While America Slept: Our Lost Billions from Crowdfunding and FinTech Innovation


Global Crowdfunding & Alternative Finance Researcher | Strategic Advisor | Author |

The recent lawsuit by the Massachusetts Secretary of State Galvin attempting to subvert the expressed will of Congress, and the well designed and deliberate rules allowing firms to raise money under Title IV of the JOBS Act is the latest in a series of tragic mistakes by our regulators and consumer protection advocates. While America dithers, the rest of the world is rapidly innovating and developing profitable and safe financing vehicles helping fuel business growth and innovation.

Chinese Premier Wen Jiabao recently spoke at Tsinghua University and announced that the next 30-year plan for China will be based on innovation – not on manufacturing. Premier Jiabao understands the transformative power of innovation, and Tsinghua University is launching a huge program focused on FinTech and small business capital formation to provide the financial innovation necessary to support a new innovation based economy.

The European Union has an incredibly effective working group in crowdfunding and is crafting regulations to support crowdfunding – recognizing that crowdfunding provides a meaningful and significant source of alternative capital to spur economic growth.

The United Kingdom has crafted a lightweight regulatory scheme that has led to the creation of the most dynamic alternative finance market in the world. The eyes of the world are turning to London for leadership in finance, and the US is correctly seen as a failure in terms of supporting financial innovation.

What are our regulators doing to support job creation and economic growth in the United States? Nothing! We are still waiting more than three years later, for the SEC to pass Title III – which as I have written before, is unlikely to happen without the intervention of Congress.

Based on an exaggerated sense of risk – a fear that the open, transparent and regulated crowdfunding market will somehow turn into a fraud mill, we have potentially lost billions of economic growth. The crisis in America is not the too-big-to-fail banks; it is the too small for anyone to care about small businesses. While 2104 saw a resurgence of Venture Capital investing, the 99.9% of businesses that are not capable of receiving venture capital investing are left languishing – with banks hamstrung by Basel III and Dodd-Frank and unable to profitably lend to small businesses.

The Galvin vs. SEC case is tragic – it will delay the Title IV market from growing for years if the Federal Courts issue a stay. It represents the worst in government, the desire of a State to subvert an important new financing market that could lead to hundreds of small IPOs. If Venture Capital firms are wrong 80-90% of the time, what possible logic leads anyone to believe that a State security regulator can choose good investments for its citizens? After all, Massachusetts rejected Apple computer’s filing – since the company was overvalued!

Tax policies and incentives need to be created to encourage and facilitate risk investment and seed capital for small business. Crowdfunding and Alternative Finance cannot flourish in an era of regulatory uncertainty. There is already a drumbeat in certain Washington, DC government buildings for increased regulation of marketplace and alternative lending.

While I generally support a balance between effective regulation to support citizens – such as environmental regulation – and the need for business growth, in this case, the best available evidence demonstrates that regulators are attempting to protect us against the risk of profit in a new market they simply don’t understand. The exaggerated risks of fraud don’t justify the billions in growth we are losing to other nations.

It is time for us to focus on the innovation financial economy – without it; all of our other innovation programs may simply be a waste. It is time for government to allow a new market to flourish – following the lead of the UK. In the case, the US response to financial innovation has been a tragic, uninformed and dangerous miscalculation.

I encourage Congressman McHenry to dust off his legislation and short-circuit this lawsuit by pre-empting State review of Reg A+ offerings. It is time for America to act and encourage financial innovation, before more Billions are lost, more jobs destroyed, and more intellectual talent flees the United States for countries that are more tolerant of financial innovation.

Tags: , , , , , ,


ForbesHow Crowdfunding Can Supercharge Your Campaign In 2016ForbesThey say that there are about 7.45 billion people living in this world right now. Imagine that if you could get each of these seven-and-a-half billion people to contribute one cent to your project, well, you know what I [...]

ForbesHow Crowdfunding Can Supercharge Your Campaign In 2016ForbesCrowdfunding has helped a lot of businesses recently. Want to join the queue? Here's how to raise funds for your projects.and more » [...]

San Antonio CurrentSan Antonio Cat Cafe Launched 20K Crowdfunding CampaignSan Antonio CurrentAs Austin's Blue Cat Cafe turned one (and dealt with some gnarly vandalization), San Antonio's Cat Cafe launched a GoFundMe crowdfunding campaign to help open its doors. Casey Steuar [...]

BillboardCrowdfunding for His Life: How GoFundMe Helped Save a Punk Legend's LifeBillboardSo on the advice of a close friend, Julian -- like an increasing number of aging musicians without a lucrative record contract -- turned to crowdfunding, launching a campaign on the No. 1 pl [...]

Minneapolis Star TribuneSEC releases new, relaxed rules on investment crowdfundingMinneapolis Star TribuneNew rules announced this week will make it easier for small companies to raise capital from small-time investors, another step forward for Minnesota's fledgling investment cr [...]

The GuardianCrowdfunding: the new buzzword for academics needing research moneyThe GuardianArchaeologist Dr David Petts, from Durham University, has also used crowdfunding, raising almost £25,000 to fund a project on Lindisfarne, off the Northumberland coast. The dig, in June, led to [...]

How Crowdfunding Has Changed the Startup GameSingularity HubCrowdfunding has become a multi-billion-dollar industry, funneling millions of dollars into thousands of projects. Technology in particular is one of the leading categories on popular fundraising platforms like Kickstarter an [...]

The RecorderFTC Hears From Company Leaders as Crowdfunding GrowsThe RecorderSACRAMENTO — The future of crowdfunding is one of specialization, with an ever-increasing number of firms finding niches in equity, nonprofit and even creative projects silos, industry leaders told a Federal T [...]

Crowdfunding in commercial real estateJournal Record (subscription)jdavidchapman In 1997, a British rock band funded a reunion tour through online donations from its fans. This may have been the first example of a concept now known as crowdfunding. The crowdfunding industry has quickl [...]

Crowdfund InsiderWhen It Comes to Retail Crowdfunding, SAFEty FirstCrowdfund InsiderOn September 22nd, Crowdfund Insider published a post summarizing the arguments presented in our new essay entitled “Crowdfunding and the Not-So-Safe SAFE“ (forthcoming in Virginia Law Review Online). [...]

CFB Finance

Press Release

CrowdFund Beat News

Hello @CrowdFundBeat's 17363 followers - thank you so much for following! Wishing you all a happy Thursday! >> bit.ly/_want_this_free

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |