by Mike Masnick
Tue, Jul 16th 2013 2:43am
by Mike Masnick
Fri, Aug 24th 2012 3:19pm
from the run-for-your-lives dept
There's been a fair amount of talk about this effort, and a bunch of companies chomping at the bit to get into the market once crowdfunding for equity is officially in place. The main holdup? The SEC. As part of the law, the SEC is supposed to put forth rules for how such crowdfunding can work. But the SEC made it quite clear before the law passed that it didn't like this idea -- not one bit. So I've been quite curious to see what rules it would eventually put out... and so far all it's done is keep stalling. The rules were supposed to come out yesterday (which was already postponed from the original date), but instead, the SEC pushed things back another week.
While everyone waits for the SEC rules, various state securities regulators, in the form of the North American Securities Administrators Association (NASAA), are ramping up the FUD about such equity crowfunding. They released a report on the top investment scams... and crowdfunding in general is near the top of the list. They seem especially worried that the space is quickly going to be overcome by fraud:
"The number of entities out there already pitching themselves as crowdfunding entities online has risen in a significant fashion," said Matt Kitzi, NASAA Enforcement Section Chair and Missouri Securities Commissioner. "Just look at web domain names: it has gone from a couple hundred to well over 1,600 in the past year. They are staking up a position to enter crowdfunding market. There will be a lot more to come on this."Here's the thing: there are always scammers out there. And that's going to be a big part of the challenge for any of the platforms that are jumping into the equity crowdfunding space to deal with. They're going to have to distinguish themselves by how they enable trust between buyers and sellers and how they prevent fraud. But, some fraud is going to happen -- just as some fraud is always going to happen in just about any market. That doesn't mean we don't let the market itself develop.
In early in August, the Massachusetts Securities Division charged a Lowell, Massachusetts man for a crowdfunding scam, bilking 20 investors who thought they were investing money in a gaming site of $153,396.
Secretary of the Commonwealth William Galvin, who brought the case, wrote to the SEC urging regulators not to let the JOBS Act changes become a tool for financial fraud and abuse. "Longstanding problems in the markets for small and speculative stocks show the pitfalls of relying on the wisdom of crowds."
In the end, I'm guessing that the SEC rules will be fairly strict, and may limit this kind of market. Also, contrary to some expectations, I doubt that many will see this as a true replacement for angel or VC financing. It seems like the sort of thing that will likely be more useful for small businesses (such as local businesses) rather than traditional high growth enterprises which are the kinds of "startups" that usually attract angel and venture money. Surely, some people will set up scams and get tricked. But there have been scams in the startup world for ages, and there are likely already some scams that have made it through existing crowdfunding platforms. But that's the nature of risk. Sometimes you lose.
While most people focus on how this will compete with angels and VCs, I'd think that it's much more a form of competition for the crowdlending platforms, since those are more about investment as well, just with debt financing, rather than equity financing. And while there certainly have been cases of fraud that came about because of those platforms, for the most part it hasn't sunk the top players in that space, because they've been able to try to minimize the likelihood of fraud while educating the market on investing wisely. There's nothing to suggest that the top players who emerge in the equity crowdfunding realm won't be able to do the same.
by Mike Masnick
Wed, Nov 16th 2011 12:19pm
from the indeed dept
- A large majority of the angel investors and venture capitalists who took part in a Booz & Company study say they will not put their money in digital content intermediaries (DCIs) if governments pass tough new rules allowing websites to be sued or fined for pirated digital content posted by users.
- More than 70% of angel investors reported they would be deterred from investing if anti-piracy regulations against “user uploaded” websites were increased.
- More than 80 percent of the angel investors would prefer to invest in a risky, weak economy (with the current internet regulations) vs. a strong economy (but with the new, more stringent proposed regulations on copyright infringement).
- If the legal framework for digital content was clarified, and penalties on copyright infringement were limited for content providers acting in good faith, the pool of angels interested in investing would increase by nearly 115 percent.
by Mike Masnick
Tue, Nov 16th 2010 7:21am
from the this-will-not-end-well dept
Not surprisingly, the article notes that "lawsuit lending is a child of the subprime revolution," and often the lenders charge ridiculous interest rates, rather than being willing to just take a direct cut of any winnings. And, of course, these days, with the mortgage space being a weak investment, banks have to find somewhere new to put their money, and apparently lawsuits are attractive to some. The whole thing seems so open to abuse and excess that it seems likely that we're going to be hearing a lot more stories of lawsuit lending... and the resulting problems it causes.
by Mike Masnick
Mon, Oct 20th 2008 11:48pm
from the not-much-to-glean dept
by Mike Masnick
Fri, Nov 30th 2007 12:20am
from the things-are-getting-interesting dept
What's more interesting than the CEO job or the money, however, is the question of what SK Telecom is playing at here. The company has invested heavily in its US MVNO joint venture Helio, which was announced nearly three years ago to great fanfare, but hasn't lived up to the hype (though, it has managed to survive where many MVNOs have collapsed). SK Telecom, like Japan's NTT DoCoMo before it, keeps looking for investment opportunities outside their home countries, but never seem to be able to repeat the successes they've had back home. DoCoMo, you may recall, had a deal with AT&T Wireless that turned into something of a disaster for everyone, so having SK Telecom assisting Sprint is hardly a slam dunk, despite its success back in Korea. SK Telecom seemed to pitch part of the benefit of working with Sprint being its experience with WiMax in South Korea, but so far, that experience is anything but encouraging. It's also worth wondering if such an investment would eventually lead to Sprint taking over Helio to consolidate SK Telecom's focus (alternatively, some might point out that since Helio uses Sprint's network, SK Telecom's investment offer could even be seen as a way to protect Helio's network).
What is clear is that Sprint needs some leadership and some direction, and it needs it quickly. With Verizon Wireless' LTE announcement, the race for next generation wireless technologies got a lot more interesting. While Sprint may have had a pretty big head start, the more it staggers around trying to find a CEO and a plan, the more it cedes to the other players who at least have the appearance of having a comprehensive strategy in place (the reality may not match the PR spin, of course). The SK Telecom deal may have provided both a leader and some direction, but clearly the company's current board didn't appear thrilled with either. Don't expect this to end here, though. There may be additional attempts by SKT, and it may cause others to wake up and pay attention as well. Sprint may end up with a leader and a strategy thrust upon it, whether it wants it or not.