As we enter a new decade, we approach a world that is, and has been, developing exponentially on all fronts. Globalization, technology and social media are affecting and evolving societies and economies across the world, and things are changing rapidly. The way we do business, the way we live and the way we invest are quickly transforming. Not exempt from this epidemic of change is the investment economy. The ways we invest our money as individuals, as well as the ways that organizations find investors, are quickly changing with the times.
Concurrently, a new generation of adults is emerging into the workforce and the global stage. They are the generation that never knew life without cellphones and smart technology, that developed under the forces of accelerating change, and that is expected to change the world at the same rate that it changed them. Enter: generation Z.
One recent and exciting symptom of these changing times was the birth and legalization of regulation crowdfunding.
Legalized in 2016 as a result of the JOBS act, regulation crowdfunding allows you to invest in private companies by means of independent, regulated online marketplaces. Previously, only accredited investors were allowed to invest in startups or even real estate. Accredited investors, who often operate as venture capitalists or angel investors, are required to have either a $200,000 annual salary or a net worth of at least $1 million. The pool of eligible startup investors had thus been fairly limited prior to these regulatory changes.
Regulatory crowdfunding makes it easier for startups to find investment. Previously, startups would often have to rely on their connections or finding venture capital funding. When I was fundraising for my own startup, these were the only options available to us. Much of our time was spent — unsuccessfully — pursuing these avenues, which isn’t surprising, considering that the majority of startups struggle to raise venture capital funds.
Since I launched my business, I’ve learned a lot about regulation crowdfunding from a few of the catalysts who helped push for its legalization. Now, with fewer barriers to entry and a tenfold chance at success, a land of opportunity has become accessible to startup companies for the first time.
Demographics that typically struggled to find funding from venture capitalists, such as women-founded companies, can also benefit from the advent of crowdfunding. According to Forbes, “47% of successful campaigns on the popular crowdfunding site Indiegogo are run by women.”
And the new style of investing is certainly catching on. VentureBeat reported that the number of successful offerings increased by nearly 90% from 2017 to 2018, and investor participation has grown as well.
Getting Back To Gen Z
In addition to growing up alongside social media and smart technology, Gen Zers have grown up in a time of climate change, as well as political, economic and societal change, a combination that has been accompanied by increasing social transparency and innovation. This has all culminated in an evolved generation that values equality, creativity, social responsibility, diversity and engagement.
Gen Z is the most ethnically and racially diverse generation yet. And let’s not forget that diversity leads to innovation and new ideas. I’ve also observed that younger generations are demanding more from companies and leaders and want to be treated as partners, not just target consumers. They are not concerned with the norms of past generations.
With this in mind, I predict that this group will be prone to embrace regulation crowdfunding as a medium to invest their money into responsible, honest and diverse companies. It’s worth considering in your strategy that this group could migrate to equity-based crowdfunding platforms as their financial motives change.
From my perspective, this generation is also uniquely positioned to use regulation crowdfunding as a means for chasing their own dreams and launching companies of their own. Gen Z is more likely to start their own businesses, and they want to have an impact on the world. According to Gallup, 77% want to be their own boss, and 42% want to invent something that changes the world. With all of this, I believe we can expect to see a rise in Gen Z-founded crowdfunding campaigns in the coming years.
Poised For Success
Companies that find success in crowdfunding connect with their audiences on a personal level. While companies that shared on the platform less than twice during their campaigns were 97% likely to fail, according to Fundera’s 2019 statistics on crowdfunding, their successful counterparts posted an average of four times.
Transparency is another critical component. Fundera also reported that campaigns that included personal information about the people behind them got 79% more backers than those that didn’t.
As we’ve seen, success in regulation crowdfunding is a function largely of social engagement, diversity and transparency, all of which align with the values and characteristics of Gen Z. With all of their social media savviness and worldly values, they are sure to be well-apt at launching meaningful, successful crowdfunding campaigns of their own.
The ideas that this generation puts forth through the platform of regulation crowdfunding are yet to be determined, but I’m sure I won’t be the only one watching intently as these well-equipped entrepreneurs step up to the plate and go to bat in the future.