Blockchain Based Crowdfunding will give Power to the People.

In 2017, over half of the world's population is online. With this milestone in connectivity passed, the power of the crowd to fuel innovation and create change has become a new and powerful force in society and business.

I believe that equity crowdfunding is a natural progression of how the power of the crowd can be harnessed for the good of, not just business, but society as a whole. As regular, well-paid employment becomes increasingly precarious and social mobility continues to decline, equity ownership could become a vital source of income and capital for many people around the world.

The Business of Crowdfunding :

According to the World Bank, Small and Medium Enterprises (SMEs) account for more than half of all formal jobs worldwide.These businesses have recovered very slowly from the Great Recession. The consequent credit crisis hit them hard and exacerbated the credit gap between small and larger business lending. However, three major, converging forces- blockchain, crowdfunding and cryptocurrency- could radically improve this situation. Crowdfunding has been one of the revolutionary innovations in finance in the last few years. Equity crowdfunding volume worldwide has been roughly doubling each year since 2012. In 2016, equity crowdfunding overtook venture capital as a source of business funding. These are revolutionary changes to how businesses are funded. Equity crowdfunding also represents a great opportunity to make a profound change to the way that we earn, as automation and the gig economy fundamentally change the work landscape. Moving income dependence away from jobs and salaries and towards ownership stakes could play an important role in the economy of the future.

Equity Crowdfunding and Innovation:

Equity crowdfunding brings more resources into an ecosystem allowing the evolution of more ideas. The fact that the majority of people investing through equity crowdfunding platforms are not professional investors adds an interesting dynamic.

To expand on this point, I will return to the evolution metaphor. The capital from these new investors can be viewed as a different ‘food’ source. This can fuel the evolution of new ‘species’ that can feed on this new ‘food’. To clarify, I do not mean this in a predatory way as the relationship is symbiotic.

The reason the ‘food’ provided by this new class of investor is different is nothing to do with their intelligence, income or understanding of the space; accusations you may hear thrown around by members of the professional investment community. Nor is it to do with naivety or any other nonsense to that effect. It is to do with the interests of the investors, their needs, and the reasons why they invest. Sure they invest because they hope the money they put down comes back, but because they are not professional investors there is less on the line for them as their professional reputation is not at stake. Crowd investors, on the whole, are not under pressure to be the most ‘successful’ and to always pick the biggest financial winner. They are free to back projects that they believe in from a moral standpoint and things they simply want to see in the world, even if the returns are modest.

Industry and money shape the world around us and the saying ‘it takes money to make money’ holds just as true as ever. Equity crowdfunding allows everyone to have a say in the shape of the world around them, not just a select few.

Equity Crowdfunding and the Global Distribution of Wealth:

The majority of the world’s wealth is held by the minority. Much of this wealth is created and maintained by the ownership of assets which appreciate in value over time.

One of the greatest asset-based vehicles for wealth creation is ownership of equity in early-stage companies. This is where you can get the biggest ‘bang for your buck’, though obviously, it is also where the greatest risk lies. The ability to purchase this equity has traditionally only been readily available to those who are already wealthy, allowing them to compound their wealth.

Equity crowdfunding allows everyone with access to the internet the opportunity to get involved with an asset class that can yield great returns. This means that wealth can be redistributed with a greater proportion of the global population reaping the returns generated by companies.

Equity Crowdfunding and Jobs:
Prior to the industrial revolution, the majority of people earned some portion of their living through what could be recognised as ‘entrepreneurial pursuits’. This was then replaced by full-time jobs that created a salary dependence.

Artificial intelligence and robotics have already been taking ‘traditional’ jobs and the pace of that change is increasing rapidly.

Equity crowdfunding opens up another avenue for income as the world moves away from traditional work models. It is not disputed that there will be new companies emerging that create value in the world that will distribute financial returns to those who hold ownership stakes within them. I believe that as fewer people are able to work for companies more people should be able to own them to generate their income.

Equity crowdfunding is, therefore, an essential platform that gives everyone access to a new way to earn a living in a world where other more traditional options are diminishing.

Conclusion:

The ready access to information and attention has sparked huge amounts of innovation. The access to a new pool of capital can drive it even further.

For new investors, these platforms offer a way to become involved with an asset class that can redistribute the world’s wealth and even change the way we make a living. Blockchain will give security and low entry and transaction cost into this new investment and equity space.

Equity crowdfunding is already a major source of equity funding and can develop into a way of redressing imbalances in business and personal finances globally. It holds enormous potential to reshape the world around us by driving innovation and creating new opportunities for people and businesses.

About the Author: Elliot La Cour is a co-founder of Crowd-Up, a startup that plans to change the way equity crowdfunding works by using the power of blockchain technology.