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You may have heard about equity crowdfunding as a way of financing a business. Most people have actually participated in crowdfunding before and don’t realize it. If you’ve ever made a donation or tithed, that is a form of crowdfunding known as donation-based crowdfunding. For those history buffs our there, they’ll inform you that the Statue of Liberty was crowdfunded, via the newspaper so many decades ago.
Crowdfunding isn’t a new thing. It’s literally as old as humans pooling financial resources together to achieve a common cause. What is new in crowdfunding is blockchain, the internet and regulations (The JOBS Act) that enable equity and debt crowdfunding for startups, entrepreneurs and businesses.
Focusing for a moment on the role of blockchain in crowdfunding, blockchain enables the creation of new crowdfunding methodologies like initial coin offerings (ICOs), securitized token offerings (STOs), initial exchange offerings (IEOs) and soon, the tokenization of pretty much everything for mass retail consumption. What does this mean for the future of business financing and capital formation? Well, the future is crowdfunded and in the following points we’ll explore how emerging technologies — blockchain + AI + fintech + voice — are shaping the future of business.
Equity and debt crowdfunding is the future:
- Customers want to invest in products and businesses they use.
- Digital assets and blockchain-based tokens will push investing to mobile devices.
- Fintech and big data have exposed the fat underbelly of venture capital, private equity, capital markets and IPOs to the potential of blockchain liposuction.
- AI driven valuations will break the “good ole boy” syndication of deals, forcing valuations to be based on validated business models, revenues, profits and scalability that does not come at outlandish customer acquisition cost.
- Fractional ownership of crowdsources patents will change consumer behaviors and incentives.
As Axes and Eggs approaches 2020 we’re looking forward to what the next decade of opportunities look like. After nearly four years of living, breathing and surfing the tsunami that has been blockchain-based cryptocurrencies — ICOs, STOs, IEOs, as well as token generating events (TGEs), digital securities offerings (DSOs) and so much more — we are left with the simple conclusion that change is coming. Traditional capital markets, startup financing and small business capital is fundamentally under siege. That is not a bad thing. Too, it’s not that there is a single methodology or technology that is disrupting finance. Rather, fintech as a whole is disrupting fintech and traditional banking, ecommerce, and investment industries.
The blockchain effect
Blockchain has been a flashlight into the darkness of institutional inefficiencies. Will blockchain technology change the banking and finance world? Yes. By changing the culture: transparency = accountability.
What blockchain is doing is highlighting the decades old “best practices” that have enabled slow, friction filled, paper-based inefficiency and corporate glut that now have consumers up in arms. Customers want global payments systems that are as easy to use as their mobile devices and where sending, receiving, and tracking value is as easy and intuitive as texting.
Paper money has no value. Money, to paraphrase anthropologist and author David Graeber, is simply a record of debt. Money, in whatever form it may take, is too volatile when compared to the real and intrinsic value of data and other physical assets. You may have heard, “data is the new gold”. The future isn’t who controls the creation and distribution of “money” or records of debt or even currency. The future of value will be determined by how data is created, stored, maintained and shared.
Data is the new gold. Keep an eye out on how this realization impacts money; particularly as money goes digital and crypto. More importantly than the value of data is the ownership of data. In the next decade we’ll see an even more concerted push and transition to people, by default, owning their own data. Data ownership isn’t just a novel idea of the fringe. Sovereign data ownership is the hallmark upon which the future of digital economies will be built. This future will be driven by community consensus, which support cryptocurrencies, digital assets and distributed ledger networks that provide seamless user experiences and consumer-centric data ownership and privacy.
Fractional ownership literally means, “your piece of the pie”. Blockchain and fintech is forcing the digitalization of information. The so-called “blockchain revolution” is actually just Chapter 3 in the Book of Digital Transformation. You may be more familiar with this book under the name, “Automating paper to make more money”. The digitalization of paper, information and data is what is and will enable fractional ownership.
Who will own fractions of the next generations of businesses? The crowd. Who is the crowd? More importantly how will the crowd invest, support and champion the next iteration of profitable, blockchain-networked organizations — distributed autonomous organizations (DAOs)?
Two words: crowd + funding, which equals the future of business formation and capitalization. Get ready for fractional ownership. Because the 2020s will show exactly whose piece of the pie the crowdfunded DOAs will be claiming.
AI + voice + mobile
For those old enough to remember Knight Rider: why can’t you ask Kit to help you execute trades? What happens when Jarvis (Ironman reference) isn’t busy fighting off aliens and instead uses that AI computing power to analyze stock markets, emerging markets, commodities, valuations of startups and the viability of founding teams?
The future of investing, even institutional investing, will be voice-driven (meaning you’ll be able to talk to an AI/Virtual Assistant) on mobile devices. By mobile devices we don’t necessarily mean smart phones, tablets or pads. Mobile devices such as smart glasses, hearing aids and of course, Star Trek-like communicator badges. They, by the way, are the original Bluetooth enabled, AI, voice-activated virtual assistant.
Yes, I know it sounds like science fiction. But so was going to the moon, growing human organs and flying. Yes, flying. You know, 40,000 feet at 585 mph. Now flying is so routine, you forget it’s literally a miracle of science, engineering and human audacity. In five years, voice-activated narrow AI will be as routine as googling something and streaming HD videos on your cellphone to your friend on the other side of the globe.
Alternative finance is the new alternative energy
We’d like to conclude on this note. Sun, wind, thermo, tidal and other renewable energy sources were, a couple of decades ago, coined alternative energy. The sun, the source of energy and life in our solar system billions of years before humans walked the earth was, in the minds of marketers and lobbyists, an alternative energy source. Alternative of course to their financial interest and well-being. So too with alternative finance. Crowdfunding isn’t new. It’s as old as tithing, funding the Statue of Liberty or the stock market itself. In the 2020s so-called alternative finance will become as mainstream and classic as 1990s Alternative Rock.
So, go put on some Nirvana, Beastie Boys, Foo Fighters or Red Hot Chili Peppers and stay tuned for the 2020s. This coming decade will make tomorrow’s blockchain-based funding and financing classics.