The future is Crowdfunded - by Maureen Murat, Esq. and Samson Williams
(originally posted in IBM's Blockchain Blog on October 8, 2019 https://www.ibm.com/blogs/blockchain/2019/10/the-future-is-crowdfunded/ )
Financing your startup or business is hard. Every business, regardless of industry or type needs money to get started, grow and scale. Currently there are few choices for accessing capital. Option A is not an option for most, the bank. Option B isn’t the solution that the majority of small and medium sized businesses need. Option B being Venture Capital, Angel Investors and Private Equity.
To this mix of poor funding options we’d like to introduce Equity and Debt crowdfunding. In short, equity and debt crowdfunding is the future of small business financing. In the article below we expound upon why this is the case.
- Customers want to invest in products and businesses they use.
- Digital assets and blockchain based tokens will push investing to mobile devices.
- Fintech and BigData have exposed the fat underbelly of Venture Capital, Private Equity, Capital Markets and IPOs to the potential of blockchain liposuction.
- AI driven valuations will break the Good Ole Boy syndication of deals, forcing valuations to be based on validated business models, revenues, profits and scalability that does not come at outlandish customer acquisition cost.
- Fractional ownership of crowdsources patents will change consumer behaviors and incentives.
As Axes and Eggs approaches 2020 we’re looking forward to what the next decade of opportunities look like. After nearly four years of living, breathing and surfing the tsunami that has been blockchain based cryptocurrencies, Initial Coin Offerings (ICOs), Securitized Token Offerings (STOs), Token Generating Events (TGEs), Initial Exchange Offerings (IEOs), Digital Securities Offerings (DSOs) and so much more, we are left with the simple conclusion that change is coming. Traditional capital markets, startup financing and small business capital is fundamentally under siege. That is not a bad thing. Too, it’s not that there is a single methodology or technology that is disrupting finance. Rather, fintech as a whole is disrupting fintech and traditional banking, ecommerce, and investment industries.
The Blockchain Effect
Blockchain has been a flashlight into the darkness of institutional inefficiencies. Will blockchain technology change the banking and finance world? Yes. By changing the culture: transparency = accountability.
What blockchain is doing is highlighting the decades old “best practices” that have enabled slow, friction filled, paper based inefficiency and corporate glut that now have consumers up in arms. Customers want global payments systems that are as easy to use as their mobile devices and where sending, receiving, and tracking value is as easy and intuitive as texting.
Value redefined
Paper money has no value. Money, to paraphrase Graeber, is simply a record of debt. Too, money, in whatever form it may take, is too volatile when compared to the real and intrinsic value of data and other physical assets. You may have heard, “Data is the new gold”. The future isn’t who controls the creation and distribution of “money” or records of debt or even currency. The future of value will be determined by how data is created, stored, maintained and shared. Data is the new gold. Keep an eye out on how this realization impacts “money”; particularly as money goes digital and crypto. More importantly than the value of data is the ownership of data. In the next decade we’ll see an even more concerted push and transition to people, by default, owning their own data. Data ownership isn’t just a novel idea of the fringe. Sovereign data ownership is the hallmark upon which the future of digital economies will be built. This future will be driven by community consensus, which support cryptocurrencies, digital assets and distributed ledger networks that provide seamless user experiences and consumer centric data ownership and privacy.
Fractional Ownership
“Fractional ownership” literally means, “Your piece of the pie”. Blockchain and FinTech is forcing the digitalization of information. The so called “blockchain revolution” is actually just Chapter 3 in the Book of Digital Transformation. You may be more familiar with this book under the name, “Automating paper to make more money”. The digitalization of paper, information and data is what is and will enable fractional ownership.
Who will own fractions of the next generations of “businesses”? The Crowd. Who is “The Crowd”? More importantly how will The Crowd invest, support and champion the next iteration of profitable, blockchain-networked organizations (Distributed Autonomous Organizations (DAOs)?
Two words: Crowd + Funding = The Future of Business formation and capitalization. Get ready for fractional ownership. Because the 2020s will show exactly whose piece of the pie the crowdfunded DOAs will be claiming.
AI + Voice + Mobile
For those old enough to remember Knight Rider why can’t you talk to “Kit” to help you execute trades? What happens when “Jarvis” (Ironman reference) isn’t busy fighting off aliens and instead uses that AI computing power to analyze stockmarts, emerging markets, commodities, valuations of startups and the viability of Founding Teams?
The future of investing, even institutional investing, will be Voice driven (meaning you’ll be able to talk to an AI/Virtual Assistant) on mobile devices. By mobile devices we don’t necessarily mean smart phones, tablets or pads. Mobile devices such as smart glasses, “hearing aides” and of course, Star Trek like communicator badges. They, by the way, are the original bluetooth enabled, AI, voice activated, virtual assistant. Yes, I know it sounds like science fiction. But so was going to the moon, growing human organs and flying. Yes, flying. You know. 40000 feet, at 585mph. Now flying is so routine, you forget it's literally a miracle of science, engineering and human audacity. In five years, Voice activated, narrow AI will be as routine as “googling” something and streaming HD videos on your cellphone to your friend on the other side of the globe.
Alternative Finance is the new “Alternative Energy”
We’d like to conclude on this note. Sun, wind, thermo, tidal and other renewable energy sources were, a couple of decades ago, coined “alternative energy”. The Sun, the source of energy and life in our solar system billions of years before Humans walked the earth was, in the minds of marketers and lobbyists, an “alternative energy” source. Alternative of course to their financial interest and well-being. So too with “Alternative Finance”. Crowdfunding isn’t new. Its as old as tithing, funding the Statue of Liberty or the Stock Market itself. In the 2020s so called “alternative finance” will become as mainstream and classic as 1990s Alternative Rock.
So, go put on some Nirvana, Beastie Boys, Foo Fighters or Red Hot Chili Peppers and stay tuned for the 2020s. This coming decade will make tomorrow’s blockchain based funding and financing classics.
About the Authors
Dr. Maureen Murat, Esq., - Maureen is a lawyer who is licensed to practice law in the States of New York and Florida, specializing in securities, tax, business and crowdfunding law. She is Principal at Crowdie Advisors, member of the Crowdfunding Professionals Association and an Adjunct Professor at the University of New Hampshire School of Law, specializing in blockchain, tokenomics and smart cities applications of emerging technology. Dr. Murat is a crowdfunding advisor to numerous startups around the globe and is globally recognized for her thought leadership on legal implications relating to cryptocurrency policy and regulations, equity crowdfunding and small business topics. She can be contacted at: maureen@crowdieadvisors.com www.CrowdieAdvisors.com and on social media @CrowdieAdvisors.
Samson Williams - Samson is an internationally recognized anthropologist and expert on crowdfunding, cryptocurrencies and blockchain, based out of Washington, DC and Dubai, UAE. He is Principal Consultant at Axes and Eggs, serves on the Board of the Crowdfunding Professionals Association (www.cfpa.org) and is Co-Creator of the University of New Hampshire School of Law’s Blockchain, Cryptocurrency and Law Certification Program. Samson also teaches Fintech, AI and Cryptocurrency courses at Columbia University in New York City. He can be reached at: samson@axesandeggs.com www.axesandeggs.com and on social media at @AxesAndEggs.