Peter-Paul van Hoeken, Co-founder and CEO of Canada’s largest investment crowdfunding platform, FrontFundr, doesn’t think so.
Music sharing giant, Spotify, launched this week on the New York Stock Exchange, following in the footsteps of a number of high-profile mature companies. According to Ian McGugan’s opinion piece in Wednesday’s Globe and Mail, the listing is the latest demonstration of the changing role an IPO (or in this case, a direct listing) plays in a company’s trajectory . McGugan argues the IPO has changed from being a mechanism for raising money to a liquidation event for early investors and employees -- and I agree.
Spotify is a hugely successful company. It is successful because of all of us; we all use it, just like Twitter or Facebook. Unfortunately, the everyday people who have created Spotify's success have been locked out from investing. It’s a frustrating truth that private companies (like Spotify was until yesterday) have long been the preserve of venture capitalists, pension funds, wealthy investors, and company employees.
While the rest of us can now invest in Spotify, most of the increase in value may have already been realized by early stage investors. These early stage investors are likely looking to liquidate their investment through the direct listing. Small investors simply missed out on the early stage opportunities with Spotify and as private companies continue to make late entries into the public markets, growth opportunities will be off-limits for most investors.
That’s where online investing in private companies (also known as investment crowdfunding) comes in. By enabling investors to invest from the very beginning, companies provide the opportunity for their customers and supporters to benefit from major potential growth, as well as potential falls. Minimum investments are typically more accessible for ordinary investors and those who invest are likely already customers and brand champions for the company. Spotify, with their existing community of users, would have been an ideal candidate for investment crowdfunding, if crowdfunding had been available in 2008 Sweden (investment crowdfunding was made mainstream by the Jobs Act in 2012, in the US, and in 2015, in Canada, similar to Sweden’s regulatory timeline).
Investment crowdfunding not only allows Canadians to invest in private companies, from as little as $250, but it allows companies access to capital and a community of stakeholders. Perhaps, if the markets are tending to block out the small investors, then investment crowdfunding will be the knight in shining armour for them?
FrontFundr is an online investing platform that empowers Canadians to find and make direct investments in the private companies they believe in - and become stakeholders in their future. FrontFundr’s online exempt market dealer (EMD) status plus its modern technology lets users across Canada easily invest in innovative growth businesses in under 12 minutes; and often for as little as $250. FrontFundr - Own your share.