As opposed to relying on large financial institutions and government entities for capital, emerging businesses have begun turning directly to individual investors to fulfill their financing needs. Shifting trends in mass communications, advancements in technology and regulatory overhauls have now made it possible to raise large sums of money by pooling it from the masses. This new “crowdfinance” constitution is not only resolving inefficiencies and inequality in conventional market structure, it is empowering a new generation of retail products and trading platforms that are essentially reuniting the “people’s capital” with growth, yield and innovation.
I created the FinFair Conference to honor the thought leaders as well as showcase the products and technologies that are driving this democratization of financial services.
Here is the story of FinFair.
During my 23 year career on Wall Street I have had the opportunity to experience our capital markets at their best and at their very worst. In the 1990’s I had the privilege of being part of the ecosystem that took some of today’s most recognizable technology names public. I watched syndicates of small broker dealers unite to fund the innovation as well as support the aftermarket trading of those future market leaders. I experienced the results of those efforts as the Internet transformed the planet and changed the fabric of our everyday lives. I witnessed NASDAQ’s extraordinary rise and fall from a communal Quotron in a retail brokerage branch in the early 90’s, to a PC in my living room later in the decade, and eventually to a mobile device while standing in the middle of a third world country.
Sadly, I also observed the increased bias in the markets as they were corroded by regulations that favored corporate behemoths, financial conglomerates and high frequency traders – all at the expense of smaller issuers, small cap underwriters and retail investors.
In 2010, upon reading Dave Weild’s white papers: “Why Are IPOs in the ICU?” and “A Wakeup Call for America”, I had an epiphany. I could no longer sit idly by and watch the great engine of American capitalism deteriorate. In my heart I knew I needed to do something to ensure that my children inherited a prospering America.
Believing that the solution lay somewhere within the successes and failures of our past, I began delving into stock market history. I came to realize that the greatest bull markets have all coincided with a new invention in mass communications. I also found that our most devastating crashes occurred during a mad rush to invest in “fanciful securities” that were not backed by real dollars. Most disturbingly, I learned that each economic catastrophe was resolved with a regulatory band-aid that ultimately led to the creation of further problems.
It was at this point that I became engaged in the legislative process. I started voicing my opinion in the blogosphere. Then in mid-2011, when the JOBS Act was nothing more than a bunch of bills being tossed around the House Financial Services Committee, I began taking my “blog” on the road. I started organizing forums in key cities across the country with like-minded thinkers.
My programs would highlight the demise of the small cap IPO and its economic ramifications. They examined the emerging online marketplaces that were facilitating secondary trades of the then privately-held shares of Facebook and Twitter. Our speakers showed how social media, the next iteration in mass communications, was revolutionizing advertising, consumption and even finance.
As investors began clamoring for pre-IPO shares of Facebook, it became clear to me that the very same principles and innovation that once propelled NASDAQ to unforeseen heights was beginning to energize these nascent “private company marketplaces.” Much like Netscape fueled the Internet boom, Facebook was inspiring a whole new generation of companies that were able to create value far faster than was ever possible before. I knew that in a favorable market climate, this next cycle of mass communications could lead us to a new era of economic prosperity.
However, market conditions were not only less than satisfactory, they were hostile. NASDAQ, the marketplace once known for incubating young companies to large cap stardom, essentially deserted small caps, and in doing so, left a gaping void in capital formation. Without a venture exchange to turn to, America’s most sought-after growth prospects simply opted to stay private longer and flourish in the hands of VC firms instead of appreciating in the retirement portfolios of ordinary Americans.
With the vast majority of Americans legally prohibited from partaking in the upside of some of the nation’s most exciting privately-held business, the country continued to experience an ever-widening wealth gap.
It was clear to me that there were only two possible solutions. Either public markets needed to start supporting small cap growth stocks again, or laws needed to be enacted that would grant unaccredited investors access to privately-held companies.
Fortunately, in October of 2011, the House Financial Services Committee passed a bundle of game-changing bills that were later incorporated into the JOBS Act. Upon their passage, I published an article called “Bipartisanship Prevails for Job Creation” which highlighted how these bills could facilitate capital formation and job creation. I was particularly enthusiastic about Rep. Patrick McHenry’s “crowdfunding bill” which I believed would help level the investment playing field. I sent my article to the Congressman who graciously agreed to headline an event I was planning on January 23, 2012 in New York City. This was the first known crowdfunding conference in the United States, and it was where many of today’s principal crowdfinance leaders initially met.
My next crowdfunding event took place in Los Angeles two months later – coincidentally occurring on the very same day that the JOBS Act passed the Senate. It was this event that birthed the industry’s two key leadership organizations.
In the remaining months of 2012, I went on to produce 10 more widely acclaimed industry events in cities across the country as well as unleash some of the most provocative market commentary highlighting the dysfunction and injustice in the equity markets.
But I realized that it wasn’t only our equity markets that were inoperative. Our credit markets, too, had become just as flawed and unfair, leaving retail investors and small businesses with limited options. With traditional banks not lending and interest rates reaching historic lows, borrowers and lenders began turning to the Internet for capital and yield. Thus, the P2P lending revolution was born. In less than a decade, this new method of debt finance has become a worldwide phenomenon – projected to be a trillion dollar industry by 2025.
In early 2013 I teamed up with P2P industry leaders: Peter Renton, Jason Jones and Bo Brustkern to form LendIt. The sold-out inaugural LendIt conference was held in New York City on June 20, 2013. It was the first time that all of the major online lending platforms and investors from across the globe had congregated under one roof. Today, LendIt is the world’s largest P2P and online lending conference platform with annual conferences in U.S., Europe and China.
While planning the early LendIt conferences, I was astounded by the sheer level of enthusiasm for the nascent industry of P2P investing. It was beyond anything I had previously encountered on Wall Street, and something I thought I’d never experience again. Yet, here I am beginning to sense a similar fervor from the equity players over Regulation A+.
In December 2013, the SEC proposed rules for Title IV of the JOBS Act, also known as Regulation A+. I was hopeful that if implemented correctly, blue sky pre-empted Reg A offerings had the potential to restore the thriving small cap IPO market of yesteryear. Furthermore, I believed that coupled with a viable venture exchange, this could very well be that panacea I’d been searching for that would decrease the harrowing wealth gap and inspire a renewed epoch of economic growth.
Throughout the subsequent 14 months, I remained on the forefront of Reg A+, hosting a number of informative seminars and webinars framed around the proposed exemption – which was ultimately adopted by the SEC on March 25, 2015.
Also during the better part of the last year, I’ve been corresponding with a number of financial innovators -including fund managers and FinTech experts – as they endeavor to launch new products aimed at helping retail investors recapture yield, save for retirement and enhance their due diligence efforts.
With P2P becoming more mainstream, Reg A+ on the cusp of delivering the small cap IPO back to the retail investor and new products emerging to serve the investing public, I knew Wall Street was ready for its next ground-breaking event.
When I began conceptualizing this new symposium, it occurred to me that there has never been a central stage where next-generation financial technologies and retail products are introduced to the marketplace, where today’s pioneers can obtain wisdom from true Wall Street icons, and where legislative intent and regulatory frameworks are both shared and debated.
FinFair 2015 was designed to be that focal point which showcases the leadership, products and technologies that are driving the democratization of Wall Street by opening new capital doors for both emerging companies and retail investors.
It’s funny how all of our experiences – including even the most unexpected circumstances – bring us exactly to where we’re meant to be. FinFair, the composite of my professional career, exemplifies this very notion. It is giving me the chance to revisit my roots and honor the heroes who taught me the business, while at the same time, enabling me to present the products that are paving the future of financial services.
I look forward to seeing you all on July 29th as, together, we reunite the people’s capital with innovation!
President of Dara Albright Events & Co-Founder of FinFair