A New Beginning
After waiting for a long period of time, the Regulation Crowdfunding was finally released by the U.S. Securities and Exchange Commission (SEC). The SEC also set May 16, 2016 as an official date to let websites offer the equity crowdfunding service. Since May 2016, a group of websites that received the approval for operation have entered the U.S. crowdfunding market.
Diversified Crowdfunding Services
A quick look of the U.S. crowdfunding market, one would find out that the market is kind of messy and very confusing. The players in the crowdfunding market include websites that have been offering diversified services. Those existing players include donation-based websites such as Kickstarter and Indiegogo, websites that were approved by state legislation and regulators for intrastate equity crowdfunding, and websites that offer services based on Regulation D and/or Regulation A, or to accredited investors only.
The new websites that are supposed to offer the Title III, equity-based, or simply equity crowdfunding service may have added more confusion to businesses and investors. Among those new websites, some of them have already been in crowdfunding business for several years and opened to accredited investors or accepted investment for Regulation D/A, etc.
Over time, any website that wants to offer the Title III (or equity) crowdfunding would have to get approval from regulators. But, by now, either business owners or investors have to figure out which website offers what kind of crowdfunding service before using any of them. Perhaps, that was one of the reasons that crowdfunding websites including some with millions of visitors have seen significant drop in traffic in recent months.
Although no one knows what will happen in the U.S. crowdfunding market in the future, it is hopeful that the market will play it out by itself. With the Regulation Crowdfunding in place, the U.S. crowdfunding market will grow and expand to a healthy market.
In some other countries, crowdfunding was launched without proper regulations in place. The market was quickly turned to be sour for businesses and investors. Although most crowdfunding websites in that country are honest players, the bad reputation of the entire industry pushes most players to either get out the market entirely or conduct crowdfunding business under a cover of other businesses.
One of the key questions for the U.S. crowdfunding market is whether “crowd” will support and invest in companies that are looking for funding on websites. At the present time, no one has an answer yet.