Global Crowdfunders Compare Notes at Berkeley Forum

By Robert J. Mullins

Senior Staff Writer


Oct. 20, 2013 —

Julia Groves

Julia Groves of the UK CrowdFunding Association

Crowdfunding may be new, but it’s catching on in a number of countries as evidenced by the turnout at an academic forum on the subject at the University of California at Berkeley.

Crowdfunders, financial advisors and academics from the U.S., UK, Brazil, Canada, Egypt and Korea – just to name a few – gathered for the “Academic Symposium on Crowdfunding: Setting the Research Agenda” held Oct. 17 and 18. The event was hosted by UC-Berkeley’s Fung Institute with financial support from the Ewing Marion Kauffman Foundation.

“I think it’s an exceptional bunch of people to have in the same place at the same time,” said Julia Groves, chair of the UK CrowdFunding Association.

The leadoff panel featured crowdfunding experts from a number of countries who explained the regulatory framework they have in place to govern crowdfunding within their borders. In the UK, for instance, crowdfunding is limited to providing debt or equity financing for entrepreneurs, which is only now being set up in the United States. Conversely, the rewards and donations model of crowdfunding, — where donors contribute relatively small amounts of money, maybe a couple hundred dollars, and receive a t-shirt or a sample of the product being developed – is popular in the U.S. but is not used in the UK, said Groves.


A number of other presenters remarked that the genesis of crowdfunding was the global financial crisis of 2008 in which banks in the U.S. and abroad cut back on lending. Crowdfunding created a new avenue for nurturing startups.

And in Egypt, crowdfunding is looked to as a way to stabilize the country and its economy in the wake of two toppled presidents, a military takeover and riots that have taken thousands of lives, said Shehab Marzban, who’s an executive with an Egyptian crowdfunding business called Shekra.

Having academics and crowdfund executives comparing notes from different nations means some of those countries have already solved problems other countries are still trying to figure out.

Doug Ellenoff is a partner in the New York City law firm of Ellenoff, Grossman and Schole, which specializes in securities law. Besides representing client businesses, his firm also advises the U.S. Securities and Exchange Commission (SEC) on regulating crowdfunding. Under the federal JOBS Act signed by President Barack Obama in 2010, entrepreneurs can, as of Sept. 23, advertise their crowdfunding projects to solicit equity investments, but only to “accredited” investors with an annual income of at least $200,000 or a total net worth of at least $1 million, not including a home.

As an aside, Ellenoff thinks of Obama as the first crowdfunded presidential candidate. “He raised a little bit of money from a lot of people,” he said.

The SEC is in the process of writing an additional set of rules governing crowdfund equity investments by non-accredited investors. But the agency was unaware that regulators in other countries have already accomplished this.

“When we first met with the SEC, they were unaware of the international initiatives so they wanted data points. They wanted to know ‘Shouldn’t we beta test this before we take it live in our own country?’ And the answer is that it is being done successfully without fraud, raising money for interesting entrepreneurs and creating jobs in the process in many countries,” said Ellenoff.

Regulating equity crowdfunding presents the usual conflict between letting the free market operate on its own and the need to put the necessary regulations in place to protect consumers and investors.

“We’re trying to strike a balance between consumer protection and capital formation and I’m hoping there isn’t an overly aggressive, simplistic approach, which is to cut out a large number of people from investing,” said the UK’s Groves.

She remarked that the day before the Berkeley event, she was at another crowdfunding conference in Las Vegas, her first visit to that city and its casinos.

“There was no restriction on how much I could gamble,” she said.







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