The world of crowdfunding and marketplace lending continues to attract the attention of institutional investors, and their involvement in the industry appears poised to grow. A recently released report helps to shed some light on what the large institutions think about the burgeoning sector, and where they think it may be headed.
Richards Kipped & Orbe LLP and Wharton FinTech have released their 2016 Survey of US Marketplace Lending, which surveyed more than 300 institutional investors. Optimism abounds for the future of marketplace lending, with more than 80% of those surveyed believing that a bright future lies ahead. Those surveyed did express some concern about the future of the regulatory environment, and a good majority of respondents believe that a round of consolidation is likely on the horizon.
“The unchecked optimism toward this industry, combined with the fact that it is still maturing, makes it an interesting one to watch, particularly for institutional investors that sense opportunity,” said FinTech President Uday Seth.
While the report points to a prevailing sense of opportunity amongst the institutional investor crowd, not all professional investors are fully on board the crowdfunding train as of yet. A recent post on the Forbes website outlined some of the concerns from the ‘I’m smarter than you’ crowd, which included the inexperience of crowdfunding investors, as well as the increased risk of startup investing. Thankfully, FundWisdom has taken the ball to help shorten the learning curve for those interested in crowdfund investing.
While institutional investors have some concerns about the future of the regulatory environment and the risks associated with crowdfunding, we’ve gained a little bit of clarity on how things will start to play out on the individual investor side. Title III of the Jobs Act recently came into effect, and with that comes the removal of the handcuffs from individual investors.
Previously, accredited investors had the pick of the litter when it came to investing in the next big thing, while the little guy was forced to sit on the sidelines and patiently wait for an IPO that would likely be out of his reach. With the new rules, individuals can invest up to $2,000 in exchange for equity. Startups will also benefit from the new rules, to the tune of now being allowed to raise up to $1 million per year via crowdfunding. For those itching to get in the game and ready to put their $2,000 to work for them, FundWisdom has a whole section dedicated to getting started with investing in startup funds.
Investors are not the only ones recognizing the benefits of crowdfunding. In the past year, several large global businesses have taken to crowdfunding for new ideas and projects, and have gained some valuable insight in the process. What better way to determine the potential merits of a new gadget than taking the temperature of investors that will also make up the marketplace?
Taking the concept of crowdfunding for big businesses a step further, Indiegogo launched a crowdsourcing platform for big businesses earlier this year. The company’s Enterprise Crowdfunding service allows the company to collect public funding for research and development projects that may otherwise get lost in the shuffle of corporate red tape.
Other companies have followed the lead and opened up their own internal crowdfunding platform. Sony has launched its own site to sift through the best ideas and products from the company’s own employees, while artisan marketplace Etsy has launched a pilot program known as Fund on Etsy, which will provide an outlet for creative types to fund the creation of new products and to ultimately grow their businesses.
With interest in crowdfunding at an all-time high, some might worry that we could be in the midst of a bubble that will soon burst, and bring with it a whole new world of regulation that puts a halt on the substantial advancements that have already been made in the financial technology sector. To that, we say follow the money. Several former big players on Wall Street have entered the fray, and appear intent on shaking things up in the finance world along the way.
Included among the old guard that have a newfound interest in the financial technology sector are former Citigoup CEO Vikram Pandit, and John Mack, the former CEO of Morgan Stanley. Both of the former Wall Street honchos have made substantial investments in the sector, which points us to the potential that the emerging industry presents a ‘smart money’ investment opportunity. FundWisdom thinks they’re on to something as well, as this recent survey on the benefits of using big data points out.
So what does the future hold for crowdfunding as a whole? In the same realm of ‘follow the money’ for potential investment decisions, we’ll ‘follow the brains’ for a glimpse at where things may be headed. AOL co-founder Steve Case recently sat down with Fox News to discuss his new book, and shared some of his thoughts on the future for entrepreneurs and the crowdfunding phenomenon.
In part, Case told Fox News that “we’re beginning to see the benefits of crowdfunding as a means of leveling the playing field, so anybody with any idea, irrespective of where they are, have more of a shot. The seed capital to get started will increasingly come from these crowdfunding platforms, and then as entrepreneurs achieve some momentum, they can more readily connect with institutional investors to get expansion capital.”
One of the crowdfunding industry’s pioneers recently spoke with Crowdfund Insider on what the future may hold for what was once little more than a vision. Danae Ringlemann, co-founder of Indiegogo, touched on a number of topics, including her vision of what equity crowdfunding may become. “Responsible investing or socially motivated investing is the most powerful way to invest. Perhaps the main type of way to invest in the future. Profit-only investing will become a subservient one,” Danae told Crowdfund Insider.
Investing with a nobler cause in mind is always an admirable attribute, but sometimes we just want to find the best opportunities that peak our interest. Sifting through all the data and information available on the market can be nothing short of time consuming, and sometimes leave you walking away even more confused. That’s where FundWisdom comes in. We make it easy for you to examine the various platforms and costs, data and analytics, to point you in the right direction when it comes to startup valuation and investing.