One of the biggest tech stories of 2013 won’t be a new gadget or a new milestone in space, but a seemingly minor regulatory change in the rules surrounding investment.
On April 5, 2012 Barrack Obama signed into law a piece of legislation may mark the beginning of a new age for capitalism. The Jumpstart Our Businesses Act (JOBS Act) allows companies seeking investment online to offer equity in exchange for investments. So essentially, instead of only being able to offer access to the product for sale or some sort of perk in exchange for your investment, people will actually be able to buy “shares” in the company seeking funds.
Think Kickstarter meets Wall Street.
If something like the Pebble Watch can raise over 10 million dollars by offering a chance to buy a product that was still in the prototype stage, how much money could they raise if they had instead offered equity in their company? Sometime soon, when someone with a good idea for a new gadget, or movie, or music album asks for money to finance their project, they won’t only offer you a chance at buying the final product, but they will also offer a percentage of the profits.
While today it is certainly easier then ever to buy stocks, there are still important barriers to entry, such as the high cost of share purchases or need to open an investment account. These barriers are many-fold higher for those with new ideas who are seeking funding to turn good ideas into reality. Just the cost of the paperwork necessary for a small company to go public is absolutely prohibitive, notwithstanding the time which is also necessary to do this.
By allowing internet portals to connect small investors with small enterprises needing investment, this smashes through barriers that prevent money from becoming investment. This democratization of the market will allow investment money to flow into new and exciting ideas almost instantly. This circumvents the types of regulatory barriers that allow large corporations to maintain such a stranglehold on the economy.
I am confident that the first big success of this type of funding venture will probably happen in 2013, and it will change the world.
As continual advances in computers and robotics drive up the profit of making and delivering goods and services to the consumer while simultaneously driving down the number of employees necessary to do this, we will enter an age when economic growth will become completely decoupled from job growth.
In a possible future of unprecedented economic boom but continually slumping job numbers, jobs and salaries as the primary mechanism of wealth distribution may become a thing of the past. By lowering the barriers that keep people from investing in new ideas, crowdsourced funding could simultaneously deliver much needed capital to the revolutionary ideas driving the next economic boom and allow a larger proportion of people to profit directly as well. If the techno-economic boom turns out to be as staggeringly huge as some have suggested, this new market could even become the dominant income stream for the majority of people.
As with any revolution, the democratization of the market will not be perfect. Yes, there will be an abundance of scams, but who is to say it will be worse then the darker walled-gardens of today’s market. The collective detective abilities of the internet can be surprisingly efficient at rooting out fraudsters. With efficient regulation and the vigilance of internet investors these problems can be solved.
Let this be the beginning of a new age where we can both support the change we want to see and share in the profits to be had.