Crowdfunding: The New Age of Venture Capital or an Invitation to Fraud and Disaster?
February 7, 2013 5:30pm - 7:00pm
Please note that doors will close 10 minutes after the discussion starts at 6:10pm. If you arrive after 6:10pm, you will be diverted to the overflow room in the Room 280B. Due to the amount of registrations, seats are limited and are on a first come, first serve basis to pre-registered guests.
The panel will include Naval Ravikant (CEO and co-founder of AngelList), Rory Eakin (Founder and COO of CircleUp), and Professor Joe Grundfest (Stanford Law School) and will be moderated by Evan Epstein (Executive Director, Stanford Rock Center for Corporate Governance)
Co-sponsored Stanford Rock Center for Corporate Governance and Advanced Degree Student Association
The JOBS Act was signed into law on April 5 of 2012 with bipartisan support to encourage funding of small businesses by easing various securities regulations. Included in the Act is the “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012” or “CROWDFUND Act” which will allow equity crowdfunding by non-accredited investors under certain conditions. President Obama has called equity crowdfunding a “game changer” that will for the first time allow ordinary Americans “to go online and invest in entrepreneurs that they believe in.” Despite some delays, the SEC is expected to propose the detailed rules enabling this new category of retail investment in the coming months.
Supporters of the initiative believe that exempting crowdfunding from the traditional securities markets regulation should lead to a great expansion in possibilities for startup finance, thereby accelerating the growth of early stage companies and ultimately the whole American economy. Critics fear that crowdfunding means linking inexperienced investors with the most speculative ventures out there. A particular concern is that crowdfunding will be used predominantly by companies that traditional venture capital investors have already shunned as too risky or unfit. Furthermore, the detractors contend that crowdfunding will create new opportunities for defrauding retail investors, who usually have little chance of monitoring the actions of the fledgling companies in which they invest.
Will equity crowdfunding usher in a new, better age of venture capital? Or will people end up throwing their life savings into a black hole, with little actual hope of gaining a return? The panel will discuss the arguments, seeking to gauge the potential of crowdfunding to improve startup finance, to assess the risks of mismanagement and fraud, and to review the implications of the crowdfunding exemption for the overall securities regulation framework.