Despite the fact that there are heaps of articles being published, suggesting that a crowd investing sector or geography is dominating the rests. While appealing as a thought, the market is still nascent and any domination, may simply suggest that growth is uneven cross the various dimensions. However, there are observations that can be made in how the market is evolving, at various stages across the world.
The rise of a more cooperative societal nature among the citizens of the United Kingdom over the past decades has established the UK as a 'collaborative economy.' Collaborative economies are roughly defined as economic activities and models where people have access over ownership. Decentralised networks are promoted over centralised institutions, and wealth is unlocked. More and more people are sharing, everything from bicycles to private airplanes, and their own bedrooms. This collaborative nature has stirred up the pot of traditional market practices; we are now looking at a new way of doing business. And consequently, just as we share our space, we are looking to each other for finances, through crowdfunding.
An innovation is said disruptive when it “helps create a new market and value network, and eventually disrupts an existing market and value network (over a few years or decades), displacing an earlier technology”.
Crowdinvesting has been evolving in a way that could well be that of a potential disrupting innovation for many markets. And real estate may be the first one.
California and New York have dominated the entrepreneurial and crowdfunding race in the States, but almost out of nowhere, the southern state of Kentucky, who was ranked second to last in the entrepreneur ranking in 2008, is now in fourth place according to the State Entrpreneurship Index (SEI). An outstanding and promising achievement for the small state. Recent reports from the state indicate that more Kentuckians have started their own business, and the number only appears to be growing.
Crowdfunding has started to take ground in Asia as well and the countries in the region are reacting to this innovation quite promptly. After India and Japan, it’s now Malaysia’s turn, which just released a set of drafted rules for equity crowdfunding.
The future of Asia’s crowdfunding industry is looking to change in a highly promising manner as a number of countries have pronounced their ambitions for crowdfunding. Singapore aspires to be the crowdfunding capital of the region, and has pronounced this claim by hosting the very first Asian crowdfunding summit, a promising first step.
Last week it was announced that London is the world’s crowdfunding capital, based on some recent statistics published by a crowdfunding research institute, which showed that the British capital was the city with the highest number of crowdfunding campaigns launched per day. The announcement comes as little surprise, considering that the incredible growth of crowdfunding in the UK was already in the air. A very open mindset with regards to innovation and technology, on the one hand, and a prompt answer from the local authorities - that reacted to the growing phenomenon putting in place a regulation -, on the other hand, allowed British crowdfunding to flourish at very fast pace.
“Economic Crisis”. A term we heard a lot in recent years and, unfortunately, we still hear today in Europe and in the US. Yes, because the economic crisis is still a reality in many cases, especially among small businesses, one of the backbones of western economies.
In the US, an “accreditated investor” is defined as the individual who 1) had High Net Worthearned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years AND reasonably expects the same for the current year; OR 2) has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence). These criteria have not changed much since the 80’s and they currently allow about 7% of the US population to be qualified as such. However, the SEC is considering to modify the definition, potentially making more stringent the requirements, which could severely hinder US early stage finance market.
Together with the UK, Germany is the biggest market for securities crowdfunding in Europe. In fact, German platforms have been up and running for a few years now, allowing more than 100 projects to raise seed capital from crowdinvestors and reaching record-breaking sums, like the €3 million recently raised by a startup only in a few hours.
The phenomenon has been developing within the current legal framework which did not pose too stringent controls over the platforms and the issuers. Until now. In fact, the German government has proposed in the past days a draft bill which aims at increasing protection of small investors (i.e. Small Investors Protection Act).