iGlobal Forum is pleased to present the 4th Real Estate Crowdfunding Summit, taking place in Los Angeles on Thursday, June 23. Allegiancy CEO Steve Sadler is among the speakers, featured on a
July 25, 2015
I recently gave the keynote speech at the Los Angeles CrowdFinancing Real Estate Conference about the vast potential of the JOBS Act’s new Regulation A.
As real estate investors, the audience was interested and engaged with several great questions. A couple of themes emerged around the idea that the 2012 Jumpstart our Business Startups (JOBS) Act is acting as a catalyst for unprecedented, dynamic change in the U.S. economy:
The JOBS Act is a three-stage rocket.
The first stage was Reg D 506 (c), which created limited crowdfunding platforms, but investors still have to be accredited. Next was Regulation A+ (Reg A, Title IV), which increased the amount a company can raise through a public securities offering from $5 million to $50 million in a year, and allowed non-accredited investors to invest. The final stage will be Reg A, Title III, which is expected to enable true crowdfunding without restrictions on investors, but extend to just $1 million in capital.
The JOBS Act is to Wall Street what Uber is to Yellow Cabs.
Its Reg A+ rules mean the democratization of capital, so that now anyone can be a private equity investor or an investment banker. No longer will individuals have to rely solely on intermediaries to invest early in growing companies. And companies will have improved ability to source capital with more reasonable terms.
The growth rate for Reg A opportunities could be as astonishing as Uber’s, or AirBnB’s (two wildly popular dis-intermediators in the travel and hospitality industry).
In Los Angeles, for example, Uber grew from 0 to 20,000 driver-partners in fewer than 30 months. In Richmond where we’re based, there are now twice as many Uber drivers as regular taxis. Similarly, AirBnB is now the fourth largest hotelier in the world, growing from 10 million to 15 million rooms booked for one night within a single year (2012).
And maybe, just maybe, Reg A+ will make it possible for regular folks to participate in growth companies like Uber and AirBnB in the early rounds. As crowdfunding platforms are streamlined, those types of deals already surpassed $1 billion in 2014, and are expected to reach $2.5 billion this year.
For the first time in living memory, the barriers separating entrepreneurs from investors are being lowered.
Since the 1920s, the barriers have only grown – starting with the Securities Acts of 1933 and 1934, and extending through the creation of the SEC, FINRA, and the Sarbanes-Oxley and Dodd-Frank laws, and on and on and on.
Consider these 30-year increments: In 1942, Pfizer launched an IPO raising $5.9 million. In 1971, Intel did an IPO raising $6.8 million. And in 2004, Google executed an IPO raising $1.6 billion. Clearly, it’s become harder to access capital. The mechanics of navigating the many bureaucracies have become so onerous and expensive that only the largest offerings make sense any more.
But, for the first time in 100 years, investors and issuers are seeing barriers between them eliminated. Maybe the bureaucratic boxcheckers and bootlickers will slip into the background for a while.
This will stimulate growth – it could be the road back to dynamism for the U.S. economy. Entrepreneurs can again work directly with issuers. People with guts and dreams and the desire to work hard can raise capital to build businesses again.
I believe that in 2016 and beyond, Reg A offerings volume will explode, and disintermediation will continue to accelerate. I encourage everyone to look at your old business models and evaluate how you are adding value. Then find ways to embrace and leverage these changes so you can thrive in this exciting new world.
The foregoing does not constitute an offer to sell or a solicitation of an offer to buy securities, and no money or other consideration is being solicited hereby, nor will be accepted. An offer to purchase or a solicitation of an offer to buy the securities can only be made or received and accepted once an offering statement is qualified by the Securities and Exchange Commission as exempt from the registration requirements of the Securities Act of 1933 (the “Act”), as amended, pursuant to Section 3(b)(2) of the Act. Any such offer to purchase securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date of the offering related thereto, and any indication of interest to purchase securities involves no obligation or commitment of any kind.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are based upon the Allegiancy, LLC’s (the “Company”) present expectations, but these statements are not guaranteed to occur. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place undue reliance upon forward-looking statements. For further discussion of the factors that could affect outcomes, please refer to the “Risk Factors” section of the offering circular dated January 14, 2014, and filed by the Company with the U.S. Securities and Exchange Commission on January 15, 2014. The offering circular, and any supplements or updates thereto, is available on the EDGAR system located on www.sec.gov.
George Washington is known as America’s `First Entrepreneur’ and I am fully confident he would have been a huge proponent of crowdfunding and the new Reg A+ rules — also