Hello Beautiful People!
A quick note to point out the obvious thing in RegCF...the Broker Dealers are joining The Crowd. Some bullet points for you to mull over:
- Last week $17.3M was committed to RegCF deals. This is probably up 100% from 2020 but you'll have to go to KingsCrowd.com to confirm.
- Note the #5 Funding Platform isn't actually a "Funding Portal" but a Broker Dealer.
- Who is Dalmore Group? And why should you care that BDs are swimming with The Crowd?
While there are only 65 FINRA registered Funding Portals, there are over 3200 Broker Dealers in the USA. BDs have far more access to capital than even Sharks do. To put it in terms more easily understood, if VCs are Sharks, Broker Dealers are Orcas. DYK that Orcas are the only seafaring creature that actively hunts Great White sharks?
SO! This is a big deal because BDs have access to institutional capital the likes of which VCs could never fathom accessing. What happens when institutional money meets crowdfunding?
Buckle up. RegCF is on track to generate over $550M in funding in 2021 and looks to have 100% growth year over year until at least 2026. Which means, conservatively, $8B to $12B a year could be raised via RegCF. How is that possible you ask? Deep pocketed Orcas, swimming in the early stage part of the investing ocean.
For more information on Dalmore Group follow their CEO, Etan Butler. And for more informatics and data on the state of crowdfunding visit www.KingsCrowd.com
Cheers!
Samson
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Most BD's do not touch deals below $5M and frankly given the additional scrutiny they get from FINRA regarding "Best Interests" (REG-BI) and the need to register in all 50 states COMBINED with the need to have relatively sophisticated IT to manage the granularity, I suspect we're NOT going to see many BD's jump into the space.
If anything, the survivor FP's will WANT to register as a BD in order to generate meaningful revenue from REG-D and REG-A offerings, plus it is really the only path to operating an Alternative Trading System (ATS) at the moment.
The reality is that the BD space is SHRINKING year over year at a pace of about 3% for the past 10 years as the owners retire or expire.
https://www.investmentnews.com/number-registered-reps-brokerages-declined-in-2020-finra-206872
I suspect it is actually going to accelerate and eventually FINRA will be replaced by a more nimble decentralized organization! Imagine having one that that actually understands who they work for and how to do their job consistently operating based on some kind of Service Level Agreements. FINRA cannot survive on their current model as it will be impossible for them to make payroll based on trying to fine members over perceived harms. The largest of the firms do not get fined and the smallest of the firms just cease to operate.
It is simply not worth it for the vast majority of Broker-Dealers to get involved with REG-CF -- the cost to comply with the OFFICIOUS documentation requests nearly requires hiring a full time person just to open the emails -- not even kidding here as we had fully three different departments at FINRA nosing around looking for something to do in the last few weeks. Of course the right-hand doesn't even know it has a left-hand over there...
The future of funding is PRIVATE PORTALS -- where issuers simply license and host their own deals under some kind of simple fee model as part of an "Investor Relations as a Service" spend.
When issuers ask us how many investors we are going to find them I immediately ask them if it will be okay for us to spam their investors with other offerings? Most recoil in horror at the idea and they should! Portals do not own investor eyeballs or wallets and people do not randomly go looking for things to invest in. Not a single issuer has been able to tell me about time they fired up their laptop and went looking for a startup to invest in even though they have this fantasy belief that others must be...
Lastly, nobody brags about their ISP or what accounting software they use to run their business. The focus on FP's and BD's is akin to that as there is really no correlation in an issuers success and we are already witnessing some issuers "hopping" from one platform to another trying to fish the ponds out.
Frankly I'll be surprised if there are even 50 funding portals in operation this time next year.
And I'm looking forward to Samson buying that steak dinner on that wager ;-)
-dvd
What! We don't have agreement about the future direction of crowdfunding?
The absolute delight.
Cause there is more than one way to the top of the mountain but at least we're all heading in the same general direction.
Too, I agree that no one cares who their Internet Service Provider is and that private portals will play a HUGE role in the future of crowdfunding. Apparently there is more than one path to success for capital formation. ;-)
"All fundraising from selling magazine subscriptions door to door or soliciting capital for your business is the same: it is the SLOW conversion of your social capital into financial capital!"
People who "post and pray" or "spray and prey" do not raise significant amounts of money.
Yes there are "lottery winners" but they are the exception not the rule. There are tons of people with small amounts of money willing to set it on fire for kickstarter potato salad recipes as any fool and their money are soon parted.
This isn't a mountain -- it's a marathon of sorts laid out on a course that looks like the children's game called "chutes and ladders" ;-)