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Crowdfunding is the Real Deal - a Report from the Crowdfunding Bootcamp
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Crowdfunding is the Real Deal - a Report from the Crowdfunding Bootcamp

Editor's Note: In this wrap-up from Sherwood Neiss of Crowdfund Capital Advisors, we get the lay of the land for the nascent crowdfunding industry from the first Crowdfunding Bootcamp in Las Vegas.

The first annual Crowdfunding Bootcamp co-sponsored by the Crowdfunding Professional Association and Funding Roadmap was held this week in Henderson, NV. In attendance were over 300 investors, entrepreneurs and members of the crowdfunding industry from eight countries. The conference produced some unique insights, and from our vantage point we can already see trends developing in this nascent industry.

When President Obama signed the JOBS Act into law on April 5, 2012 we knew the battle had been won but not the war. The legislation provided the SEC with 270 days to issue the rules for crowdfund investing (aka equity or debt-based crowdfunding) to operate. Soon after, we learned that the industry would fall under the oversight of FINRA. In an attempt to provide a united industry voice for portals, investors, entrepreneurs, and third-party providers two industry associations were formed, The Crowdfunding Professional Association (CfPA), focused on investor education and representation, and Crowdfund Intermediary Regulator Advocates (CFIRA) began actively engaging with the SEC and FINRA to provide accurate and timely information from the industry during this rule-making phase of the process. (Editor's Note: The National Crowdfunding Association was also formed in 2012) This conference organized by Ruth Hedges of Crowdfunding Bootcamp was the first time members of all of the associations came together to share best practices, educate entrepreneurs and plan for the future.

As founding board members of these organizations and advisors to portals, incubators, investors and governments, it is fascinating to both watch and participate in the growth of this industry. One of the most interesting insights to come out of the conference from our perspective was the emerging trends. Here are a few of the top crowdfunding trends to watch:

1) Crowdfund investing IS coming and it will be loud and strong. You can tell this is going to be powerful when more than 300 people, from seasoned entrepreneurs to angel investors and security lawyers, assemble to make it known that crowdfund investing is the future of startup and seed/gap financing.

Recent opposition by the North American Securities Administrators Association (NASAA) has only helped the industry to unite around the Crowdfunding Professional Association and build momentum. While NASAA only sees fraud in their daily jobs, their role doesn’t allow them to provide alternative solutions or the ability to acknowledge that fraud does NOT exist in over 99 percent of the transactions that take place in the securities markets.

There is strong interest in crowdfunding from not only entrepreneurs and crowdfunding professionals but also the investment community and government—our voice is growing and we will make an impact!

Crowdfund investing (as part of the JOBS Act) passed both houses of Congress with one of the largest bipartisan votes of the current congressional session. It represents not just Democrat and Republican ideals about how the security markets should operate in 2013 and beyond but the WILL OF THE AMERICAN PEOPLE to create jobs and support small business, entrepreneurs and innovation. If regulators chooses to delay or throttle the opportunity that Congress and the President signed into law, they are reversing what both houses of Congress and The President have passed . Crowdfund Investing is Web 3.0 where social networks meet community financing. As we learned at the event, it has been operating in similar but limited fashion in Australia and the UK for up to 7 years, and has been operating free from fraud.

“The enthusiasm displayed by the attendees of the Lake Las Vegas Crowdfunding Conference is a clear statement of the nationwide commitment, desire and necessity to having Crowdfunding fully approved and operational in 2012,” said Doug Ellenoff Partner at Ellenoff, Grossman & Schole LLP a law firm specializing in crowdfunding. “Representatives of funding portals, entrepreneurs and investors mingled to strategize on how to best approach this emerging new industry to best serve all the constituents in the most responsible cost effective manner and to ensure that the proper balance is achieved between access to capital for entrepreneurs and appropriate investor protections. Every month the ranks of Crowdfunding champions increases across the country and their collective voices are resonating in all corners of the US economy.”

2) Together we are stronger. One of the other interesting trends that we are seeing is the solidarity of the industry. In a nascent industry where the regulations are being written staying outside the fold and not working together can be detrimental to a platforms health. One of the commonalities of many of the platforms is their willingness to work together—so everyone can succeed. The most successful platforms seem to know this and are more than willing to share best practices, give advice and help others. During Wednesday morning’s panel on Crowdfund Investing one of the platforms even stated “The market is big enough for us all. We welcome new platforms—the more the merrier.”

3) A rising tide lifts all ships. Who can forget the quote from Fred Wilson stating that crowdfunding will be a $300 billion dollar industry? While we believe this is true and have a white paper coming out in the next weeks drilling down market numbers we believe the success of crowdfunding of the market will be so much larger when you factor in the impact already developing in the “white space” of this ecosystem. We can see that industry; ranging from legal and accounting services, marketing and PR for crowdfunding companies to entrepreneur and investor education, due diligence and other services making a very large impact on the economy as a whole. While there will be a lot of dollars spent by companies looking to raise capital on incorporation, audits, marketing and others services think of the impact that will be made once capital is in the hinds of business owners. Currently entrepreneurs only have access to 1% of the capital what happens when they have a bigger slice of the pie? They need legal services, accounting, and many other services to manage and run their businesses. The effect will be large and long lasting in our opinion.

This industry is full of disruptive technologies. If you thought the idea of democratizing access to capital was disruptive, wait till you see the investor relations tools and fraud prevention mechanisms that will be launching soon. These services have been developed for the crowdfunding industry to deal with thousands of investors and issuers all across the country and will increase transparency and credibility in the broader markets.

4) The world is listening. There were attendees from Singapore, Israel, India and Canada. International interest is high in this topic. Everyone is looking for ways to increase jobs, and improve economic development and stability. Crowdfunding can provide a new solution to help address these issues while increasing innovation and entrepreneurship…all with no additional government spending.

Anecdotally, we are seeing this in our work at Crowdfund Capital Advisors working with governments, development agencies, and multi-national telecommunications firms seeking to address early stage financing gaps by adapting a crowdfund investing framework for their countries/securities cultures similar to the one used in the JOBS Act in an effort to stimulate entrepreneurship, innovation and jobs.

This year alone we have been to many nations including Canada, Sweden, Turkey, Mexico and Italy. While in Rome earlier this month we spoke at innovation summits, entrepreneurial events, and met with representatives of the three largest political parties in Italy to learn about the situation there and share our perspective on crowdfunding. Just last week, after two years of hard work by many dedicated individuals, the Italian government signed a “start up” decree and a “digital agenda” decree, that among other important actions, also legalized crowdfunding.

We also recently traveled to Mexico City to learn about that ecosystem, as well as being called to Colombia to work with the national development bank on early stage financing and entrepreneurial issues. Is this the tipping point for global crowdfund investing?

We think the next 36 months will create national, regional and global opportunities for first movers and fast followers. The world is listening to the crowd.

In just six months the Crowdfunding Professional Association has grown from 13 members to more than 800. The urgency and passion of this new industry was heard loud and clear throughout the 3-day event. We believe we can build a robust and orderly market in which our nation’s job creators have the capital they need to continue to lead America into the future. (Please SEC/FINRA—don’t let us down).

Finally, we were touched and honored at the event by being selected to receive the Crowdfund Visionary Award for drafting the framework and leading the lobbying effort to legalize debt and equity-based crowdfund investing in the U.S. There is no greater honor than to be recognized members of your industry—there were so many who gave so much to make this.

Read more from Sherwood Neiss on crowdfunding moving forward here.

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