I am optimistic about the outlook for equity crowdfunding, as I expressed in my speech at the Senate Mini-Summit on Crowdfunding on July 13th. I am optimistic because the parties that need to work together are working together and there is clearly momentum at the SEC and FINRA to get the necessary regulations made. Given much of the overstated pessimism I’ve heard of late about the crowdfunding rulemaking, I think it’s worth reminding folks of this momentum. We didn’t sign up for a quick process when we won the fight to add an exemption to long-standing securities doctrine. The process is moving and I have witnessed the SEC and FINRA deliberating in good faith. For now, that’s about as much as I could hope for.
That said, I would like to put on my project manager hat for a minute and highlight why we won’t see crowdfunding portals, as defined separately from broker/dealers in the act, start conducting equity crowdfunding offerings until about this time next year. Here’s the gist, as it became clear in Washington back on July 13th:
- The SEC will create its rules to elaborate on the crowdfunding provisions in the JOBS Act. The SEC has called the deadline at the end of 2012, “aggressive.” They are trying to hit that deadline, but let’s build in a project manager’s cushion and estimate that we get it a few months late, in say February of 2013.
- Then FINRA will start drafting their rules that pertain mostly to what Broker/Dealers and Funding Portals have to do to register and operationally comply with the SEC rules. I’m not totally clear on their required timeline for drafting and public comment periods, but let’s say that takes three to four months, until perhaps late May 2013.
- Then FINRA submits these rules to the SEC for approval. Let’s hope they get it right on the first try and don’t have to iterate. Let’s block that out at one and half months and then we’re into the middle of July 2013.
- Then portals will begin the registration process. Let’s assume that will take at least two months and we’re into the middle of September 2013.
I’ll presume that the portals will be lining up potential clients with loose sign-ups and be ready to go live as soon as they get their registration completed. So, that means that the first crowdfunded offerings are going to go online around September of 2013. I intend for this timeline as an overestimate and it is quite general, but it’s certainly in the ballpark. I’m still optimistic and I think this is what we knew we were going to get all along, but have only recently really understood. As optimism is more a trait than an observation of the facts, I can understand why others are not so upbeat about this outlook.
I can also acknowledge that this is not inline with the rhetoric and politics behind the JOBS Act. It may take a year or so for the crowdfunding provisions of the JOBS Act to lead to increased capital for growing businesses that they can use for hiring Americans. The opening up of general solicitation under Title 2 of the JOBS Act will probably become a reality this fall, that will lead to increased investment by accredited investors and related jobs growth. That’s timely, both for America and for the presidential election.
As for what this all means for Launcht, I can tell you we are quite happy that perks based crowdfunding software and white label crowdfunding platforms are in demand. We’re elated that this model has received as much attention as it has and that people like what we’re offering. For example, check out our client’s site at ThreeRevolutions.com. The revenue we generate from our current work continues to fuel us as a company and provide for our development of a similar offering to support equity crowdfunding. We’ll continue to grow with the current model of crowdfunding and look forward to when we can offer our clients the software they need to run equity crowdfunding platforms.