BY Dara Albright CrowdFunding Beat Guest Sr. Editor, a financial revolution – ignited by hordes of individuals who have grown leery of conventional financial institutions, and powered by contemporary P2P and crowdfund marketplaces – has been germinating across the planet.
In the same way that the Industrial Revolution redefined manufacturing and theInternet Revolution refashioned commerce, this “Crowdfinance Revolution” will transform global capital markets and reconstitute financial systems.
Just like in prior seismic industry shifts – innovative businesses will arise from the ashes of the old, visionaries will replace retiring CEOs, and fortunes will be made as well as lost.
What sets today’s revolution apart is the speed at which it is progressing, and the way in which it is being financed. Modern fintech businesses are propagating around the globe – some growing at unprecedented rates. However, unlike the 1990s, the companies fueling this revolution are not listed on traditional public exchanges. At least not yet.
In order for investors to capitalize on this remarkable growth, they generally need to “know someone” who can introduce them to a deal. Or, in some cases, they can purchase shares via online “angel” marketplaces – as long as they meet certain income and net worth standards. This is because our Government – you know that bloated entity that squandered our money funding Solyndra – assumes that people with lesser means are just too stupid to make sound investment decisions.
I, on the other hand, have much more faith in the investing public. I believe that each and every one of us is capable of making lucrative investments – even in startups that lack that indispensable public reporting. You know, like the SEC filings that safeguarded us from Enron and Worldcom.
Just like not every “dotcom” went on to Amazon stature, not every P2P or equity crowdfunding business will create vast amounts of wealth. Some will become iconic brands and rocket to great heights. Others, particularly those merely trying to capitalize on a P2P or Crowdfinance craze, will wither and die like the faux dotcoms that preceded them.
It kind of reminds me of a trading strategy employed by a really smart hedge fund manager during the dotcom hype. I’ll call him Matt, since that is his name. Understanding that the “Amazon Affiliate Relationship” was nothing more than a link back to Amazon’s website in hopes of generating a book sale, Matt began shorting every dotcom company that issued a press release announcing a “strategic affiliation with Amazon”. Despite the insignificant monetary value of such an arrangement, some Internet stocks would soar on these announcements – only to be immediately followed by a sharp decline.
Unfortunately, not all Wall Street professionals were as astute as Matt. Had investors and analysts been on the inside of the nascent Internet industry, they would have known that the bulk of dotcom businesses were being constructed from fictitious “barter revenue”. Armed with this knowledge, who knows how many retirement portfolios may have been salvaged.
With some crowdfinance industry know-how and effective research pointers, today’s investor need not suffer the same disastrous fate. As an industry insider who helped initiate the crowdfinance revolution, I created this must-read guideline to help investors determine whether they’ve uncovered a viable crowdfinance investment opportunity or another iteration of dotcom vaporware.
Recognized authority, thought provoker and frequent speaker on topics relating to market structure, private secondary transactions and crowdfinance. Welcome to my new personal blog where you can glean unique insight into the rapid transformation of global capital markets.