Access to capital and investment is an integral part of translating innovative ideas into sustainable business lies that drive job creation and growth. For a significant number of entrepreneurs, however, traditional banking and venture capital mechanisms are unable and/or unwilling to provide them with the capital required to turn their ideas into reality. As a result, small and medium-sized businesses (SMEs) and the entrepreneurs that drive them are increasingly seeking out non-traditional sources of financing, such as innovative crowdfunding organizations like Kickstarter and IndieGoGo. Perhaps soon, equity crowdfunding platforms will become the primary means of growing ideas into businesses through a democratized model of finance. In doing so, crowdfunding builds on the evolving processes of web-enabled engagement and participation that have disintermediated numerous industries that were previously thought impenetrable.
Through its role as a conduit for donations, loans and investment, crowdfunding is poised to play a significant role in financing SMEs. Equity crowdfunding, in particular, offers significant potential to open up a new funding source for entrepreneurs, and a new avenue for investment for investors. In so doing, this nascent platform will help facilitate job creation and innovation by ensuring that good ideas don’t die on the kitchen tables of would-be entrepreneurs. As this report argues, however, jurisdictions seeking to capitalize on this new avenue must develop balanced regulatory frameworks that protect investors without stifling the elements of long-tail participation and engagement that make this medium a potential game-changer.
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