Since the approval of the Jumpstart Our Business Startups (JOBS) Act in 2012, there have been significant changes in the way people invest. Majority of the people are now turning to alternative ways of investing and this has also changed the status quo of Wall Street investing. A large percentage of small and medium-sized enterprises (SMEs) are no longer seeking loans from traditional sources such as banks. Instead they are looking for funding from crowdfunding sources.
…majority of them will prefer investing in private markets which are referred to as alternative platforms
Technology, which includes the Internet, has changed the way people communicate, invest and conduct financial transactions. All these changes are impacting different investment sectors such as real estate, manufacturing, hospitality, transportation, consumer goods and medical services.
The current trends in the crowdfunding industry show that in as much as people may still buy stocks and bonds five years from now, majority of them will prefer investing in private markets which are referred to as alternative platforms. These platforms are likely to become the primary method of investing because they integrate the current technological and legislative changes which give more people diverse opportunities to invest.
Here are some of the reasons why alternative platforms are going to continue changing the future of securities crowdfunding industry:
- Explicit returns & exit strategy: the crowdfunding securities purchased online will have clearer projected returns and logical exit strategies
- Diversified investment opportunities: online platforms will have numerous businesses spanning various investment sectors
- Equal playing field: crowdfunding eliminates all investment barriers such as geographical location, gender, race, social class, experience, income level and net worth. This gives everyone an equal opportunity to invest
- Easy liquidity: secondary market platforms will make liquidity easier
- Aggregation will become standardized: offerings will be easily syndicated on multiple platforms making it easy and quick for investors to access them.
- Tech-based systems: they will ensure that safety and compliance regulations are adhered to so as to protect participants against fraudulent activities
- Micro finances: small businesses valued below $50M will be able to earn significant returns from their pool of investors as they profitably manage businesses with relatively small capital amounts while investing in private securities in their industries of choice
- Integration of brokers and registered investment advisors (RIAs): they will earn more by providing their clients with new portfolio alternatives and selling crowdfunding securities
- Research for data and information: it will become easier as more research firms will provide more detailed information about platforms’ offerings and track records