Crowdfunding - An elite strategy for the masses

I remember the first time I can recall seeing Irish economist David McWilliams on TV.  It was the late 90s, I was half-way through my degree at college and things had never been better in Ireland. We were at the beginning of what would later be called “the Celtic Tiger.”  Ireland was winning its wealth from the rest of the world by having a low cost, agile workforce and a trade surplus and the Government’s disastrous policy of asset stripping the country via the property market to keep the good times rolling had not yet begun. When I heard McWilliams speak, I remember thinking, “This guy doesn’t sound much like an economist… sounds like an ordinary punter giving his opinions on complex economic issues in plain English.”

That is the brilliance of the man. McWilliams has an ability to highlight the fact that in economics “the important things aren’t that complex and the complicated things aren’t that important.” This is the vibe that comes across in each session at the annual Kilkenomics event that McWilliams co-founded. Hosted in the charming little city of Kilkenny, Ireland and billed as “Davos with laughs,” Kilkenomics aims to bring the often complicated, and lets be honest--rather boring topic of Economics, the science of how we are all affected financially, and breaks it down so that everyone from the broke student to the retiree concerned about their pension fund can understand.

During a session last night entitled “The Winner Takes It All: Why the rich are getting richer and you are left behind.” The panel included the FT’s Martin Wolf, Dutch Journalist Joris Luyendijk, Indian professor and businessman Vikas Nath and financial commentator Stacy Herbert. The discussion focused on the growing wealth and income inequality gap that is becoming more and more apparent in the western world.




While there was general consensus that inequality in wealth and income is a problem, there was less consensus about what could be done to ameliorate the situation until Herbert made the most important point of the evening. She began by pointing out that in the UK (as well as in most parts of the West) traditional banks tend to opt for investment in property rather than innovation and Startups. The reasons for this, Herbert pointed out, were simple. In cities like London, a house can provide up to a 40% return in the space of a year or two, where as, historically, investment in Startups and new business came with a high level of risk and failure. And in an era where those who are cash rich due to policies such as ZIRP and Quantitative Easing, the idea that risk taking is an integral part of speculation no longer holds true!

It’s a long established fact that will be familiar to any entrepreneur who has ever sat across the desk from the bank manager hoping to secure funding, that all too often the focus of such conversations centres around collateral and personal finances rather than the brilliance of the innovation or how quickly it will disrupt an existing growing market.

Indeed even in the US, where the entrepreneurial spirit is far more mature and developed than in Europe, it is not in the world of traditional banking where one will find the financial beating heart of Startup culture, but in the ring fenced, tight knit Venture Capital community. If one takes a quick look at the enormous successes which have sprung up in the US over the last two decades two facts will become obvious: 1) the vast majority of these successes have been in the Tech Space, and 2) the original funders for most of these ventures usually come form the same short list of tech VC superstars. Firms such as Benchmark Capital, Andreeson Horowitz and Sequoia Capital, as well as individuals like Peter Thiel or Sean Parker seem to always have the Midas touch when it comes to finding the most successful Startups. Is this a case of titanic brilliance and foresight or is there something more grounded in the reason behind the success? While there’s no doubting the brilliance of the minds behind many of these success stories there is a more geographical reasoning behind their continued success.




Any tech Startup in the second decade of the twenty-first century knows that in order to attract capital in a significant way, it’s going to have to go to Silicon Valley and network with the titans of the VC community and make its case. And that’s the secret sauce for those very same VCs. The reason they are able to pick winners so consistently is because ALL the firms that are likely to succeed SEEK THEM OUT.  It’s always going to be far easier to pick the winners from the losers if all the participants volunteer to let you look under the hood and compile a matrix of features, strengths and weaknesses from among all the participants.

This position of strength often enables the VCs of Santa Clara and San Mateo counties in California to gain a very favorable equity position in promising Startups for relatively little upfront outlay and ensures enormous RoI consistently.

So it would appear that between apathy from traditional banks who are focused on more brick and mortar investments and a limited, close knit community of Venture Capital firms, there are very few options for a burgeoning tech Startup… until now that is!

The emergence of mass high-speed internet access coupled with the power of blockchain technology has created a financial phenomenon which is quickly becoming what I believe will be the most disruptive and important financial innovation of the last 250 years. Rewards based and Equity crowdfunding platforms such as StartJoin and Bank to the Future are creating something which the market hasn’t seen before: a truly global marketplace where entrepreneurs and would be investors can connect and help bring their Startup and investment dreams to fruition.

The Internet has made it possible AND the blockchain has made it incredibly cost and resource efficient to create such a global marketplace. What we are seeing as a result is the democratization of finance and corporate funding. The democratization of finance and corporate funding.  No longer are we living in a world where a very small few control the purse strings to the early stage funding that companies require to morph a brilliant idea into an industry changing platform. Whereas in the 20th century entrepreneur’s had little option other than to approach a small group of individuals and firms in attempts to acquire a large amount of funding, in the 21st century, and thanks to the revolution of blockchain technology budding, would be entrepreneurs can now market their products and services to the masses with the aim of acquiring a small amount of funding from each one. After all it’s a lot easier to ask 1 million people for a dollar than asking one person for a million dollars!




About the Author

Karl Gray

Author & Editor

Karl has been investing in financial markets all over the world for the last 10 years. Forecasting both the commodities bull markets of the naughties and the rise of crypto currencies, Karl has a proven track record in identifying global trends.

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