Crowdfunding is more and more treated as an alternative source of venture capital for SMEs. There aren’t however many evangelists of this mechanism in the finance sector.
Crowdfunding is great, because it allows creators to raise funds for their projects (reward-based crowdfunding) and ventures (equity crowdfunding). It is based of a new source of capital, provided mostly by people that aren’t active on capital market. So called mini business angels are people eager for investing and taking part in new ventures. There are millions of them all over the world. Why then the representatives of traditional finance institiutions are not engaged into crowdfunding revolution? The more ventures in the early stages will gave an opportunity to raise capital, develop and grow, the more potentiall clients they will get (more developed companies are more likely to pay for transactional advisory, organisation of financing etc.).
In the science of finance there are many models, methods and tools that help to analyse, measure and make decisions, wheather the investment project is a great opportuity or a piece of shit. The huge majority of them cannot be used by crowdfunding. Why is that so? Crowdfunding in its roots is based on feelings, not the spreadsheets. So are stock exchanges, might someone say. But, traditional investors are aware of the fact that they can’t measure the behaviour of investors, and they still do that. There are many theoretical proofs that make the imagination of measuring what is happening on the capital markets. But you can’t make money on the models, that everyone knows and against which can formulate a few counterarguments. Mathematical proofs are based on the historical results, and you can earn only by anticipating the future.
There are really only a few people, that take crowdfunding into real academical consideration. Among them are Aggrawal, Catalini, Marom, Lawton and a few more – quite a great bunch of experts. But still, there are no textbooks and lectures on crowdfunding. The thing is, that is had to measure and anticipate the result of cowdfunding campaign. Let alone to foresee the future achievements of crowdfunded ventures. Probabely that’s the reason for the finance experts to avoid writing and researching this topic. Which I personally consider stupid. Having said that crowdfunding creates and is based on a new venture capital owner, I must confess that this is the revolution in finance, that is happening, but not exactly likely to traditionalists. Why? They are no longer needed in their current roles as long as equity crowdfunding is considered.
What is your opinion on the future of crowdfunding as a source of venture capital? What you think has to be done, to put into acadmical books on finance? Why isn’t emotional rate of return treated as a real mean of measuring value tu investor?