Three Reasons Why Crowdfunding Will Disrupt Capital Markets

Over the last five years we have seen Internet technology disrupt a number of industries, sending the dominant players into a downward spiral from a kingdom they once ruled. Whether it was ignorance from management teams or simply the fact that technology changed too rapidly for their massive organizations to shift their operations, the results remain the same with new companies taking over as the market leader. Its not just the main players that are effected when an industry is disrupted either, its all of the supporting industries and service companies that receive a rude awakening as well.

The music industry was quietly taken over by Apple and its iTunes service when executives failed to adapt to online music piracy.

Video rental giant Blockbuster filed bankruptcy in 2012 after years of opting not to enter the online market via an acquisition of Netflix.

Amazon’s online book sales’ having an effect on traditional bookstore chains is an understatement.

Newspapers….you get the idea.

With the rise of Crowfunding platforms around the global and non-profit organizations like the National Crowdfunding Assocation of Canada (NCFA Canda) advocating Crowdfunding within their respective countries, it appears to be only a matter of time before our capital markets are disrupted by this Internet technology trend. The launch of the JOBs act in the United Sates, short for Jumpstart Our Business Startups, gives the ability for the general public to receive company equity in exchange for funding is now a possibility. Excessive profits, amid fraud and scandals have really demonstrated the inefficiencies in the worlds capital markets, which is why the following three aspects of Crowdfunding could disrupt capital markets:

Transparency

The transparency and social networking dynamics of crowdfunding have been excellent at keeping fraud near zero, to the point where many people feel heavy regulation will work against this new economic machine. The participatory nature of Crowdfunding creates a public forum of sorts between funders as well as the target investment. In an industry shrouded in secrecy and back door deals, transparency to the public is the driving force behind the rise of Crowdfunding.

Versatility

Current financial products can be repackaged to be delivered through a Crowdfunding model. Indicating where things are headed, for accredited investors there is IRAvest, the Internet’s first equity-based crowdfunding portal specifically created for self-directed IRAs.

Accessibility

The issue is entrepreneurs find it very difficult to access financing so Crowdfunding is a huge transformation in the small business financing landscape. Considering small business account for the majority of job creation in both Canada and the US, the implications could be very promising for the economy. From a small investor perspective you will now have access to an asset class that was previously difficult to engage.

If you would like to support Crowdfunding in Canada, you can sign i-Canada’s Crowdfund Invest Campaign petition here. Crowdfund Investing will change the rules of investment for the first time since the 1930s. It will add the power of the phenomenon of our new age – social media – to the world of finance. Companies and idea will now be able to rise, where before they would not have had a chance.

Source: Calgary Herald – Brock Willis

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