by: Markus Lampinen
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Crowdfunding seems the buzz of the town, right? We at Grow VC have been hard at work with ‘crowdfunding’, even before the term was brought to life. Despite the current upbeat market around the global phenomenon, it’s been a long journey to get to this point. But now that we have reached this point in time, where are we headed?

To state that the mood for crowdfunding is all cheers and laughs, would be misleading. However, when discussing a new, emerging financial market, a superficial approach to handling and building a sustainable new market would be plain wrong. There are several issues and topics to be raised, which is why we also have taken an active role in the dialogue. The discussion is healthy and should be thorough, to understand the topic at hand and work out what gaps need to be addressed. If we take a few steps back in time, it’s clear how far we’ve come.

the sinking financial markets

As we started mapping out the market and the needs for new models in early stage funding, it wasn’t clear to everyone that it was needed in the first place. The global financial crisis and bank lending drying up for early stage businesses, made it a lot more visible and a few years later the discussion was already wide spread. Imagine that only a few years ago people we’re yet convinced there was much to improve on in the early stages of funding. Sure, there were a lot of pioneers in this field that we also discussed with, but not to the extent that we have today.

In the present, opinions are still divided. However, there is no illusion that the current financial models or the ones that led us into the financial crisis, are the answers we are looking for. The reception to our networks program from the financial market and those who already operate in the early stage funding market, has been a clear signal for change, as many established actors start to explore and embrace new, more transparent and democratic funding models.

Sure, there is still some hurt ego in the established sector, mainly stemming from misunderstandings on what the new funding market is and how it should work. Some see it as a replacement to their activities, when it should most likely be viewed it as a complement. Some limit their view on equity funding alone, which as a sector is surely important, but not nearly sufficient for an effective market. Equity funding serves one niche in the market, that one niche is small in a grand scheme. What about small and medium size businesses? Surely you can’t expect a restaurant to be bought out at 100 times the valuation of your investment?

The demand for more transparency, efficiency and participation is clear in various sectors and the financial sector is long overdue for a change. We see that it’s not enough for a single change, but the ecosystem and support infrastructure needs to evolve with the new world. We’ve discussed the changes we see for the funding market to work properly before as well, and we see that the reforms needed in the infrastructure span the entire lifecycle of new enterprise, both locally as well as nationally, and internationally. However, these changes will appear in increments, to create sustainable models and infrastructure to a new, market.

Existing models in the early stages suffer from low liquidity, which can surely benefit by bringing more effective participation into the mix. No one doubts the lack of liquidity and the struggle that often faces angel investors and founders alike.

The wider ecosystem at hand is also calling for more connectedness, where players are not fit into isolated buckets, but can work and communicate with one another effectively. The Grow VC Group is announcing solutions to the paradigm revolution later on this fall, and we are currently working with hundreds of partners in various clusters. By introducing more models for direct participation, from local ecosystems, such as universities, incubators and alumni networks, to effectively support themselves, we are surely laying the building blocks of tomorrow.

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Crowd Valley, Startup Commons, Kapipal, Grow Advisors, TradeUp Fund, Deal Index, Crowdcitee, p2p Safety, Crowd Index Fund, Commoditarian

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About the author

Markus Lampinen Passionate, driven entrepreneur. CEO at Crowd Valley, the crowd funding infrastructure, Senior Partner at the Grow VC Group. Markus has also worked with actors in both the private and public sector, to improve the infrastructure for entrepreneurship and serves as a frequent public speaker on related themes. Follow Markus on Twitter, LinkedIn & Google

This entry was posted on Monday, October 1st, 2012 at 3:21 pm and is filed under Entrepreneur Inspiration. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.