Our LaunchTalks: Show Me The Money event about new funding sources debated some of the hottest topics driving changes in the fintech space. The panel included experts from the private markets, equity crowdfunding platforms and a bitcoin exchange talking about how new regulations and technologies are transforming the financial markets. The panelists’ comments were extremely well received and provoked engaging questions from the audience which consisted of business owners, technology companies, financial professionals and creatives. The crowd enjoyed intimate conversation over wine and cheese in a townhouse loft surrounded by art.
The initial discussion focused on the JOBS Act and its most significant implications, increasing the number of prospective investors in private firms to 2,000 (excluding employees) from 500 (which included employees) and lifting the “general solicitation” ban that had prevented advertising, which reduced hurdles for many companies seeking initial public offerings. The equity crowdfunding provision, Title III which is yet to take effect, will allow individual investors to buy shares, further expanding the available source of capital beyond sophisticated or accredited investors. You can also check out some video highlights from the event here.
Aaron Kellner, Investment Executive for SeedInvest, an equity crowdfunding platform currently leveraging Title II of the JOBS Act, discussed the various funding path alternatives and the other types of crowdfunding approaches, such as real estate, royalty and cause-based, that have evolved outside of equities. He described how companies with large consumer audiences and broad commercial appeal can benefit from their customer validation, which in turn can drive market growth, as Oculus, a virtual reality company acquired by Facebook for billions demonstrated.
“Technology is now being infused into processes that have long been established to transform them, for example creating centralized systems to engage with, replacing use of paper. ” Aaron Kellner
Adam Smith, CMO of Startup Valley, another equity crowdfunding platform targeted at technology companies under Title III of the JOBS Act, discussed the increasing role that crowdfunding can play in helping high growth businesses to promote their companies and gauge market interest prior to evaluating a public offering. Crowdfunding can be a more cost-effective way to access capital for businesses, particularly as no new pension funds are being created, and represents a democratization of ownership. He highlighted the different crowdfunding niches and the importance of talking to friends and family prior to starting a campaign – the ability to leverage “brand evangelists” creates a huge opportunity for local bricks and mortar businesses. However there was some debate around how clearly retail investors will understand the implications of their ownership stake – will they actually see any returns on their initial investment?
“A rewards-based crowdfunding campaign can become part of a company’s overall marketing strategy to generate interest, drive engagement, validate the market and be a precursor to an equity crowdfunding investment offering.” Adam Smith
Rob Malin, Vice President of Sales for Nasdaq’s Private Market, an alternative source of liquidity for private companies, shared his experience with companies looking for ways to create liquidity for existing shareholders. As companies are remaining private longer, they are waiting until later stages to capture alpha or generate liquidity. The current process of managing the capital table is very manually intensive and cumbersome, so Nasdaq is pursuing opportunities to make this process more efficient for private companies.
“As private companies create more value, businesses are waiting longer before an IPO.” Rob Malin
Shawn Sloves, CEO of Atlas ATS, outlined how bitcoin works. He explained the digital currency protocol as an open source technology that stores value whereby the block chain records the value, while the coin itself can represent anything, for example ownership of a house or stock or a luxury product (which could be given a unique ID). This new approach of having a bitcoin wallet with the private key (that an individual owns) and a public key (with a designated address) creates security and immediacy, while also reducing fees which can empower businesses. The ease of use reduces the time-consuming process of establishing lines of credit and can disintermediate credit card companies. Shawn discussed how rapidly both the currency’s value and number of owners had increased (Coinbase’s client base exceeded Facebook’s at a similar stage of its growth). He commented about the challenges around managing risk, the current state of the money transmitter licensing process and finding common ground from a regulatory perspective – with progress being made as New York State takes a lead with its bit license.
“Bitcoin technology is the biggest disruptive thing I’ve seen since the internet and email… It has the potential to change everything we know in terms of ownership of stock.” Shawn Sloves
Lenore Kantor, President and Chief Launch Officer of Launch Warrior, a strategic marketing and business growth consulting firm, moderated the panel and explored the ways that regulation and technology are creating significant changes for both companies and investors. She noted some of the potential opportunities for retail investors and the challenges of competing with more experienced institutions. The recent pace of change was quite striking in that all four businesses on the panel did not exist over 2 years ago.
“The pace of change is unbelievable and the potential implications for retail investors and the capital markets will be fascinating to watch.” Lenore Kantor
Small business owners inquired about how they might take advantage of these new resources and opportunities – whether through bitcoin or crowdfunding to grow their businesses. There were also some very interesting audience responses to the leading question: “What is the most important driver of change in the financial markets today?” Comments ranged from regulation, new technology like bitcoin, industry consolidation, distrust of banks, role of the retail investor and most notable and thought-provoking, women (that last perspective from Patrick Williams, Publisher of DailyWorth.com).
Big thanks to our lead sponsor Atlas ATS. Wandering Bear Coffee graciously provided cold press ice coffee tastings. Around Digital Media took fabulous photos and captured the event on video at Dejavu, the lovely art-filled venue. We are grateful to our supporters and attendees, all of whom enjoyed the event and made the evening a lot of fun.