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2014 will be remembered as when “Crowdfunding” became a formal entry into the lexicons of financial services and social media. A beacon of the “sharing economy”, crowd finance has evolved from meager online intermediation of a wishful funding for the a starving artist, to now an industry that has yielded two multi-billion dollar public offerings with more to come. Certainly, the industry is gaining steam in various genres of finance – be it perquisite, corporate or real estate – and we expect 2014 to witness nearly $5 billion of successful crowd financed offerings.
While there are still hopes for accelerated growth, there are still challenges. The term “crowd” initially intimated natural persons participating, and probably non-accredited investors, as pursuant to Title III of the JOBS Act. Well, the make up has changed as this mode of finance is increasingly becoming institutionally oriented, at least for those that are pursuing securities-based offerings. Further, we are seeing various business models begin to pivot, as the basic intermediation model is a bit more complicated and given the nature of what’s required, can such platforms create sustainability? We have also expected that broader participation of investing would take place through this online, even panoptic, platform, but most are still highly localized. Is this a global phenomenon with global participation? The technology is there, but can we see the potential in action.
With respect to CFB’s Person of the Year, there were many notable individuals, each influencing the events of the year, and rightly could have been recognized. From the Vermut/Suber team at PROSPER for its turnaround, or Renaud Laplanche and the successful Lending Club growth and IPO. The Miller brothers at FundRise with their $45 million venture round led by social media platform RENREN, underscoring the convergence of financial services and social media. How about Mike Cagney at SoFi taking on the Student Loan market? Certainly there were the folks at OnDeck, AngelList, many of the infrastructure parties, SEC officials and those in the press, including CFB, that press the words to foment the continuation of the buzz.
But, with all that said, we concluded that one individual has really emboldened the vision for crowd funding. As such, our crowdfunding person of the year is Jon Medved. Mr. Medved had been a long-standing venture capitalist based in Israel, and has invested globally for decades. With the view of where this financing concept may go, he founded OurCrowd, which has become one of the most active and successful sites in terms of deploying early stage capital to aspiring technology firms. We recognize Jon and his efforts with OurCrowd as they have developed a business model which, given our suspicions on many, makes sense, allows the “crowd” to play, but has an approach dissimilar to others.
Leveraging his relationships and venture investing background, the OurCrowd model is analogous to a “just-in-time” venture fund, where OurCrowd puts up direct capital as the lead investor, and then invites the crowd to participate as follow on investors. Certainly, there are costs to the “crowd” such as incurring a management fee as well as OurCrowd carried interest, but fees and carries are on a deal by deal basis and there is no management fee for committed but undeployed capital. Additionally, Mr. Medved and team has commenced a global expansion, setting up offices in Australia, Europe and the United States, pursuing the power of the crowd in terms of where deals originate as well as where investors have appetite. So with both a funding model to engage the crowd with “smarter investing”, and then tapping into global audiences, Our Crowd characterizes what “crowdfinance” was meant to do.
A captivating speaker, Mr. Medved has graced many conferences with his inimitable wit and vision for crowdfunding done “his way”. So far, we are impressed and supportive of Mr. Medved and his Our Crowd endeavor. We believe he exemplifies the thought leadership in the space and thus our recognition of him and his efforts.
WATCH: Jon Medved Keynote Speech at GLOBAL IMPACT AND POLICY UC BERKELEY SECOND ANNUAL ACADEMIC SYMPOSIUM
“Equity Crowdfunding: The Next Wave of Innovation Finance”