadian Jurisdictions
Overall, the recent announcements will help lower the cost of raising capital and broaden the pool of investors companies can attract to invest in their business. That has been our goal from the outset, and although not perfect, these are significant steps to satisfying the funding gap companies face when seeking between $250K and $2 million in growth capital.
Download “Your Guide to Raising Capital Online“.
Until now, the only way private companies could raise capital from non-accredited investors was through the Offering Memorandum exemption requiring them to prepare a complex disclosure document complete with audited financial statements (note – Ontario has just published its intent to allow its constituents to participate in these capital offerings effective January 2016) . This exemption has worked well for companies raising north of $2 million in capital, as it is good corporate governance for companies of that size to audit their financials in any event (and they can actually afford it). It simply didn’t make practical sense for companies that were looking for the gap financing I refer to above. So now, companies can prepare a relatively simple disclosure document, present their offering on a public facing portal and attract investment from a wide array of investors – institutions, angels and individuals.
Many of our peers are concerned that companies raising capital through these new exemptions will be saddled with too many shareholders and a dysfunctional cap table that will be disruptive to future investment. I too, agree that too many shareholders may be challenging to manage. The new regulations have investor limits that range from $1,500 to $5,000 for non-accredited investors. In simple math, if a company raised $1.5 million from only those investors, they could be faced with managing over 600 investors. The reality is, no one would recommend that a company raise that much money $2,500 at a time. Capital raises, whether conducted offline or online most always involve different types or classes of investor.
Related: Despite new rules, equity crowdfunding is no picnic
The first investors are key to a successful capital raise. Everyone wants to see someone else lead the way and typically, those lead investors are close to the company and its management or are advocates or customers of the company and have watched the development of the business to this stage. Companies that want to raise $1.5 million through equity crowdfunding should secure this lead investor prior to launching their raise. The funding portal helps the company share that story with Business Angels and other sources of large capital, filling the middle portion of the raise. The Crowd is there to fill out the rest.
When done properly, a $1.5 million capital raise might have 75 investors from different classes. A lead investor for $500,000, sophisticated investors averaging $75,000 each and the Crowd averaging $7,500 each. That may still sound like a lot of shareholders, but structured properly and managed with technology solutions, those 75 investors can be the company’s sales and marketing arm. When out to dinner with friends, they’ll be talking about their latest investment and encouraging the success of the company.
Hey – have you heard about the XYZ app? It’s awesome – you should download it now! Did I tell you I was a shareholder?
Anyone remember a little company called WestJet? They built their company with the “average investor” advocate. In their day, they did it in the public markets, but today, companies can start with private investors, then go public when they are ready.
Related: Equity crowdfunding market no longer the preserve of start-ups
Here’s why these regulations are important and what they will mean to the Canadian economy. The potential investment dollars in the hands of the Crowd is enormous. If just a very small percentage of the “not-yet-accredited” investor put a suitable proportion of their investment portfolio into early stage companies, Canadian businesses could access over $1 billion in untapped capital. Imagine what companies could do with that capital. They will grow their businesses, add jobs and contribute to the innovation and diversification of the Canadian economy. Seriously – shouldn’t we give them a chance?
View the original blog post --> here
Hear Sandi Gilbert of SeedUps Canada at the Calgary Crowdfunding Bootcamp (Dec. 3)
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more About Us or visit ncfacanada.org.
Despite new rules, equity crowdfunding is no picnic
The Globe and Mail | Brenda Bouw | Nov 12, 2015
New equity crowdfunding rules are being hailed by proponents as good news for small businesses looking to expand. However, some experts are warning crowdfunded businesses will face a big challenge in managing a broad base of retail investors.
Unlike regular crowdfunding, where people donate cash to help get a project off the ground, equity crowdfunding allows investors to buy a stake in the venture and cross their fingers for a financial return. Until recently, only accredited investors could get in on these private deals in Canada.
The changes, which are slated to come into effect on Jan. 25, are being adopted in Ontario, Manitoba, Quebec, New Brunswick and Nova Scotia. The new rules will allow companies in these provinces to raise up to $1.5-million annually, with a $2,500 ceiling for individual investors per deal. Investors in Ontario will face an annual cap of $10,000 a year for total crowdfunding investments.
Accredited investors – those who are wealthier and have more investment holdings – will be able to invest up to $25,000 per investment, although Ontario will also impose a total annual crowdfunding limit of $50,000 for individuals.
There will be no investment limit for so-called “permitted” clients in Ontario who have net financial assets above $5-million.
But despite the new rules that create a larger pool of investors, equity crowdfunding will come will its own set of headaches for a company.
“Having that many individual investors would be very difficult for a startup to manage, especially if many of the investors are inexperienced with this type of investing,” says Michael Mahon, director, strategic investments and partnerships at BDC Capital.
To achieve the maximum $1.5-million investment, Mr. Mahon notes that a startup would have to crowdfund from a minimum of 60 individual accredited investors, or up to 600 retail investors.
For investors looking for future growth, that many investors documented in the company’s investment ownership record or “cap table” could also be off-putting to angel investors or venture capitalists looking for a more simple capital base. It could also be challenging for companies to round up investors’ approvals on the future direction of the company.
“It’s a viable funding alternative, but I would encourage founders to consider where they see their growth path taking them,” said Mr. Mahon, noting that equity crowdfunding should be considered one part of a startup’s broader fundraising strategy.
The new rules are a “nice to have,” according to Chad Bayne, a partner and co-chairman of the emerging companies practice group at Osler Hoskin & Harcourt LLP. However, he expects few companies will use it, especially in the technology space he deals in.
“Do you really want to have hundreds of shareholders you don’t even know?” Mr. Bayne says, noting that it can be a distraction, not to mention a huge administrative burden for small companies with limited resources.
See:
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NCFAs Open Letter to Prime Minister Trudeau
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Nominee structure is vital to equity crowdfunding, Seedrs in the UK
“I would look at all other options before you go down this path because this is going to be an expensive way to raise capital.”
Marcus Daniels, co-founder and chief executive officer of the venture-capitalist-backed accelerator Highline, said equity crowdfunding will likely be more attractive to smaller businesses not looking for massive scale, or those seeking to fill smaller financing needs.
“It allows them to collect some financing that maybe typical VCs or angel investors wouldn’t touch,” says Mr. Daniels.
The new crowdfunding exemption follows a similar but separate “startup exemption” that was adopted in May in B.C., Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia. Under the startup exemption, companies in those provinces can raise up to $500,000 per year – but no more than $250,000 in one offering. Individual investments are capped at $1,500 per deal.
Vancouver-based investment platform FrontFundr has already started supporting companies in places like B.C., but founder and CEO Peter-Paul Van Hoeken says adding Ontario to the mix will allow him ramp up the business, given the economic might of the country’s most populous province.
“Not being able to raise capital [in Ontario] has been challenging for us,” said Mr. Van Hoeken. “There are a lot of startups and investors in Ontario who have been locked out of this type of investing, until now … it fits very well with our expansion plans.”
Craig Asano, executive director of the National Crowdfunding Association of Canada, said the changes will “energize the emerging crowd economy,” in Canada, and make it more competitive.
For example, the U.S. Securities and Exchange Commission recently approved new crowdfunding rules for startups south of the border as part of its Jumpstart Our Business Startups (JOBS) Act, enacted in 2012 to help spur small-business growth.
“It about time that Ontario, which is a juggernaut in Canada in terms of a financial centre, had a position [on equity crowdfunding] and supported it,” says Mr. Asano. “We don’t want to fall behind other leading countries in this space.”
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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more About Us or visit ncfacanada.org.
Crowdfunding: enabling global entrepreneurship, the future of Canada’s innovation economy
NCFA Canada | Oct 28, 2015
Dear Prime Minister-Designate Trudeau,
On behalf of the National Crowdfunding Association of Canada (NCFA), I would like to extend our congratulations on your victory in last week’s federal election. We believe that your new government has provided Canada with the opportunity to effect real change in public policy, including as it involves crowdfunding.
Crowdfunding is about harnessing the power of the internet to unlock transparent and cost effective sources of capital for early-stage companies and projects from a wide range of stakeholders. Online financing is an innovative approach that brings together investors, entrepreneurs and borrowers in a way that simply didn’t exist ten years ago.
In 2014, global crowdfunding funding volumes grew to $16.2 billion across all crowdfunding models (eg., equity, debt/loans, reward/product and donation) according to a leading industry report (with 2015 predictions approaching $35 billion). The World Bank forecasts that the crowdfunding industry will represent a $96 billion industry annually by 2025, and the World Economic Forum has included crowdfunding as one of the 6 major disrupters of the future of financial services.
In Canada, we can quote one of Canada’s first and largest crowdfunding marketplaces, “35% of the listed companies are from the technology sector and more than 20% of the ventures listed are owned and/or operated by female entrepreneurs. Alternative financing is helping bridge the gender gap and directly accelerating the growth of early stage ventures. With over $20 million raised in 2014 and an expected $100 million to be raised by the end of this year, clearly crowdfunding is helping entrepreneurs acquire the necessary funds to jump start their business, while also boosting the Canadian economy which in turn will generate countless jobs."
Back in March 2013, NCFA recommended a set of principles to guide the implementation of emerging equity crowdfunding regulations including developing a robust, transparent and inclusive set of rules to maximize opportunity for all involved without missteps.
To nurture development and help these complex alternative finance and hyper markets grow proportionately to the opportunity at hand amidst increasing pressures from global competition, we offer the following principles to help guide policy makers in the near term to avoid any lost opportunities.
1. Canada needs to commit to not falling behind other leading countries
The absence of a national securities regulator in Canada makes it difficult to comply with a ‘patchwork’ of regulations across 10 provinces and 3 territories.
If friction points are too great and impassable, the ability for new entrants to emerge becomes impractical. So, we would encourage your government to move quickly with the Canadian Cooperative Markets Regulatory Authority and work to bring the remaining provinces onside as participants.
Regulations that were designed in the 19th century and implemented in the 20th century need to be updated to reflect conditions in the 21st century. Let’s ensure Canada has an internationally competitive regime that is developed for current times and revisit outdated restrictions, such as qualifying CCPC (Canadian Controlled Private Corporations) must have less than 50 investors.
Not falling behind also means increasing the amount of support for and access to early stage capital such as the amounts that crowdfunded ventures can raise from investors and the amounts that investors can put into crowdfunded projects and companies. In the UK, the British government garnered a tremendously positive public sentiment and greatly helped spur the growth of small business by investing £40 million in debt-based crowdfunding and implementing mandatory referral programs in the ecosystem.
Canada aspires to diversify our economy from dependence on natural resources and to create world class new economy businesses. Our early stage funding ecosystem is sorely lacking in capital.
2. There needs to be a level playing field for all who provide early-stage capital
A level playing field means that the newly-emergent P2P business marketplace and consumer lenders are not disadvantaged relative to traditional lenders and that the tax system is structured as to provide equivalent levels of support to all who participate in the innovation economy.
We note for instance that investors in British Columbia have employed the Venture Capital Tax Credit with great success and your party has committed to restoring a retail investor tax credit mechanism that had been jettisoned by your predecessor. Early stage tax incentive programs will help de-risk qualifying investments while also improving market confidence.
In the same vein, it is likely appropriate to carefully re-balance the entire tax treatments for those involved in nurturing innovation. Ultimately, this means revisiting Canada’s treatment of capital gains, stock options and the SR&ED program.
3. Canada needs a robust crowdfunding education and literacy program and industry metrics and benchmarks
As an educator yourself, you are keenly aware of the value of continuous learning. In our opinion, to maximize the opportunity for democratizing finance, many more people in this country will need to be educated about the opportunities that crowdfunding offers for early stage-capital raising, such as the ability to tap into global markets and resources that will help small businesses achieve international scale and commercialization of their venture.
Building on our expertise, the government of Canada should partner with the NCFA to deliver these programs from sea to sea. Invest in a national crowdfunding literacy program based on data-driven research and best practices so that all involved, from investors to issuers, can confidently use these new and exciting financing tools.
4. There needs to be a Royal Commission on the Innovation Economy
Ultimately, it is time for a wholesale review of how Canada can better stimulate the innovation economy and improve the rate of commercialization of new discoveries in high-tech, scientific, medical and environmental fields.
Our recommendation is that you speedily name a Royal Commission on the Innovative Economy. This Royal Commission, modeled after the former Macdonald commission of three decades ago, would be composed of eminent persons with the mandate to consult Canadians who would report back to you within twelve months with a set of recommendations for energizing the new economy.
This new Royal Commission could be directed to finding the best ways of unblocking the bottlenecks that are now choking our collective ability to best deploy the ideas, energies and entrepreneurs now emerging from our institutes of higher learning.
We welcome the opportunity to collaborate. The time to act is now.
Yours sincerely,
NCFA Canada
Note to readers: This post is written on behalf of the NCFA Canada, its members, and affiliates. Special thanks to the following participating members for their valuable contributions in our collective effort to develop Canada into a world class alternative finance crowdfunding centre: Andrew Graham (Borrowell), Cato Pastoll (Lending Loop), Craig Asano (NCFA), Daryl Hatton (FundRazr), Diana Yazidjian (DFY Consulting), Gil Michel Garcia (Financement Participatif en Capital Québec), Jaimy Warner (Raindance), Marcus New (InvestX), Matthew McGrath (The OCMX), Peter-Paul Van Hoeken (FrontFundr), Richard Remillard (Remillard Consulting Group), Rubsun Ho (Crowdmatrix inc.), Sandi Gilbert (SeedUps Canada), Sean Ballard (ATB Financial), Sunny Shao (NCFA) and Tim McKillican (Open Avenue)
The National Crowdfunding Association of Canada is the leading and only nationally organized non-profit working with over 1300 social and investment stakeholders across the country, and the national voice of an industry that is fast becoming an integral part of the start-up financing ecosystem. Learn more About Us or visit ncfacanada.org.
2,000 Global Crowdfunding Sites to Choose from by 2016: Top 5 Growth Indicators
The Huffington Post by David Drake | October 23, 2015
Crowdfunding is growing at a tremendous rate and shaping the innovation of every S.P.P.I.C.E. (service, product, project, investment, cause or experience), causing a shift in the role of financial institutions around the globe and influencing government policies and market trends.
In the UK alone, the Nesta Report disclosed that the alternative finance market which includes Crowdfunding was expected to grow by £1.74 billion (US$1.99 billion). This was based on the 150 percent growth experienced by the market from 2012 to 2013, and 161 percent from 2013 to 2014.
The Nesta Report also highlighted that the UK alternative finance that includes crowdfunding is estimated to have provided working capital in 2014 for 7,189 small and medium enterprises, equivalent to 2.4 percent of bank lending to businesses.
In the United States, real estate crowdfunding emerged as one successful niche in the crowdfunding landscape. The 2015 Times Realty News Real Estate Crowdfunding Report cited that there are more than 140 real estate crowdfunding platforms in the US, with funds raised online placed at US$1 billion in 2014, and is expected to climb to US$2.57 billion at the end of this year.
In 2016, the number of crowdfunding platforms is likely to hit the 2000 mark due to the following reasons:
1. Growth Rate of Crowdfunding Platforms since 2012
There were more than 700 crowdfunding platforms in the world in 2012. Of this number, 191 crowdfunding platforms were established in the United States that year. The Soho Loft News, which is an Alternative Finance news and info site, have tracked over 600 of the more than 1250 online crowdfunding platforms today globally and adding to the list daily.
The number of crowdfunding platforms in other parts of the world is also growing exponentially. In Europe, the number of crowdfunding platforms has also gone up.
View: 2015 Canadian Crowdfunding Directory
In the real estate financing industry, the 2014 TRN Real Estate Crowdfunding Report highlighted more than 60 real estate crowdfunding platforms that year worldwide, which was worth US$1 billion by year end. This number has now increased to over 230 platforms in 2015, and currently being tracked by Times Realty News.
If this trend continues, there will be over 2000 crowdfunding platforms across the globe by early 2016.
2. Easing of Regulatory Environment
More investors are now able to make private investments across the globe as the regulatory environment becomes favorable.
In the United States for instance, changes in legislation has opened up the space to non-accredited investors and allowed issuing companies to state publicly the plans they have for raising funds. The approval of Title IV of Regulation A+ under the Jumpstart Our Business Startups (JOBS) Act is likely to spur development of more crowdfunding platforms. Under Regulation A+, accredited and non-accredited investors can participate in public offerings, a move that expanded the investor pool from which entrepreneurs can raise capital. This regulation also raised the maximum crowdfunding ceiling to 50 million dollars and removed the requirement for state compliance.
See also: Equity crowdfunding market no longer the preserve of start-ups
Italy was the first country to enact Law 221/2012, the law on equity crowdfunding in 2012 that allows innovative startup companies to raise funds online. CONSOB, Italy's equivalent to the US SEC, released regulation no. 18592 on June 2013. This consists of rules in implementing the law which covers the creation of platforms, requirements for their registration, rules of conduct and offerings and more. However, the equity crowdfunding market is not moving that much because of intrinsic limitations within the business environment and existing regulations. Not to be left behind in the crowdfunding space, Italy in its Law Decree no. 3, allowed Undertakings for Collective Investment (UCI) and venture capital (VC) companies to raise capital online for any specific project, provided they invest in startups and in SMEs engaged in innovation.
Austria, on the other hand, has recently passed its crowdfunding law. In this new law, only a simplified prospectus is mandatory for issue volume between EUR 1.5 million and EUR 5 million (no longer EUR 250,000). The complete prospectus will now be required only for issue volume of EUR 5 million or more. An individual can invest up to EUR 5,000 per project, but this can be doubled if his or her net monthly earnings reach EUR 2,500. Investors can withdraw within two weeks, just like in its Consumer Protection Law. Issuers can only raise EUR 5 million in capital over the next 7 years, less the amounts already paid back to investors. The company is required to issue a capital market prospectus if this is exceeded.
View: Alternative Finance Update: Key Crowdfunding Trends
3. Changes in Investor Behavior
In the Democratising Finance report, behavior changes among investors is an important factor fueling the growth of the alternative finance industry, a concept that brings crowdfunding and peer-to-peer (P2P) lending together. Based on this report, there are changes in the demographics of people who use P2P lending and crowdfunding, with boomers being 10 times less likely to make use of P2P lending than millennials. The millennials opt for mobile and online solutions that offer limitless and faster user interactions. This new breed of investors finds the growing interaction and openness that crowdfunding platforms offer in investment processes more appealing. This will drive the need for crowdfunding platforms to tap the huge population of millennials.
4. Technological Innovations
Technological innovations are occurring rapidly in alternative finance. When it started, crowdfunding was operating as rewards-based and donation-based fundraising options. Today, crowdfunding has evolved and expanded operations as debt and equity funding options. Additional tools such as data providers and analytics are evolving to complement the crowdfunding sector. There is a growing trend of integrating social media in crowdfunding platforms where investors and issuers get incentives for marketing their funding campaigns online. This results in a network of investors and issuers enhancing the ability of crowdfunding platforms to attract customers, sometimes turning their customers into investors or crowdfunders.
See: Get the Leading Global Industry 2015 Crowdfunding Report (member discount)
Many of these innovations were spurred by the online automation and streamlining of the underwriting and financing of the real estate industry. This was reflected on the increase of real estate crowdfunding platforms that is being tracked by Times Realty News: From a hundred real estate crowdfunding platforms in January 2015 it rose to more than 230 platforms globally by summer 2015.
All these innovations in technology will drive the growth of crowdfunding platforms in 2016. The automation in the space indicates that an additional 700 will join this list by next year.
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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1100+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more About Us or visit ncfacanada.org.
The truth about women entrepreneurs and crowdfunding
The Boston Globe by Elizabeth Gehrman | October 22, 2015
Female entrepreneurs tend to be excellent at scoring big-time equity funding. So why don’t more of them go for it?
Last July, Stefanie Mnayarji of Boston took a line of breathable silk support-wear she’d developed to Kickstarter, aiming to raise $10,000 for her first production run. Within 16 days, her company, Luxxie Boston, had not only exceeded its goal by 220 percent but had also won scads of media attention and, ultimately, a loyal cult following of women who buy its slips and camisoles in every color and evangelize about them to their friends.
“It really caught fire,” Mnayarji says. The campaign gave Luxxie enough buzz that continuing sales should finance the company’s growth for the next two to three years. After that, when Mnayarji and her husband and cofounder, MIT research scientist Michael Gordon, are ready to take Luxxie to the next level and “make it a household name,” they plan to use crowdfunding again. This time it will be on an equity platform like CircleUp or AngelList, where accredited investors give larger amounts in exchange for an ownership stake in the company. “It’s a great way to democratize the venture-capital process,” Mnayarji says.
Countless women like Mnayarji have found grass-roots and — after proving their concept by gaining followers and racking up sales — equity support through crowdfunding sites. Women are the majority owners of about 36 percent of the businesses in the United States, and they make up 35 percent of project leaders on Kickstarter. Yet only about half that many can be found on equity crowdfunding sites — even though, according to CircleUp, women-led businesses this year met their fund-raising goals on the site 21 percent more often than those led by men.
Related: Ten reasons why more women are turning to crowdfunding
“Women are definitely catching up on rewards-based sites” such as Kickstarter, says Geri Stengel, president and founder of Ventureneer, a New York content marketing and research company, “but not yet on equity-based ones.”
Experts say women are particularly good at crowdfunding because of the skills needed to make it work. “Women are well organized,” says Stengel, “and project-management skills are needed. They’re really good at following up with people, and they’re good at networking,” from letting everyone on their contacts list know about the campaign, to reaching out to bloggers and social media, to attending a “gazillion” fund-raising events.
But perhaps the most pertinent skill women bring to the crowdfunding table, says Shari Worthington, the lead entrepreneur-in-residence at Clark University in Worcester, is the ability to weave a compelling narrative. “Women tend to be better at sales and marketing,” she says, “and that’s the way you succeed at crowdfunding. Women are good at telling their stories, and they tend to have better empathy. On the whole, they’re fundamentally more effective at connecting with people.”
So why aren’t more women taking to the Internet to raise funds for their businesses? For one thing, women-owned companies are likely to be smaller; the National Women’s Business Council reports that some 89 percent of the nearly 10 million women-owned businesses in the United States are sole proprietorships with no employees beyond the owner. Such companies are also more likely to be service-based, and lacking enough business role models and education, that means “a lot of women don’t see the potential to grow their businesses into large enterprises,” says Worthington. How many women over the years have offered freelance housecleaning, she asks — but it was a man who scaled the job up by starting Merry Maids in 1979. “The odds of being able to get to a larger size are significantly reduced if you don’t have some kind of background — either work experience or watching someone grow a company — or education,” Worthington says. But education needn’t come in the form of an MBA, she stresses. Many reputable schools have real-world or online entrepreneurship certificate programs that cost less than $10,000, and there are also entrepreneurship resource centers, workshops and seminars sponsored by the Small Business Association’s Small Business Development Centers, and continuing education classes at local universities and colleges. “To do it on your own without learning on the way is very difficult,” says Worthington. “You don’t know what you don’t know.”
Related: Why Equity Crowdfunding Is Good News For Women
Finally, while there are hopeful signs that women are inching toward parity — research from Babson College shows that three times as many of the companies receiving venture capital investment have a woman on their executive team today as did in 1999 — it’s no secret that most venture capitalists are men, and even online, gender bias still exists.
Companies like Luxxie Boston are a perfect example of how this can play out. “There’s a lot of great stuff out there, both products and services, that the world needs,” says Patricia Greene, the Paul T. Babson chair in entrepreneurial studies at Babson College, “but that male-dominated venture capitalist funds don’t recognize it as a need, including new technologies and products related to women and children.”
Recent sites targeted toward women investors should help to address this problem. Portfolia — in which Greene invests — welcomes small-scale angel investors with as little as $5,000 to lend and lets them provide feedback on the companies they choose. Once sites like this start to gain traction, women will have more potential partners helping their companies move forward, helping to level the playing field even further. “More women could grow businesses and create jobs and generate revenue,” says Greene, “but more important, crowdfunding can open doors for different kinds of people with different kinds of businesses to be able to say, ‘Let’s talk.’ ”
MINORITY WOMEN ENTREPRENEURS ON THE RISE
Gender and ethnic diversity is good for business.
In terms of racial diversity among women-owned businesses, there’s good and bad news. African-American, Hispanic, and Asian-American women are the fastest-growing groups of entrepreneurs in the United States, starting up to three times as many businesses today as they did in 1997. But, says Mary Godwyn, an associate professor of sociology at Babson College, “their numbers are still relatively small in absolute terms.”
View: Crowdfunding To Narrow The Gender Gap in Venture Capital
Access to business capital is increasing, in part because of crowdfunding. But according to a 2014 report by the Center for American Progress, women of color still have a harder time getting startup capital, and African-American women and Latinas tend to found businesses in the lower-paying health care and social services fields rather than in high tech or professional services. In addition, minority women say they lack role models, feel excluded from networking, and suffer from stereotyping.
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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1100+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more About Us or visit ncfacanada.org.
