What do you think of this crowdfunding phenomenon? Fad, or the way of the future?
Well, in the UK it is estimated that in the last year over £1 billion was raised for small and medium sized enterprises (Samuel, J, ‘Crowdfunding clampdown may hit small firms hard’, The Times, 2 Dec 2013) which is an estimated 60,000 to 70,000 (big variance) individual investors.
Just like in Australia there is a question whether regulations for direct capital raising as they exist, having been drafted pre-crowdfunding, are adequate. In the UK the politicians have been quick to state that they don’t want any review to impede this flow of capital to SMEs but regulator, the Financial Conduct Authority, is yet to complete its review.
In Australia the uptake of crowdfunding has been a lot slower. As such our politicians have largely ignored the matter while ASIC conducts its review, however, from those comments I have read it is likely they will conclude the current capital raising provisions of the Corporations Act will suffice for the foreseeable future. The one big question will be the advertising of a small investment offering to non-sophisticated investors and how the advertising of the crowdfunding platform will be effected by those quite restrictive laws.