10 years from now, few people will seek 'traditional' financing suppliers as capital is about to get real efficient real quick. Bottom line is, this will be excellent for businesses of all shapes and sizes.
I also reject that things like electronic trading for the masses are bad because the general public has bad investors. That's like saying online fraud should determine my access to ecommerce.
In many ways, platforms will help validate concepts through user participation... And the community can validate credibility. I don't just think this is a dumb money thing, I think investors will have advantages they've also never had. The bottom line is both sides of the market will get a clear benefit.
edit: Also, on top of not enough deals, investors don't normally easily get access. In the past, this was for the investor's protection, of course. Theoretically, this would also solve that inefficiency. Again, in the past, this inefficiency existed for the investor's protection, not a bad thing.
I would also say it's a stretch to call this "pent up money." Equity crowdfunding is merely an alternative outlet for your money (the usual outlets being currency, bonds, public equities, etc.). You can think of in terms of substitute goods.
Not to mention that most people have absolutely no business investing in startups. All the best deals are going to go to the established, connected VCs and angel investors who can add value in addition to the money invested.
Alternatively, take a look at a lot of the hardware/product projects on Kickstarter. Those startups are using Kickstarter as a platform to show their idea is wanted and credible. So then the VCs who passed on the risky venture come in later after the idea is validated to a certain extent. They might not see the same upside but they're also taking on less risk.
SEC. 301. SHORT TITLE.
This title may be cited as the ‘‘Capital Raising Online While
Deterring Fraud and Unethical Non-Disclosure Act of 2012’’ or
the ‘‘CROWDFUND Act’’.
You know why?
Normal people suck at investing. Period. They just aren't equipped to make good investment decisions - they can barely handle regulated housing/stocks/bonds. The average investor isn't trained in the most basic aspects of finance, isn't qualified to determine the merit for an arbitrary startup, often has a day job that is in a completely separate industry and is just fodder for pump and dump, pyramid schemes and scammers.
Professionals aren't that much better - but that's a whole another discussion (and they're playing with OPM).
This is just setting up bubble 2.0. It also reminds me of another odd thing we have with investing. There's no minimum qualification or licensing needed to become an investor. Odd - seeing as someone investing their live savings as an individual is quite literally playing with what is in effect a life-time's worth of money.
Now - I'm not against pre-orders for products/experiences - a la kickstarter - which I think are absolutely brilliant, and other stuff that is seen as pure consumption (not investment).
What I'm against is what stuff like this will lead to. It's the people investing in Social Media Startup No. 3015 with $5 million in life savings at a $25 million post valuation in 2016.
That's what's worrying.