So the big questions are - will these platforms be able to maintain their presence in an ever congested market? And will one of them break cover and grab hold of the prickly prize that might be the USA?
In the USA, it is has recently become legal for anyone to take part in ECF – previously you had to have a certain level of wealth and this is all very carefully regulated by the SEC under Title II of the Act. A new part, Title III of the JOBS Act (nothing to do with Apple), has just come into play. This opens up the USA to ECF.
Or does it?
Yes, it will allow the average punter to invest but the restrictions are still considerable. Firstly, there are rather confusing but strictly enforced rules about promotion or soliciting for investment – rules that are not clear to most and will mean platforms will think twice before risking the wrath of the SEC.
Secondly, the due diligence required is still considerable compared to the “help yourself” system we have here under the FCA. In the UK, we are using self-assessment, despite its failure in the run up to the 2008 crash, to provide sensible results. In America, they have learnt a little from the subprime party and have requirements for companies to fulfil before they can pitch for funding. These requirements will cost on average around £20,000 for the first £100,000 raised, according to estimates. These are upfront costs with no guarantee that the funding will be raised. This will inevitably hinder ECF for small businesses and start ups.
Seedrs, one of the UK’s leading platforms, has decided not to use this Title III bill to operate its US business. Having waited a considerable time with a listed US office, Seedrs has decided that the minefield that is SEC regulation is just too risky. They’d rather someone else got their fingers burnt first. They will try to operate under Title II but this is not really Equity Crowdfunding and would be a model far removed from their UK start up/small business one.
So who of the UK’s major platforms will grab the prize that is the US?