Is CrowdFunding a Scam
Boom or Bust, Godsend or Scam, New Vision or Confidence scheme; we’re amazed at the conclusions leapt to about crowdfunding. So much is competing for our attention that often hyperbole rather than objectivity is what we remember. CrowdFunding is the best process realignment since the invention of the automobile!
CrowdFunding, like all systemic modifications to the business process, will build slowly towards a new capital formation process encompassing all that is right about attracting capital to high quality ideas. It will do this it brings the ultimate consumer into the product lifecycle sometimes even before the money is needed and will encourage the ultimate consumer to stay involved during the entire product lifecycle.
It is clear that the regulators, working from a position of fear caused by their lack of control of the current capital system (Remember Enron and Bernard Madoff?), are imposing constraints of the broken system into crowdfunding. Change is hard and a part of life as we know it. Challenging the orthodoxy always has a period where the an outdated process is attempted as the solution even when it is no longer the best course of action. Many hate change and always seek the familiar.
All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.
Hiding in the hyperbole, is that the new process has both attainable goals and value added attributes that will make it succeed more so than any other funding choice.
Process change always has bumps and bruises along the way. It is never pretty when it begins and there will be many who will abuse the new paradigm. But there is before us a true improvement process for capital formation and it will succeed.
CrowdVestors (investors) are not stupid. They know what they want and they will vote with their wallets. Remember the idea behind CrowdFunding is a decision about the size of 4 steak dinners not your life savings. People can choose to put $250.00 towards a CrowdCo without horrific consequences.
CrowdVestors are encouraged to participate in building the product from the ground up. It is in our nature to be entrepreneurs. We in America have had this built into our core ideals “life, liberty and the pursuit of happiness”.
CrowdCos (campaigns) are actually shortening their product marketing effort and building a quality proofing engine into their development plan. This alone is worth the cost of a sustainable CrowdFunding Campaign.
CrowdCos understand the nature of new business is more craftsmanship rather than enterprise. Many projects do not need huge towers of industrial might to get their product to the ultimate consumer. Since we are not building steel mills and railroads we don’t need their form of capitalization. Small ideas, properly groomed, can grow into the largest of industrial powers; but they do not need to start huge and they can grow with their crowd.
Now it is true that here in the US we wait on regulators. We do not bemoan their hesitation and understand it’s the natural progression of movement from old to new. Process, by its very nature, is built for stepped change and continual improvement.
We need two things from government – a platform of measurements and an approval of purpose. The JOBS act approves the purpose. The SEC sets the measurements. The rest we will build within the market place and it is there that the new paradigm of capital formation will find its wings. We assert:
- All forms of CrowdFunding will survive and continue to enhance our communities.
- All forms of CrowdFunding will morph from the existing construct to new more robust forms as we come to trust the new system. Equity will look different and perform better than the model created to build railroads and mills in the last century.
- Products and ideas will find their rightful place in the new structure and management will learn to use these new tools of capital effectively.
- The scams will continue but will be weeded out and the overall structure of capital formation process will have a new empowering tool for the engines of commerce.
- Doomsayers will always be part of our life and they will be the ones shouting first and loudest. But process and the pursuit of happiness within a community of enlightened citizens will always win out.
I know this to be true because it in ingrained into our human spirit. Some have called CrowdFunding the democratization of capital. It is the new frontier that will take us to the next level of enlightened economic growth. We are very excited members of the crowd!
[Article Contributed by Bill Joyce, Co-Founder of CrowdFund RoundUp, and Adam Pressman, National Executive Officer]