President Obama called Crowdfund Investing “game-changing” when he signed the JOBS ACT into law on April 5, 2012. 2013 will be ‘The year of the entrepreneur’. Using equity or debt securities, this new U.S. law creates a financial vehicle for community financing in which the average American can invest in entrepreneurs they believe in and local businesses they trust. Prior to this law, only accredited investors (less than 2% of the US population) had this opportunity. If Americans invest just 1% of their savings via Crowdfund Investing, this policy change will deliver over $300B to the economy that will stimulate entrepreneurship, innovation and jobs. These results are achieved without any U.S. Government spending.
Crowdfund Investing isn’t just a solution to the job crisis in the United States; it can be a global solution as well. It promotes economic and political stability through entrepreneurship, innovation and employment. Historically, countries with the strongest economic output enjoy both stability and strength. Crowdfund Investing is a unique strategy to engage large percentages of the population in building and supporting ecosystems of economic success. Because of this crowd engagement, it extends existing government and NGO strategies for growth, deeper into communities. Further, Crowdfund Investing provides access to capital for both community businesses (bakery or laundry) as well as an “on-ramp” to professional capital for high growth businesses.
Community financing dates back 5,000 years. These investments are made from both the heart and the wallet. It turns customers and community members into investors and brand evangelists because they have a vested interest in that businesses’ success. Today, these ancient principals are enhanced and extended via the Internet. Crowdfund Investing is Web 3.0: where the social Web meets small business financing. Now startups and small businesses can raise money from communities not just based on geography but from those of interests and origin as well.
This paper explores how governments can unlock the power of Crowdfund Investing by enabling companies to leverage the social Web to encourage community financing, engagement and innovation. It tells how Crowdfund Investing was legalized in the United States at a time when Washington was never more politically divided, and how capital markets can be augmented so that local communities can create businesses that provide services (like water and power) and new products (like mobile games or medical devices) to their countries and regions.
Governments that introduce a Crowdfund-Investing framework to enhance their private capital markets, will decentralize capital formation, unlock innovation and create economic growth.
To request a copy of the next installment of this white paper—Ten Steps to Implementing a Crowdfunding Framework or to sign up for our upcoming educational series for government leadership: Democratizing Access to Capital