Crowdfunding - A new disruptive technology?

Roy Smith () and Won Hong ()
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Roy Smith: NYU Stern
Won Hong: NYU Stern

Journal of Financial Transformation, 2016, vol. 43, 9-14

Abstract: The Jumpstart Our Business Startups (JOBS) Act was passed by Congress with bipartisan support and signed into law in 2012. Many regulators and investor advocates opposed the new law because the securities it was enabling the sale of were very risky, and the public at large was unlikely to fully understand these risks, which include over-promotion, misrepresentation, mispricing and manipulation of prices in aftermarket trading. The first IPO under the new crowdfunding rules, a U.S.$17 million issue by Elio Motors, has now been completed successfully. Between the SEC’s new rules and new procedures developed in the market, a different way to access investors in start-up companies has been created that could provide an alternative pathway for many companies to raise early state capital. If it catches on, then much of what we know about start-up financing could be changed forever; the new pathway could disintermediate the risk capital industry, just as Uber has done to taxis, and Amazon has done to retailing. The change could be very big.

Keywords: Venture capital; initial public offerings; entrepreneurial finance; investment banking (search for similar items in EconPapers)
JEL-codes: G23 G24 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:1561

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