A recent article published by The Sunday Times reports about thousands of investors who “could lose out to venture capitalists if the firm, they had invested in, is sold.”
Referring to a company who raised £7.3 million from 5,614 investors on the crowdfunding platform Crowdcube, the journalist points out that venture capital funds “will receive their investments back on preferential terms to the “crowd” if the crowdfunded company is sold below a certain price.”
The platform replied that “All investors will be made fully aware of the terms relating to the additional institutional investment before any money has been taken.” Fair enough as it is not our job to interfere with the process in place.
What we want to do here is giving our two cents to nurture the debate by raising the following question: what’s the point of not providing non-professional investors with the same level of protection given to professional ones?
Crowdfunding has proved to democratize access to finance, allowing society to build a way out from the 2008 economic turmoil through entrepreneurship.
However, in reading the piece it seems that finance is making money by serving itself. In other words, have we already forgotten that bankers have been one of the main triggers of the global recession we live into by exploiting “the financially unsophisticated,” to quote Stiglitz?
Indeed, crowdfunding main promise is the one of a collective process of value creation and appropriation which cannot rely on rent-seeking from the few at the expenses of the many. Also because satisfied non-professional investors returning to a platform are the ones who allow the whole industry to thrive. So think crowd, look twice.