This is the second half of the Bankless Times interview with Andrew Eckerman, the CEO and Founder of Yellowbrick, a social marketplace with apps that combine projects from close to 40 crowdfunding sites from around the world to mobile devices, enabling the user to search for projects they want to support based on the criteria that are important to them.
In Part One we discussed Yellow Brick, the current state of crowdfunding, Indiegogo and Kickstarter. Today we discuss the future of the industry.
Several countries have taken steps to seemingly make crowdfunding easier and more acceptable while we are still waiting for the U.S. to do so. Do you see any scenario in which the U.S. does not allow this to happen?
There absolutely is a scenario where the U.S. doesn’t push through equity crowdfunding, and it may be more likely to see a version of equity crowdfunding pushed through that is so cumbersome as to not be functional.
I do believe the parties pushing for the approval and those who are pushing the regulatory bodies are doing the right thing and are doing everything they can. I believe their efforts will be successful eventually, but the greatest challenge facing these advocates is a true economic recovery and a return to more aggressive small business lending.
Truly no type of SBA loan activity would replace the huge potential of equity crowdfunding, but as jobs come back and the economy improves the pain that pushes the public advocates begins to lessen and become a lesser issue in the eyes of the public.
It is a difficult position to be in because we all want the economy to improve, in fact we’re all working towards that goal with pushing crowdfunding on a national and global scale, however, improvement lessens the pain for perhaps the most exciting movement to happen in private finance in 20 years.
All we can do is push as hard as we can and continue doing the right things to move this movement forward. I do believe it will happen and it will be very successful.
Microfinancing as a way to improve conditions in the developing world are gaining popularity. Given that small amounts do make a difference and with some governments looking to cut foreign aid, this seems like a perfect match of desire and opportunity. Might we see “foreign aid” crowdfunding grow in popularity?
International microfinancing has gained in popularity in even the last year. I expect this trend will continue, but the real excitement will come when U.S. crowdfunders get excited about new ideas, new causes and new businesses in these challenged regions.
The comfort level needs to improve but when we reach the tipping point in rewards crowdfunding in developing countries I believe we will see amazing things happen in these countries.
We have a ways to go and a lot of societal norms to overcome, but I believe we will get there and that the goal is worth walking the road.
You mentioned much of the public still does not know about crowdfunding. What can be done to change that? Does the NLCFA and other groups need to more proactive?
I have heard industry leaders talk about education for over a year and that is one avenue that absolutely should be pursued. However, I believe this is more of a function of how society talks about the successes and the failures of the industry, and then also the continued impact of social media on the industry.
To both points we will need to see more major successes on smaller sites, and stronger brand development by the non-Kickstarter portals.
We will see this develop but it will take time.
We all have to remember this industry is early in development, and we all have a responsibility to help move it forward.
Should these groups be doing more to influence upcoming legislation?
I believe these groups are doing as much as they can. I have talked with most of these leaders and know they are constantly engaged trying to move forward hand-in-hand with the regulators.
At the end of the day the regulators are the ones who have to take that next step. You can lead a horse to water…
New crowdfunding sites seem to be popping up daily. What is the future for the industry as it becomes more established?
It is true new crowdfunding sites are still launching, but we have seen a significant slowdown since this time last year.
In fact, based on our analysis of the industry approximately 10% of the portals that existed nine months ago are now shut down or do not have any projects on them.
This is another area where YellowBrick has endeavored to have an impact. Many of these small niche sites offer interesting specialties or a specific regional focus which is worthwhile. By gathering all the projects for these portals into one listing platform where people interested in finding great ideas or causes can filter and search efficiently we help spread the impact of crowdfunding and broaden the exposure of these niche sites.
We believe it is a natural evolution in the industry.
Will we see attrition? What traits will the successful sites possess?
We have already seen significant attrition in the industry as I talked about earlier, but it is very likely we’ll continue to see portals drop off and mildly successful portals merge.
However, I expect another outbreak of portals and other service providers once the JOBS Act flows through the SEC and FINRA.
Once the lines around the opportunity are more clearly defined we’ll see another “Gold Rush” move in the space.
Those who are the most prepared and the best funded will be the most successful.
Are there areas not adequately served by crowdfunding? I spent seven years in municipal government and see the opportunity for some degree of crowdfunding in arts and recreation projects which are often easy targets for budget cuts.
There are many areas not adequately covered by crowdfunding.
The potential that exists is such that we won’t know exactly where the tipping point exists for many of these different types of crowdfunding in specific verticals.
There have been a few successfully funded projects that would align with the types of opportunities you’re talking about.
Specifically I believe there was a significant project in Kansas City that was funded some time ago, and I would argue the RoboCop statue in Detroit would fall under this category.
My feeling is as more people are exposed to crowdfunding it will gain in effect. The arts, recreational and other municipal benefits likely to not happen as budgets tighten will absolutely be an area where we are going to see some really exciting activity in the coming years.