Equity Crowdfunding – The International Scene. Part 1

To date the UK has led the way. According to The Cambridge Centre for Alternative Finance, this country is now the best place for equity crowdfunding in the Europe (and very possibly, the world). The use of the term ‘best’ is interesting but there is no doubt that since 2011, the UK has been out front.

Where the UK has ceded regulation to the platforms, most of the rest of the world has taken a more cautious approach. The main concern has been to find a balance between the expensive senior listed company equity regulation and the new junior SME and start-up equity issuance. This balance needs to protect investors and prevent fraud whilst stimulating economic growth. There is no easy answer.

No one wants to see the spaghetti against the wall model used for what could be a vital lifeline for SMEs and start-ups. There is too high a chance that the mess could bring the wall down with it.   

Compliance with the standard regulations governing equity offerings in publicly quoted companies is expensive the world over. There would be no point in an SME theoretically raising £150k using this channel as the upfront costs would be prohibitive. On the flip side, the need to protect investors should not be underestimated and experience in the UK has shed some light on the possible outcomes that can be expected in an almost unregulated environment.

It's interesting to look at the variety of different approaches taken to overcome these challenges. One thing seems to be agreed, ECF could become a vital driver of national GDP and so a solution needs to be found.

Europe is way ahead in terms of platforms and activity but 2016 will surely see some areas like the Far East and the USA catch up and most likely, overtake.

In my  next few blogs I will look at the situation Down Under, where the Kiwis and Wallabies have taken very different approaches. I will look at Japan and Korea, where very recent developments have opened up new opportunities. Then review China and Malaysia – areas that have the potential to be an ECF powerhouse if governments allow.

I’ll cross the Pacific to see what is happening in the USA and Canada. 2015 saw the introduction of the JOBS Act 2 and the SEC’s JOBS Act 3 implementation in the States and opinions here are very mixed. The home of rewards based crowdfunding (aka Kickstarter) is proving resistant to any regulation-free equity version. Finally, I’ll take the lid off the European scene and try to come to some conclusions based on the journey.

Join me.