Equity crowdfunding is moving into the mainstream.
In September 2013, after Title II of the JOBS Act went into effect, new possibilities opened up in the world of crowdfunding. Instead of just offering a product, discount, or small reward in exchange for monetary funding, crowdfunded projects can now offer equity in exchange for public funding---if they use accredited investors.
Despite that caveat, all sorts of new online services are working to facilitate this kind of funding, from AngelList and Circleup to the FINRA-approved FlashFunders. And now, in another sign that equity crowdfunding is slowly moving towards in to the public consciousness, cable TV station CNBC and analyst outfit Crowdnetic are partnering to release a new crowdfinance index, aiming to give the investing public a window into how this new market is evolving.
"This is a sea change, and it reaches from Main Street where people are building businesses and the barriers are coming down to fund them, all the way to Wall Street, where there are mature investors looking at these platforms to find out what the next big thing is," says Steve Lewis, vice president and senior executive producer at CNBC.
Essentially, since September 2013, Crowdnetic has been tracking all of the fundraising from 16 online leading portals (like AngelList and Crowdfunder). The portals publish data to Crowdnetic, anonymized and in real-time, including valuable investor commitment data. "We see what’s being invested in, what kinds of companies those are, and the geographic locations they’re in," says Luan Cox, founder and CEO of Crowdnetic.
It’s a big market, Cox explains: there are over 8 million accredited investors, yet less than 3 percent have invested in a private deal. Meanwhile, Crowdnetic has tracked over 5000 companies that have come online to raise money, and at any given point in time, there are 3500 active companies on the portals Crowdnetic tracks, publishing data to them.
This may seem like niche news, but there’s potential to draw enormously important information from the index. As Cox tells it, it could be one way for companies to make themselves known to the public even before they’ve committed to venture capitalists. "Companies are coming online onto these platforms without needing permission from VCs," she says.
Cox says Crowdnetic anticipated the rise of wearables thanks to their data. "We were able to add that as a sector in our technology index, then all of a sudden we had something like 300 wearable companies on the platform," Cox says.
Yes, equity crowdfunding may not go truly mainstream until a new breed of service s hows up---one that allows a broader group of people, and not just accredited investors, to buy a stake in a new company. But while we wait for the Securities and Exchange Commission to approve a new set of Jobs Act rules---which likely won’t happen anytime soon---this new index is bringing the idea into the country's living rooms. And that's something.
