Crowdfunding over Coffee, Back in 1792

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I often wonder how much business gets done at coffee shops. Every time I go into the Starbucks on Clay Street in San Francisco, right around the corner from our office, there are people working diligently on their laptops. I’m sure some are even trading stocks with their online broker. Soon, when Venovate Marketplace goes live, they will be able to invest in alternative investment opportunities as well. From a coffee shop, or elsewhere.

Turns out, trading stocks in coffee shops is nothing new. I was in our New York office near Wall Street last week and was talking with someone about the Buttonwood Agreement, the document that formed the New York Stock Exchange (NYSE) in 1792. My friend pointed out that it was an attempt to institutionalize the crowdfunding of its day. The signers of the agreement agreed to only trade securities with one another and charge a fixed commission to anybody who had not signed the agreement. I began to wonder what it was like before this agreement formed an exclusive investing club.

The list of the Buttonwood Agreement signers and their addresses includes one Hugh Smith who lists his address simply as the Tontine Coffee House. That aroused my curiosity, so I did a little digging.

Tontine Coffee HouseThe Tontine Coffee House was located at the corner of Wall and Water Streets, a few blocks east of where the NYSE now stands. It was where the 18th century New York crowd met to make any sort of deal, buying and selling cargo from ships that had just arrived at the nearby docks, raising money for commercial ventures of all kinds, trading stocks and bonds, playing cards, getting in loud – sometimes violent – political arguments, and drinking coffee. A traveler from England described it as:

“The Tontine Coffee House was filled with underwriters, brokers, merchants, traders, and politicians; selling, purchasing, trafficking, or insuring; some reading, others eagerly inquiring the news … The steps and balcony of the coffee-house were crowded with people bidding, or listening to the several auctioneers…”

It must have been like the NYSE and Chicago Mercantile Exchange (CME) trading floors combined with the floor of the House of Representatives – with everyone highly caffeinated. It was truly the first crowdfunding marketplace in the United States.

Marketplaces are nothing new of course – ancient Rome had the forum, Baghdad had the souq, and old New York had the Tontine Coffee House. People need a place to come together and make deals. Coming together makes markets more efficient by making information more accessible and price discovery easier. It gets everyone a better deal. Today, the market for almost everything is online. Amazon and eBay will sell you anything. Online discount brokerage firms like Schwab and E*Trade, and financial data sites like Bloomberg and Yahoo Finance have given everyone the access to the stock market that once only floor brokers and institutional traders had.

One of the few remaining pockets of face-to-face deal making has been the world of alternative investment opportunities. That’s because until recently it was not legal to offer alternative investment opportunities to someone you did not have a “significant relationship” with and knew to be accredited. The JOBS Act has changed all that, by making the general solicitation of alternative investment opportunities legal. Now, this market too is able to move online – to Venovate Marketplace.

Venovate Marketplace will offer access to alternative investment opportunities like private equity, hedge funds, direct investments in small and mid-sized companies, real estate, and natural resources deals. It will also provide an aftermarket where investors can obtain liquidity. If you want to be among the first to experience Venovate Marketplace, just sign up for our Beta. There is one slight disadvantage to an online marketplace – we can’t serve you coffee like they did at Tontine’s.