In a recent Wall Street Journal article about Venovate, venture capitalist Tim Draper was quoted as saying about us: “I think the timing is about right now. This is a very exciting time for private companies and investors.”
I couldn’t agree more. We are at the convergence of a number of important trends. Crowdfunding sites like Indiegogo and Kickstarter have made people comfortable with the concept of using the web to fund something they believe in. The JOBS Act has opened up the possibility of using some of these same techniques to finance companies and deals. At the same time, state regulators are expressing valid concerns about how investors will be protected in this brave new world of “crowdfinancing.”
In many ways it reminds me of the early days of online stock and options trading. We faced many of the same challenges, but we met them. Many members of the Venovate team come from the online brokerage world, and some have been at it as long as me. I am confident we can meet these challenges and believe that there are three keys to our success with smarter alternatives. We need to make investing in private placements meet these three criteria:
Easy – Make investing in alternatives as easy as trading stocks online. Believe me, when you make a stock trade lots of things go on behind the scenes that are invisible to you. But to you, it’s simple and easy. We are committed to make private placement investing just as easy. We want to make it easy to find and evaluate information on an opportunity, easy to indicate interest, easy to sign the documents, and easy to close the transaction. We’ll do the heavy lifting behind the scenes.
Safe – Provide a safe place to shop for opportunities. The JOBS Act gives everyone more freedom. With freedom comes risk and responsibility. Regulators are concerned about fraudulent and unscrupulous actors having easier access to investors. We share that concern. We have listing standards and will curate deals which will help ensure that investors have full disclosure and complete transparency so they can make educated decisions. We feel transparency is the best protection against the unscrupulous. There are no guarantees of success in investing, but we intend to do everything we can to help investors make informed decisions.
Liquid – Create an aftermarket for private placement securities. One reason many investors shy away from private investments is their inherent illiquidity. This is a concern to be taken seriously. Read the information provided by the sponsor about how long your money will be tied up, and don’t commit money that you might need sooner. That said, we plan to create an aftermarket for shares of alternative investments. It will be an auction-based market that still affords sponsors a measure of control about when liquidity windows are open. We believe that a liquid aftermarket will make alternative investments more accessible and less risky.
Crowdfinancing is a new approach to an investment process that has been around for a while and is ripe for innovation. Some people are early adopters and are eager to jump in. Others want to wait until the concept is more proven. The early adopters will help us shape the way this new industry evolves. If you want to be one of them, sign up for our Beta.