“GATE Global Impact has announced a strategic alliance with online platform Crowdfunder to open securities-based crowdfunding between qualified U.S. business owners and accredited investors. The alliance makes investor protection paramount by utilizing the regulatory framework of GATE’s broker dealer division – GATE US, Member FINRA, SIPC – to oversee and facilitate all securities-based transactions across Crowdfunder’s community of 9,000 investors and entrepreneurs and 1,100 registered companies.” Source
Tapping GATE’s broker dealer license, this partnership paves the way for Crowdfunder to join CircleUp, FundersClub and others in crowdfunding companies today from accredited investors. The five, six – shoot, who are we kidding – likely eight month lead this gives them (experience, brand awareness, usability testing, process optimization, etc.) is an opportunity to break out from the increasingly competitive equity crowdfunding market pre-JOBS. But could there be more to this partnership than meets the eye? Something far more momentous? I believe so.
Cue the GATE Platform: a robust trading platform for transacting alternative assets. “The platform brings buyers and sellers of these securities together electronically to deliver transparency, efficiency and liquidity to traditionally opaque marketplaces.”
What’s to stop GATE from bringing crowdfunded securities – courtesy of Crowdfunder – to this platform?
An axiom of all marketplaces: liquidity wins. And with a base of existing institutional investors, GATE has serious liquidity. Not just initial liquidity (the fundraise), but secondary liquidity as well (buying and selling post-raise). And less we forget, as the law is written, accredited investors are allowed to buy crowdfunded securities that have been held for less than 12-months, while non-accredited investors are not. Bringing liquidity to this 12-month “silent period” for non-accredited investors would be pretty darn valuable. (To be sure, competitors are working on other marketplace structures for crowdfunded securities. In a pitch competition, Motaavi highlighted its proprietary marketplace technology as a key competitive advantage.)
Additional food for thought: GATE is piloting a test platform with Prudential Financial that facilitates the transaction and evaluation of impact investments (GATEway). This raises an interesting question: Will local, small business crowdfunding qualify as an impact investment? I sure think so. Impact investments represent a burgeoning asset class that many institutional funds (read: liquidity) invest exclusively in… Did I mention how important liquidity is ; )?
Of course, none of this is confirmed. But integration with GATE’s platform, frictionlessly exposing crowdfunded securities to institutional capital, would represent a powerful point of differentiation between Crowdfunder and its competitors.
This brings me to a larger belief: the battle of crowdfunding portals will not be won independently. Our financial markets are simply too mature, and too complex. It will be won through strategic partnerships. Crowdfunder has made their move. If it’s what I believe it to be, it’s bold. Who will be next?
Another formidable partnership that hit the wire this week – between Accion USA and smallknot – will be the topic of my next post.