To probe the legal intricacies revolving around the US JOBS Act (Jumpstart Our Business Startups Act) and how these new laws might impact the crowdfunding scene in the next months leading to and right after the much-anticipated full implementation of crowdfunding for equity, David Drake spoke with Jouko Ahvenainen,Chairman and co-founder of Grow VC.
Drake: Jouko, your firm has been a global leader in the area of crowdfunding both in Hong Kong, Europe and now the US as you expand into the region. We have followed you very closely and have seen you attend the White House hearings and the US Commerce department delegations I participated in Rome and Brussels last summer with the EU Commission. We are both working on pushing crowdfunding for equity into law in Europe and recently attended the EU Commission workshop in Brussels in December. We wrote an article at The Soho Loft 1000 days for a EU Crowdfunding Law that summarized some of that meeting and predicted it will take 1000 days for EU to get such a law through - just the same as it is taking the US 1000 days to get a practical law into motion. (See Obama’s 10 Steps with SEC & FINRA to Legalize US Equity Crowd Funding by January 2014.)
The US Government and the EU Commission invited Grow VC’s Chairman and co-founder Jouko Ahvenainenand The Soho Loft and LDJ Capital’s founder David Draketo participate in the Transatlantic Economic Forum.
We are excited to be working with you alongside on these projects as yours was the only European firm that lobbied for the US JOBS Act crowdfunding law that President Obama signed into law April 5, 2012. Let us hear more about your efforts in 2013.
Yours is one of the oldest crowdfunding firms globally - tell us about your firm, when it started and how?
Ahvenainen: We started to work with this in 2008. I and my co-founder, Valto Loikkanen, are serial-entrepreneurs who have also done startup investments. We felt the market doesn’t work properly and we needed a more open and effective market. We didn’t talk about crowdfunding then, the term came later, but we planned to set up a market place and make it very global.
Drake: Which divisions do you have now?
Ahvenainen: In Grow VC Group we now work with many activities. Growvc.com is a global place for startups that look for investors and experts to help to build the company. Crowd Valley Inc. offers full scale crowd funding platform for organizations like incubators, broker dealers, and investors that want to have their own market place. Grow Advisors is a consulting and boutique investment banking services company for new funding models. Mutual Seed Fund is working to launch co-investment vehicles for crowdfunding. We have also media and development operations and our own portfolio of startups.
Jouko Ahvenainen of GrowVC and Denis Bartelt of StartNext during
The European Crowdfunding Network in Brussels.
Drake: How do the Hong Kong, London, the US and Helsinki centers operate differently?
Ahvenainen: I think startup people and entrepreneurs are quite similar around the world. There are differences, how willing people are to invest in startups. We always think operations so that they must be scalable to roll out globally, but we want to work with partners and local people to customize them to local needs.
Drake: In which markets besides the US have crowdfunding worked best?
Ahvenainen: I think some markets in Europe like the UK, Germany and the Netherlands have become quite active. But there are starting activities around the world, also e.g. in Africa where we work together with the World Bank. We also modify our models based on local needs and work - e.g. with Singaporean and Indian investment companies and starting activities in Russia.
Drake: How are the Chinese looking at this industry?
Ahvenainen: We are in our phase in mainland China. The Chinese market has been very special for many years because when there are many big companies and also quite a lot IPO’s. That’s why earlier phase companies haven’t been so attractive an investment target - you can make money faster in other places. But we see that startup market, new investment models, and probably co-operation between traditional investors and crowdfunding is also starting to happen there.
Drake: Which other Asian countries do you think will be quickest to embrace crowd funding?
Ahvenainen: I think big dynamic markets like India and Indonesia will be important when they have also crowdfunding type historical models, e.g. how people in a village has collected money and helped entrepreneurs to start a business. We also see that it is not only traditional investment models or crowdfunding, but we need to find models to get these to work together.
Drake: You offered a free third party application through which anyone can start a crowdfunding platform with your brand. This used to be free but now costs money. Please tell us about this.
Ahvenainen: Yes, Crowd Valley Inc.is our US based company that has this business. The free version was more like a startup directory type service, but when a third party wants to have a real equity or lending model, all the needed functionality and back office, we charge for it. But it is anyway the most cost-effective way to start a crowdfunding service. It is easy to make a basic directory service or matchmaking, but if you want have a full scale finance platform to manage investments and all things after an investments, that kind of platform needs a lot of work. We have developed it now for four years.
Drake: Which are the top 10 target audiences you are looking to use Crowd Valley services - you have 300 clients now, right?
Ahvenainen: I think number is now approaching 500. We have seen that it is not only for startup crowdfunding, but e.g. broker dealers are interested to use it for other assets. They want to move their offline investments and investors to online and get operations more effective.
Drake: With the upcoming changes to the ban on general advertising and general solicitation, how can securities professionals leverage this new opportunity in the financial markets?
Ahvenainen: Crowd Valley has built a technology platform (Platform as a Service) that allows asset managers, investment advisors, broker dealers and other securities professionals to bring issuers, investors and securities transactions online – all under their own name, brand and management. For a securities firm looking to take advantage of opportunities in the nascent market, this platform supports various assets and models, giving the securities firm access to bring their operations, or some part of them, onto the private, password-protected or open-to- join network.
Drake: What could you tell the readers that would help them understand how this technology can facilitate their business today?
Ahvenainen: The Crowd Valley platform is a combination of social networking and real finance platform and back office. It means anyone can easily start a social investment service, manage micro or larger investments, and also handle all tracking and reporting after the investments. You can find more information in crowdvalley.com.
Drake: Thank you Jouko. Your firm is one of the top 10 global crowdfunding firms of the world and we are excited to see what you will do in 2013. We encourage the readers to reach out as we see how this technology can strategically be implemented with the right media distribution.
We would like to see someone from Wall Street comment on crowdfunding. This sphere is not only about startup funding, but about ways to really start to utilize the internet better in finance services, finance 2.0.
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