CU Boulder professor writes ‘roadmap’ to investment crowdfunding

Investment crowdfunding might blossom into an even bigger online market, and a professor from the University of Colorado Boulder said Friday he has spent a decade creating the must-have roadmap — not only for companies and investors, but for policymakers.

Investment crowdfunding, sometimes dubbed the Kickstarter for startups, took off less than a decade ago and allows anyone to invest in companies, including small amounts.

University of Colorado Boulder Professor Andrew Schwartz signs copies of his new book “Investment Crowdfunding” in Boulder Friday.

Investment crowdfunding, sometimes dubbed the Kickstarter for startups, took off less than a decade ago and allows anyone to invest in companies, including small amounts.

The Future of Startup Finance: A Symposium on “Investment Crowdfunding” held at CU Boulder Friday convened legal and financial thought leaders from across the country to dig into the topic — its future, its benefits and the risks.

The event launched the new book from CU Boulder Professor and Fulbright Scholar Andrew Schwartz, billed as the definitive guide to investment crowdfunding. “Investment Crowdfunding” aims to stay palatable for the general public while simultaneously striving to guide policymakers as they oversee the online marketplace.

His basic conclusion, Schwartz said, is that investment crowdfunding has “huge potential for upside,” and a modest downside. He also makes the case for light regulations. A decade of research went into the book’s making, which also compares the regulatory landscape in the U.S., the UK, Canada, Australia, New Zealand and the EU.

“The only workable legal regime is one that keeps the regulatory compliance costs to an absolute minimum,” Schwartz told the symposium crowd.

Schwartz’s book outlines what market forces, economic incentives and non-legal guardrails can steer investment crowdfunding. For example, he said, crowdfunding platforms can function as gatekeepers by vetting companies, knowing if they allow a fraudulent actor to use their site and investors lose their money, those investors aren’t coming back.

Panelist Jonny Price, the vice president of fundraising at the crowdfunding platform Wefunder said the platform is, in part, about supporting a vibrant economy and society.

The Wefunder mission is to flow more capital to startups, to diversify who is able to invest, to support diverse startup founders, and to democratize the system, he said. Part of that involves empowering women and people of color outside of Silicon Valley to generate capital and snap up stock, he said.

“Let’s open it up. It lets everyone invest in stock,” he said.

The panel of legal experts also weighed in. Panelist and University of California Law at San Francisco Professor Abe Cable drew comparisons between investment crowdfunding and the phenomenon of the online trading app Robinhood, which brought millions of new investors into the market, albeit with some controversy.

Investment crowdfunding is arguably a technological breakthrough just as Robinhood was, he said, with social-media-esque and user-friendly platforms. He feels more comfortable with investment crowdfunding than he does with Robinhood, Cable said after outlining his critiques of the trading app, which included the risk of making complex options available to people who might not understand them.

He urged continuing caps on crowdfunding investors to “contain the damage, if there is any,” of people compulsively or riskily trading.

“The bottom line is, crowdfunding, better than Robinhood. Keep the investor caps,” he said.