News Room
Sharia Compliant Crowdfunding – Creating a Crowdfunding Ecosystem for the Muslim World
- Details
- Category: Creating a Global Framework
- Published on December 13, 2012
- Written by jillian@leverage-pr.com
This week, the Global Entrepreneurship Summit took place in Dubai. The Summit, the first of which was launched by the President in 2010, is the premier gathering to promote prosperity through innovation and entrepreneurship and featured entrepreneurs, investors, policymakers, academics and ecosystem players from all over the world.
Sherwood Neiss and Jason Best, Principals from Crowdfund Capital Advisors spoke about a new trend in startup and growth financing called Crowdfunding and how they are working to create a global framework. In particular, they discussed how Crowdfunding compliments the principles of Islamic Finance and how Muslim nations can benefit from building a Sharia compliant crowdfunding ecosystem. Such an ecosystem would build strong relationships among people, promote the socially responsible distribution of wealth, and encourage risk sharing in economic transactions to reduce the risk to any one party. All core elements of both Islamic finance and crowdfunding.
In 2013 a new form of seed, startup and growth financing will begin in the USA. It is called "crowdfund investing" where startups and small businesses can seek up to $1 million from their social network on SEC-registered online platforms. It is equity or debt financing. Requires that 100% of the funding target is met and caps the amount investors can commit based on income or net worth thresholds. It updates securities laws that prohibited the use of the Internet for raising capital as well as limiting investors to mainly only accredited ones.
“But it changes the financing landscape,” says Sherwood Neiss, Principal at Crowdfund Capital Advisors (CCA). “Unlike normal VC’s who provide money and expect the entrepreneur to do all the work, crowdfunding brings about a new class of stock and a new kind of investor, the “customer investor” who is not only a buyer of the product or service but a crowdsourced volunteer of knowledge and experience and a net promoter of the company since his or her financial return is tied to the performance of the company.”
Crowdfund Investing fills the zero to $250,000 funding gap that exists for startups and small businesses, particularly after the economic crisis of 2008. Without this capital companies are struggling to survive. This capital is critical because small businesses provide the bulk of the net new jobs according to the Kauffman Foundation.
“Our framework details the way in which the transactions will take place,” says Jason Best, co-author of the Startup Exemption and Principal at CCA. The Startup Exemption was the framework for which the tremendously bi-partisan law passed. “An entire ecosystem is developing to support the infrastructure and allow for transparency, credibility and market efficiency. Background checks on the issuers are mandated as well as investor education to make sure investors are informed of the risky nature of these investments.”
Expert Venture Capitalist Fred Wilson, said “if Americans take 1% of the $300 Trillion they have in savings it would create a $300 billion dollar market.” Crowdfund Capital Advisors in conjunction with UC Berkeley and the Thunderbird School of International Management will be releasing a white paper estimating that in the first year over $3.6 billion will be transacted on crowdfund investing platforms helping fund over 38,000 companies.
“Islamic countries have tremendous opportunity,” says Neiss. “Islamic finance follows the rules of Sharia law. Sharia law is based on the principals of shared risk and reward. Where social justice is key and wealth is shared.” Islamic nations produced over $1 Trillion dollars of value. It is expected to grow to $5T in the next several years.
If Crowdfund Investing can deliver the shared risk reward profile, it is hoped that it can also unify and stabilize communities and economies. As communities come together to pool resource to launch a business and share in the risk and the potential. “By working together we can promote peace and prosperity through entrepreneurship. That’s something everyone can support,” says Best.
World Bank Selects CCA
- Details
- Category: Creating a Global Framework
- Published on December 06, 2012
- Written by Jason Best
The World Bank has selected Crowdfund Capital Advisors (CCA) as the winning bid for the engagement titled, "Crowdfunding: Unlocking early-stage financing for innovative developing country entrepreneurs." The project will deliver research at the intersection of innovation, technology, and entrepreneurship to create opportunities for inclusive growth, job creation and poverty reduction in the developing world. During the project CCA will provide the World Bank with analysis of crowdfunding's role in the developed world and developing world.
"CCA is thrilled to be working with the World Bank on this proactive, visionary research project to identify ways to leverage the new crowdfunding industry in developing nations and develop a long lasting relationships as we enter the Web 3.0, where social media and communities create access to capital. Crowdfunding is a very old idea, that now benefits from technology that create efficiency and transparency. This will fuel innovation to support innovation, entrepreneurship and small businesses globally," said Jason Best, Principal at CCA.
The project will contribute to the World Bank's strategy for using Crowdfunding in conjunction with its efforts to deploy smart capital.
What are the Global Implications for Crowdfund Investing?
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- Category: Creating a Global Framework
- Published on November 26, 2012
- Written by Sherwood Neiss
Government focused on growing economies focus on creating jobs. Small business and entrepreneurs are the driving force behind every successful economy across the globe. Cultures and governments that embrace and celebrate the entrepreneur are more likely to succeed in both the short and long term.
Although crowdfund investing is not an economic cure-all, it can be an important part of the solution. It allows significant numbers of citizens to make modest investments in high-growth and/or community businesses. And it can benefit your country for the following reasons:
1. Ideas Follow the Money
Fostering an ecosystem that encourages entrepreneurship and innovation requires capital. If the financial markets or regulations in a particular country are such that capital isn’t flowing, businesses can’t get the money they need. Entrepreneurs who are passionate enough about their ideas will go where the money is available to fund them. This is why many Canadian entrepreneurs head to the United States: because capital is more readily available to fund them there. Countries that wait to update their securities laws will create “brain drain” as skilled entrepreneurs head to other countries where they can fund and launch their businesses. An idea that is successfully funded in one country generally stays there and rarely returns back to the entrepreneur’s country of origin.
Italy Invites CCA to Speak on Crowdfund Investing
- Details
- Category: Creating a Global Framework
- Published on October 10, 2012
- Written by Jason Best
Nation seeks CFI experts as it prepares to legalize crowdfund investing
There’s nothing quite like an economic slump before a national election to get governments focused on solutions to issues like high unemployment rates and dropping GDPs. It’s certainly no secret that those factors helped us at Startup Exemption get the bipartisan support from Congress we needed to include legalized crowdfund investing (CFI) in the JOBS Act in 2012.
So with the deepening economic crisis in Italy sitting on the doorstep of that country’s election year, it wasn’t surprising that Italian government officials would look to crowdfund investing as a possible solution to their nation’s socio-economic challenges. And when they began seeking the leading experts in CFI throughout the world, it wasn’t surprising that the phone in CCA’s office rang with a formal invitation from Rome.
What Role Should Governments Play in Business
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- Category: Creating a Global Framework
- Published on August 01, 2012
- Written by Sherwood Neiss
We can all agree on the important role governments play in our societies. Fundamental to the way we all interact, they provide order via laws, they facilitate economic activity by building infrastructure, and they are the administrators of force via policing departments and military, which protect us and ensure safety. Still, there is a widely-adopted social mythology that the role of government has nothing to do with business, because mixing for-profit motives with not-for-profit interests is like mixing oil with water. Should this “black or white” idea be brought in to question? Considering the facts, the reality is that policy regimes create the conditions under which businesses either thrive or perish. So, policy plays a critical role in business. For example, a government’s policy regime creates or diminishes efficiency in capital markets. Also, sometimes lingering legislation from times past can have enormous consequences today, though circumstances change. I argue that this is the case with the Great Depression-era policy framework that governed securities activities in the United States before the passage of the JOBS Act and sits on the books of many well-meaning countries, looking to protect their citizens from fraud. Sadly these outdated laws have unintended consequences which increase the cost of capital to a point that makes it unrealistic for small businesses hindering growth, employment and prosperity for their business, communities and country as a whole.
