According to the economic philosopher Karl Marx, meaningful change would only come about when the workers seized control of the means of production. Just over the past few decades, technological progress has been slowly, but surely transferring the power away from large corporations to the people. R&D has moved from the siloed corporate laboratories to open-data and open source information, marketing has switched from a largely PR approach to social media and peer-to-peer (P2P) connections. Distribution is no longer dominated by a few firms, but millions of individuals through Amazon and eBay, manufacturing is now being challenged with 3D printers, and now capital, one of Marx’s favorite subjects, is being democratized through crowdfunding.
Crowdfunding has been proven to be hugely popular and for good reason. People are putting their money into things that they care about and it’s also a reaction to the financial crisis and the relentless focus on profits at all costs. It’s especially relevant for renewable energy because it offers revenue derived from a fixed-income source rather than an investment eroded by inflation. Mosaic is an example of this trend, demonstrated by its popularity among investors who are seeking a steady return on their investment, while putting their money where their values lie.
But, it’s not a perfect system. More than 30 per cent of small and medium-sized businesses fail in their first two years and high rates like those are among the risk factors being considered by governments and regulatory agencies who warn about the possibility of low or negative returns and liquidity issues. To protect against these risks, regulators are looking to limit who and how much individuals can invest.
Crowdfunding isn’t particularly new, but in the past few months, governments around the world have begun to realize its significance and are creating legislation around it in efforts to boost the economy and protect investors.
Last month, The U.S. Securities and Exchange Commission (SEC) opened up the process to accredited investors, people with a net worth of more than $1-million or who make upward of $200,000 a year in personal income. Extending it to ordinary investors, who are also known as retail investors, was part of Title III of the JOBS Act, and is expected to be published by the end of the year.
States are also getting in the action. Kansas was one of the first players and other states have joined in passing or writing up crowdfunding legislation including Georgia, North Carolina, Wisconsin, Washington, Florida, and Michigan.
It’s an exciting time to be part of this industry and we hope our local and national governments continue their support in democratizing the archaic and traditional financial industry so that true prosperity can be spread and where democratization levels the playing field.