CROWDFUND INVESTING FOR DUMMIES by Sherwood Neiss, Jason W. Best, Zak Cassady-Dorion, Wiley & Sons, NY, 2013
EQUITY CROWDFUNDING by Jonathan Frutkin, Cricca Funding, LLC, 2013
These two books, Crowdfund Investing for Dummies and Equity Crowdfunding, synthesize all the necessary concepts, models, information and strategies to understand and capitalize on the crowdfunding revolution now bypassing traditional financial circuits and markets. While bitcoin and the latest crop of crypto currencies help us understand alternative payment systems, electronic information-based exchanges and 21st century barter, crowdfunding has taken its place as the premier open-source network of platforms for alternative investing.
Authors Sherwood Neiss, Jason Best and Zak Cassady-Dorion of Crowdfund Investing for Dummies were prime movers in this new crowdfunding asset class. They campaigned tirelessly with bi-partisan support in the US Congress. This pushed the Obama White House to get the 2012 JOBS Act enacted. This law required the SEC to set the rules allowing small investors into the restricted game of financing start-ups - at a time when traditional venture capitalists had lost their way and become risk-averse.
Many of the most ethical critics of Wall Street's antics were appalled at the passage of the JOBS Act, warning of a new plague of pump and dump bucket shops. They saw small investors as being fleeced by this new wave of financial tricksters and their fly-by-night websites already funding myriad local projects on Kickstarter, Indiegogo, RocketHub by offering premiums and future products instead of the forbidden shares in these enterprises. For example, Kickstarter in 2012 raised more money for arts projects than the National Endowment for the Arts (Frutkin, p. 22). Internationally, equity crowdfunding is legal on such sites as the Prodigy Network.
Instead, I saw these social media sites as more transparent and practical for small local investors, entrepreneurs and inventors - preferable to the OTC markets, insider trading scandals and Ponzi schemes being uncovered on Wall Street. I supported Neiss, Best, Cassady-Dorion and the merry band of disrupters who founded the worldwide crowdfunding movement finally accepted in the USA by the JOBS Act. The embattled SEC with all its internal conflicts of interest was forced into setting rules while avoiding capture by the traditional broker-dealers. After initial resistance to the JOBS Act, many broker dealers came to see new opportunities to unload their toxic assets on unsophisticated Mom & Pop investors.
Crowdfund Investing for Dummies and Equity Crowdfunding by lawyer and venture investor Jonathan Frutkin are both essential reading for all small investors who care about their local communities and want to bypass Wall Street and too-big-to-fail predatory banks. Everything they need to know about the risks and rewards of the now exploding crowdfunding movement is contained in these two books. All the authors themselves are leading venture capital providers. Neiss, Best and Cassady-Dorion, co-authors of Crowdfund Investing for Dummies, are founding principals of Crowdfund Capital Advisors, LLC.
Jonathan Frutkin of Equity Crowdfunding: Transforming Customers into Loyal Owners is CEO of Cricca Funding, LLC, and former managing partner of The Frutkin Law Firm of Phoenix, AZ. Frutkin's breezy, readable book covers all the territory for successfully starting and growing local businesses using all the crowdfunding tools now available. Well-known examples such as Mosaic which crowdfunds solar energy projects based in California are now proliferating worldwide. Retail investors are aware of their risks, yet see that transparency is a safeguard, as well as simply knowing your neighbors which reduces risks in local and community investing. Trusted groups including BALLE, Slow Money, and websites including Kiva, AngelList and all these alternative investing opportunities are those we also cover daily on our Crowdfunding and Community Development pages on ethicalmarkets.com.
Why is crowdfunding now a global "bubble-up" alternative to the trickle down financialization of traditional finance and its global casino now lost in cyberspace? The answer is trust, since markets always operate on trust, still eroding away from haute finance after 2008. Increasing distrust is exacerbated by high-frequency trading, algorithms, co-location, latency, maker-taker markets and the faux liquidity they purport to provide as described in Flash Boys, Broken Markets and Dark Pools - along with quantitative easing money-printing by captive central banks and compliant politicians. Our tax-payer funded new communications tools; satellites, fiber optic cables, microwave towers, the internet itself are public infrastructure often misused by traders. Now this same infrastructure also is providing more useful platforms for social media, homegrown finance and the safety nets of trust in ourselves and our local communities.
Time for conventional asset managers seeking alpha in obsolete metrics and benchmarks to jump ship and learn the new games of local finance and currencies, public banking and the growth of cooperatives, microfinance and community-based credit. Restoring trust will also require better, more ethical markets, writing down stranded assets and un-repayable debt and joining the shift to investing in cleaner, more equitable, knowledge-richer sustainable societies and our common human future. These two books are good places to begin.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.