Is Equity Crowdfunding The Key To More International Startup Hubs?

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Forbes | | March 17, 2014

Crowdfunding ecosystemsIs crowdfunding the secret to creating more Silicon Valley-like tech hubs around the world? Crowdfunder CEO Chance Barnett argues yes.

Talent, we all know, knows no geography. Great brains and big ambitions can be born anywhere. The sorts of ecosystems that nurture this talent and accelerate innovation are far rarer.

History, government policy and culture all play a role in determining where a cluster will (and will not) develop, but so, of course, does the access to capital to grow ideas into big businesses. Is equity crowdfunding the solution to this piece of the puzzle and a key to accelerating the growth of international clusters?

That’s what Crowdfunder CEO Chance Barnett recently wrote on the Unreasonable Institute blog. He argues that crowdfunding platforms will facilitate the connection of local players and  speed clustering, as well as accelerate access to capital and attract the attention of more traditional investors, advisors and partners. Forbes got in touch to ask him for more details on how crowdfunding can help nurture ecosystems around the globe and the obstacles that still stand in the way of its greater use.

Why do you think the “bottom up” method of crowdfunding beats more “top down” initiatives like government accelerators, etc.?

I believe that both are necessary — and that one without the other is relatively ineffective. Top down initiatives generally mean capital or resources given to those in the ecosystem (investors, companies, working spaces) by the government. These can have a short-term impact but have a lesser long-term effect on the level of talent, experience, diversity, and successful outcomes when done in isolation. It is hard for investors and the free market to pick winners and effectively allocate capital. It is more difficult for government to do this adequately, though there is a place for it in building capacity and helping jumpstart an ecosystem locally.

View:  Equity Crowdfunding for Investors - Frequently Asked Questions

Bottom up methods are more about small groups collaborating, sharing knowledge, sharing resources, sharing capital. They complement the top down by building interactions and networks where good ideas and skills spread more effectively. Crowdfunding and equity crowdfunding are a kind of “meeting place” of ideas and companies.

Are there regions or countries that are particularly well placed to take advantage of the community-building aspects of crowdfunding?

There is a significant global entrepreneurship movement. Entrepreneurs are building incredibly innovate products and services in places as difficult as central Africa, and solving hard and meaningful problems.

Equity crowdfunding is and will scale faster in more mature ecosystems like the early-stage investment market in the US. There are larger existing flows of investment capital and risk appetite that are moving increasingly online in the US. That said, the lesser developed countries and regions have the opportunity to effectively speed their development of an entrepreneurship and investing culture and “leap-frog” a few of the development phases that other markets have had to slowly grow through.

I believe equity crowdfunding will be a key growth driver of entrepreneurship and innovation in Latin America, Southeast Asia, and parts of Africa. We are the first and largest investment network now in Mexico, and are expanding into other countries in Latin America.

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