Crowdfunding has worked its way into the investment lexicon over the past few years as a description for the pooling of financial resources from many individuals in support of an idea, project, or increasingly, a business. Instead of relying on a few large donors, it uses technology to attract many smaller ones. As a member of Dealflow.com, you might be interested in how crowdfunding can help raise capital for your company, or perhaps you want to use the Internet to find specific deals in which you are interested. Maybe you want to do both.
It is rare for something to come along and fundamentally disrupt a core Wall Street function, but crowdfunding – or rather equity crowdfunding, to be specific – is undoubtedly one of those things. When fully implemented, it will replace an old, inefficient and expensive process with one that leverages modern technology to seamlessly and inexpensively connect companies and investors.
To say it is revolutionizing Wall Street is an understatement.
Investment banking, venture capital and private equity will never be the same. At the same time, companies will have easier access to the capital they need to grow than ever before. IPOs, at least as they were previously understood, will no longer be necessary. Crowdfunding takes the technological revolution that has brought us companies like Facebook (FB) , Twitter (TWTR) , and LinkedIn (LNKD) to its logical conclusion – using online tools and networks to place investments in deals.
Initially, there was tremendous resistance to this new paradigm — and laws in place that specifically prohibited it. As it became increasingly clear that the use of the Internet to market deals was going to happen, it became ridiculed, as in the quote above, as being something to which only a desperate issuer or investor (or both) would resort to.
Now, it’s rapidly becoming the fastest, cheapest and least complicated way to raise capital and to invest in companies. Eventually, we might look back and wonder how (or why) it was ever done any other way.
This is an excerpt from Dealflow.com's THE NEW ERA OF DEAL MARKETING: Equity Crowdfunding and the Advent of Online Deal Marketing