A few weeks ago, we had the pleasure to have a chat with Dan Marom, co-author of The Crowdfunding Revolution. He will be skyping in during our event at Social Media Week Glasgow taking place on the 28th of September at 5pm. The event will be live streamed too.
Hi Dan, thanks for taking the time to do this interview, really appreciated. You’re probably a person as well known and well published in the crowdfunding area as anybody, so we really appreciate your time. Tell us a bit about your view of crowdfunding.
Thank you for the kind words. One of the first things to note about crowdfunding is the nature of it is purely social. Kevin Lawton and I recently finalized the second edition of our book, “The Crowdfunding Revolution”, where we wrote a chapter dedicated to the idea that crowdfunding is the new “Like”. I am of the opinion (albeit a provocative one), that companies who are looking to be “liked” on Facebook are doing yesterdays work. Why? Because “liking” a company is a passive way to engage, whereas crowdfunding is active engagement. Individuals can pick and choose the brands, initiatives, and entrepreneurs they care about, and invest in them. It is a more sophisticated and active form of engagement, engagement, and the social effects are what count.
We would echo those feelings entirely. It’s quite a profound connection that you make when you invest and you offer a level of binding to the brand and organisation or to a project in a way that is much stronger than buying a ticket.
It will be our pleasure to have you there. When is the book actually due to come out?
The 2nd edition is forthcoming soon (this December) by McGraw-Hill.
Looking forward to that. Where did you meet Kevin Lawton, the co-author, and what prompted you to write the book in the first place?
It’s actually a funny story–despite writing a book together, Kevin and I have not yet met in person. In the book’s introduction, we discuss the global effects of crowdfunding and the manner in which the age of the internet has changed the way we interact, and we are a living, breathing example! Kevin and I are live 15,000 miles from each other, we have never met, and yet we are writing the second edition of our book! Our story is a testament to virtual cooperation.
Three years ago, while I was looking for an exciting issue to write a Phd thesis about, I wrote several pages and started to interview academic researchers. At the same time, I thought that I should write a popular science book, so I started approaching and interviewing different thought leaders in the field. At that time, many of the current platforms were in their infancy, but I had the opportunity to interact with the different parties involved. Then I happened upon a blog post Kevin authored about trends, was intrigued by his material, and then one thing led to another and we decided to write the book together. Kevin is a fantastic guy, very smart, and is a true thought leader in this field.
That’s amazing and it’s a great testament to what’s possible now with these technical platform that are available to us (and giving that SMW’s main global theme is empowering change through collaboration there is a wonderful example of it, it’s fantastic).
Going back to the book, when writing the second edition, you must have seen quite a few changes in the 2 years since you did the first edition. Have you updated it at all and what would be the key things that are different now from when you first published?
That is a great question. We wrote the book in mid 2010, so the landscape has changed in the past two years. The second edition has several updates. First, integrated the latest milestones of the crowdfunding scene. Second, we added several chapters that are focused on the funding campaign, with best practices, suggestions and pointers to make the book more practical.
When we started to interview the major players at the beginning of 2010, the overall crowdfunding market was very small. We have gone a long way since then and the book illustrates the metamorphosis both companies experienced.
All in all, I think that most of our predictions were actualized and we illustrated some of the future trends that we are seeing now.
The thing that I think will make huge difference is that whilst equity crowdfunding has been possible in the UK for some time with Crowdcube leading the way, and Brewdog, a Scottish craft brewery, that raised 3.5 million in equity share sales through crowdfunding, in the States this wasn’t legal. But now if the JOBS act becomes permissible then clearly there will be a massive burgeoning of the take up and popularity of equity based crowdfunding platforms.
Absolutely. Over the past three years, Kevin and I have been involved in several groups working on the regulatory aspects. We are optimistic the JOBS act will transform crowdfunding from a trend to the industry standard. While it will take time, and there will certainly be challenges, I think it will happen. I am also interested in the regulations aspect of crowdfunding. Kevin took a leading part at the work on the JOBS act, and we anticipate the SEC regulations will be impactful on the future of crowdfunding in a positive way.
I think you’re right. (A law firm here in Glasgow just launched their own equity based crowdfunding platform, it’s really starting to take off over here too.) The thing that I find fascinating is that much of this equity based crowdfunding will be first round, so the traditional capital market will get involved at the second and third round funding. I’ll be really interested to see if and how these traditional capital market players will come get to grips with the fact that they’re second-round investing in a company that has already sold 10 per cent of their equities to people that are out of their traditional environment.
Great point. I believe hybrid mechanisms are the future. The crowd itself will find it hard to succeed with a start-up company or any other initiative alone without some institutional money, and the classical financing intermediators are currently resisting to any change. There is tension between these mechanisms, and I think we will see a lot of change in the next five years. There are no alternatives to these hybrid mechanisms. It is also a major business opportunity, and has serious potential to be a gold mine. The bridging between financial institutions to crowdfunding platforms and players could be a significant area of growth in the near future.
Thank you very much, Dan.