Will Crowdfunding Replace Wall Street for Small and Mid Size Companies?


From the beginning, the concept of crowdfunding has turned heads and raised questions in the minds of those who encounter this concept. Some prominent investors have been to the point that it may be the catalyst that would change the way small and medium-sized companies increase their capital in the future. There was a time when US companies had the habit of going public just to launch instruments to raise seed money to support their expansion plans. In recent times, however, this has changed dramatically and fundraising has become much more difficult. Banks became more cautious when they made loans, leaving small businesses in the bud with no option but to perish or look for other fundraising methods.

By lifting the ban on general solicitation, SEC has allowed more and more companies to advertise through the media on their private equity financing deals. This has given a huge advantage to crowdfunding. The Jobs Act has made capital more accessible to startups by introducing these provisions. The SEC is at the same time trying to cancel their rules and companies are waiting for crowdfunding for investment to be available for non-accredited investors. This is supposed to have a much greater economic potential.

The past two decades have been marked by a steady decline in the small section of Wall Street IPOs. The stock market, considered a source of quick money for those seeking up to $ 5-10 million in seed capital, has seen less than $ 50 million raised for small and medium-sized businesses. This has become more complex with the introduction of the electronic or digital stock market. Complexity keeps small players away from seeking funds. On the other hand, crowdfunding in the same way as angel investing with its simple structure can potentially attract all of these actors so that they raise money and invest money in the business. 39, other enterprises. This is seen as an evolution of stock markets and a quick way to raise funds.

In the current scenario, entry into the stock market is not easy for medium-sized companies, which themselves reach a certain level but are not sufficient to enter the stock market. They are too big to become private equity entities and too small to become public. This leads to their acquisition by the largest companies. It ends up restricting competition and consolidating the market. This has a direct impact on the economy, due to reduced competition. This boils down to the scarcity of employment and the reduction of income, which in turn degrades the economic situation of the masses and has a negative impact on the economy in general.

Following the intent of the law did not please the SEC, as usual. They imposed serious constraints on financing through a general solicitation by imposing new crippling steps on businesses and investors.

If the crowdfunding case remains the same, experts worry that it will become even more difficult to raise funds using this method compared to a stock market fundraiser. As Alon Goren, president of the Invested.in crowdfunding platform, says, "We are putting this site online because you can reach a wider audience and do some really exciting things, but if we remove all these obstacles, it's more difficult than to meet in person and to shake hands ".

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