Equity Crowdfunding Week Keynote: Empowering the Private Markets

Speakers

Oscar Jofre

CEO and Co-Founder

KoreConX

Oscar Jofre

CEO and Co-Founder

Oscar is currently one of the Top 10 Global Thought Leaders in Equity Crowdfunding, a Top 5 Fintech Influencer, Top 10 Blockchain and a Top 50 InsureTech. He has published an eBook that has been downloaded in over 20 countries, and been distributed by partners worldwide. Oscar is a featured speaker on Fintech, regulated, equity crowdfunding, compliance, shareholder management, investor relations, and transparency in the USA, Australia, UK, Germany, France, Netherlands, Canada, Singapore, Indonesia and China. He speaks to audiences covering alternative finance, RegTech, insurance, banking, legal, and crowdfunding. Oscar also advises the world’s leading research, accounting, law firms and insurance companies on the impact Fintech, RegTech, LegalTech, InsurTech and OrgTech is having in their business.

Oscar Jofre  00:23

Well, good morning, and good afternoon or good evening, from everyone around the world. What a way to start the day there to dream today’s the last day of equity crowdfunding week. And it’s been amazing. It’s amazing to see what 10, 12 years has done to a sector. And today, thank you to the team at startup starter for giving us this opportunity to give you an insight into the private capital markets. What is happening, where we got all started, and where are we going with it? And where are the challenges and opportunities that are going to arise in the market? So this is going to really be an insightful conversation. I hope you enjoy it. Obviously, we’re here for equity crowdfunding. So, where did it all begin? Where we’re hearing words like democratization? Where did it all start? Where was that vision for the change in the private market? And where was the plan to change the world? And it started with one man, one person that really changed the world for all of us. Look where we are today. We have this wonderful event, celebrating equity crowdfunding week for an entire week for the whole world to see the impact it’s had on our lives. Mr. David Weild, the fourth, the Father, the Jobs Act, a former vice-chairman of NASDAQ, and currently the chairman and CEO of Weild & Co., one of the fastest-growing FINRA broker-dealers in the United States. His vision was to democratize. Democratization was to allow everyday people, the ones who got left behind, to be able to participate, invest directly into companies, to be able to be part of that journey. And I’m going to talk a little bit about that because we cannot lose sight of that. We cannot, and we’re getting close to that. But right now, this is the important thing. Every video, every person I’ve heard speak throughout this week, says democratization, it’s great. It’s great for the company, it’s got to be great for the investor. Let’s not forget the people that got us here today. But there have been other game-changers as well. People like Sara Hanks. Without Sara and her leadership, we wouldn’t have Regulation A+ today. This is a remarkable journey that she took on with just one or two other lawyers to change the regulations for us to do what we’re doing today. That regulation is flourishing. And we can thank people like her. And then of course Sherwood Neiss. Who has been a strong voice to the entire crowdfunding sector providing us data, muchly needed information to keep the pace going. Even when the first grant funding was just only a few $1,000, he was right there. He didn’t leave the post. He wanted everybody to see it. So it’s really important that we go back to the roots. Because if we do not go back to the roots, and we don’t remember where we all came from and why this is here, we’re gonna forget this journey. And I’m going to talk about that a little bit as we go forward. 

 

So what is the private market? So the private market, everybody’s talking about it now. But what does it look like? Why is it that everybody’s got such a big buzz? Well, first of all, a lot of money is being raised in private markets. Our sector itself has had year over year growth and three digits. I mean, this is exciting. The regulator’s, thanks to them, they changed the regulations, they saw it as well, they amended Regulation CF. It allows you, the company, to go from 1 million to five. It allows you to utilize Regulation A and raise up to 75 million. But there’s another part of the private markets that everyone here needs to see. Did you know that all of us here this whole week, we are part of the larger pool of capital in the world, but yet nobody sees us. In fact, all of us rely on information from providers out there based only on the 2% of companies. It’s a shame, but it’s changing. People like Kings Crowd and others are changing that model to give you exposure to that market. One day the whole world will see the rest of the market and how it’s flourishing, creating jobs and raising capital. This is what this journey is all about and why it’s so exciting. But we’ve had our challenges when we got started 10, 12 years ago, you know, there was no roadmap. The only roadmap we had is the one that’s visible to us. What does that mean? The public markets and obviously most of the participants that came to private markets came from there. And they brought in true and true approaches, but it didn’t actually work. And I’ll get to that. 

 

But they had it all. They had an infrastructure where a broker-dealer could transact. The investor would have access to the information, people can do it in their mobile device, voila. And people can buy and trade right on the spot. But in private, we don’t, we didn’t have that. It’s inefficient. Everybody was building something. Everybody’s a bit niche. Everybody’s building a little island, nobody’s talking to the other proprietor, everybody’s working with different sets of groups. Ultimately, we end up becoming even more fragmented. But obviously, in order for this market to flourish even further. To go to the next stage, we need to look beyond that and see what the opportunities are because we are the largest sector in the world. There are 450 million privately held companies around the world, 32 million just in the United States. There’s only 100,000 publicly traded companies worldwide. So we are larger. It is going to take time, but it’s going to take visionaries like the ones you’ve heard all this week. To bring all that together to work together to bring this sector completely in one infrastructure for all of us to be able to transact. So we’ve had our challenges. Some of you have felt it all the way through. The challenges are not bad. It just allows us to see what we got to do to continuously improve as a new door opens a new chapter. A new entry comes in a new process, we need to look at everything we’re doing. So the private markets, why it’s been such a great market because it’s fragmented. It’s inefficient, everyone, as I said, is building their own things. And look at all the different parties a company needs to work with. You need to work with the regulators, the exchange, the secondary markets, the auditor, the lawyer, the bank, the compliance team, the broker-dealer, the investors, who then become shareholders, and so on, so on, and so on. And everybody’s taking a piece of you, they want this, and they want that, and you’re growing your business, right, from just wasting maybe $50,000. Maybe you’ll go from a million to five to 10 to 25. It’s great. But all of this information, the way it’s being done. Is being done at ad hoc in most cases, and it’s been decentralized. 

 

So that’s how it got started. So obviously, the regulators and visionaries like David Weild, Sara Hanks and Sherwood Neiss, and many others, of course, had the vision. It was up to us to bring it all together. So these are the challenges. And today, the private markets are flourishing. Why? Because we’re getting closer to that dream. We’re seeing companies who are building the infrastructure for all this to happen. So what does this do? It gives confidence to the investors. Investors need to feel confident about transacting with companies. Whether they’re doing it on a funding platform, or they’re doing it on the issuer’s website with a FINRA broker-dealer. Regardless of how they do that transaction, they need to have the confidence. And more importantly, in order for any of these two parties to transact, you need an infrastructure that meets all the requirements. And at the core of it is compliance.

 

Compliance will either beat us or we will embrace it and move forward. All the other pieces, everyone’s doing. Privacy, security governance, we need to provide investors proof of ownership, we’re doing it. We’re taking care of our shareholders, we’re managing them, companies are managing their corporate records. All of these things are necessary in an infrastructure that we can then put on a whole bunch of different applications. There are companies out there today. Not five years ago, they weren’t there. But today they are. There are companies today, there is no reason for any company not to be using some sort of online technology to manage their entire business.

 

And these things are important because if you want to take advantage of these wonderful regulations, you need to think differently than the way you were managing it before. Doing it in Microsoft Word or Excel or Google Sheet and all that isn’t going to work. So you need to think outside of it. So today you do see companies building cap table management, there’s the transfer services component, there are people building share all the management tools, or portfolio management tools or issuance platform. All of these things are important, and if you can find one that has them all even better. But the important thing is that’s what the evolution of the market has done. We have brought all of this together for you to be able to utilize these technologies to make you more efficient. 

 

By making you more efficient in your capital raise, you have the ability to become more successful. And that was ultimately the way we democratize because you need the tools in order to get there. So you need to see the roadmap we’ve been taking. We took something that was severely fragmented, and still a little bit like that still, but every single day, some new innovation, some new participant comes in to fix the problem. And it could be a payment, it could be IRA, could be shared with whatever the solution is. It will be sitting on top of an infrastructure that we can all collectively work with, in order to never forget. We’re here to democratize capital to be able to allow companies to raise capital from everyday citizens in the world to allow them to be participants in the company directly. Directly, which is what the Jobs Act was intended to do. So the success of Reg A, and Reg CF, and Reg D, it’s been phenomenal. 

 

Kings Crowd just recently announced that September, there was a 209% growth in 2021 for September. That is phenomenal, how many other industries do you know where we’re growing at that rate? That tells you something, people love what we’re doing. But that comes with a responsibility, our responsibility that we cannot forget. Also, in October 2021, Thanks to Sherwood Neiss, but he’s been tracking it, we are going to hit a major, major milestone. $1 billion has been raised under the Regulation Crowdfunding. Hurray to everyone, to the investors, to the companies, to the funding platforms. This is a major milestone I’ll never forget, in 2015, where just only 10, 20 $30,000 was raised. It’s amazing where we’re heading with this. But again, it comes with responsibilities where we’re going. And it’s important to understand with these new regulations, companies have choices. You do have more selection, we are not an alternative. Democratization does not mean you exclude. It’s about including everyone, it’s to allow everyone to participate. It’s not about the private equity group, you know, not being part of it. You’re going to soon realize that as you want to raise capital, you need to include everyone. So we need to start seeing that this is not about us and them, it’s about all of us working together. What private equity group would not embrace a company was getting good momentum in the market raising 3, 5, 10, $15 million, why would they not participate in the same round. And we’ve seen that, we’ve seen that happen. So we need to start thinking about this in a very different way. Democratization is to allow everyone to participate, not just the non-accredited investor, the one that got left out. But also to include the existing investors who can bring value, they can bring value. It doesn’t mean you give them different terms. That’s not what I’m saying. But what I am saying, they can bring value to accompany. They can bring capital and other items. And it works.

 

And then for companies, when you are raising your capital, you have choices. You can either raise your capital through a register funding portal, or you can do a direct listing with a FINRA broker-dealer directly on your website. For any of these three regulations. You now have choices. It’s not just one way or no way, you have choices, and every choice that’s there, it’s there to make sure to optimize your success. That’s the key. And you notice I keep talking about democratization of capital because it’s the key. It’s the key to the whole sector. The reason today, we’re able to celebrate, we’re able to embrace, we’re able to get excited about what’s going on. Because the very people that got us here. The shareholders, no, the customers, the ambassadors to our brands. They’re the ones we should be applauding. And I applaud Darren and Ginny who said it. They’re going to have retail investors speak today. So you can hear the stories, why they did it. Why they passionately put their dollars in your company, and why they will continue to do so. But you got to listen to the stories here. This is the important part. You need to listen because these individuals cannot be treated like what the public markets did. 

 

So what does that mean? You are going back to the beginning, when David Weild had the vision. The vision came from the 2008 financial crisis that happened in the United States, where in middle America, everyday people lost everything. The bankers didn’t, but everybody else did. Owners of their companies lost everything. We needed to change that and we needed a way to bring everything right back up. And if we do not remember that, if we forget why we got here, these are our customers, these are our ambassadors, these individuals are gold. And if we treat them like that, it will pay forward. There are companies who keep going back using these regulations because that’s exactly what they did.

 

Companies like BrewDog Breweries, Legion M, and many, many others who have recognized that these individuals are not just shareholders. They’re joining the journey. And they’re part of our company. They’re the bloodline to everything. They’re participating in everyday marketing, they’re participating just as you would with your customers. And they are the champions of the brand in social media. They’re not hiring big guns to do a tweet for $250,000. They’re getting everyday people to pride and joy and to tell people, look at this wonderful product or solution from the company that I’m part of. That is the winner. That is what makes this regulation, these three regulations so powerful for all of us. Do not forget that they are not shareholders. That’s it. They’re not just giving you capital, they’re giving you more than that. Yes, they’re shareholders from a regulatory point of view, we need to manage them and all, that’s great. But the way you treat them, it’s going to make the difference for you in your journey, and to the entire market, how we proceed going forward. 

 

And now, a new door opens. That’s right, a new door. In 2012, when the JOBS act got signed in by Barack Obama, President Obama. That was one door. When in 2015 regulation CF went live, that was another door. When Regulation A+ went live that was another door. And throughout those doors, innovation was being created. Participants were coming through now we have a new one, secondary market trading where everyone gets to trade. That’s right. Even if you only bought $5 worth of shares, you’ll be able to trade in a registered secondary market. And what’s interesting, so if you start thinking about what are the opportunities here. Obviously, the secondary platforms, they’re coming, they’re already there. There’s Rialto Markets, there’s Templa, there’s Start Engine, there’s PPEX. They’re starting. There’s lots more coming, that is great news. But what’s even more important is that now we need to build an ecosystem to support those activities. The same way it took us a few years to support this, the primary capital raise. Now we need to support the secondary market, put your thinking hats on. The innovation has not ended, it’s just beginning with this new door. 

 

There are things that are going to be needed in order to support that secondary market. To make sure it’s done fully compliantly, but at the same time to support it. So people become aware, we are in the education phase of secondary market trading for the very first time. You as a company get to stay private. And you, the investor, can monetize your investment on a registered secondary ATS. And you can do it for as low as a $5 investment that you made in a company. That is amazing. So as I said, the regulation is, it’s exciting as to what’s happened with the regulators. 

 

What’s even more interesting in the market now is that with the new door, we have new challenges that we are being faced with. We have new challenges that we need to be aware of that we need to consider. These challenges are not going to go away, and we just need to address them properly. And I am looking for my slides. So I do apologize. It’s okay. There it is. It’s the, it’s “welcome to the world of technology when it happened.” So, let me tell you some of the challenges we are going to face for the next little while. So you can think back to yourself and say okay Oscar, what are the challenges? What’s next? We need to be ready for 2021 or 2022. When shareholders will unite. And they’re going to unite not because we wanted them to, but because something is happening in the market. I keep going back to the democratization of capital. People are forgetting why we are here. We are here because we wanted to give the everyday person and I’ve heard this word over and over, to participate in investment in a company directly. And it’s regrettable that unfortunately, there are certain participants in the ecosystem today that they’re putting investors in these vehicles where they’re not really directly investing in a company. They’re being put in this bucket. And that to me is the crime of democratization. That is the ultimate con to that investor who, who, who came in with their $100 or $50, or whatever it is to say, I love that company, I want to put it in. Only to find out later that I’m not a shareholder in the company? I need to go? What does that mean? It is, it breaks my heart, it breaks my heart because how we got here is because of them.

 

But that’s what we’re going to be seeing as a sector. We’re going to need to adopt best practices for the greater good. What does that mean? It’s not going to be good enough anymore, just displaying the basic information, we’re gonna need to provide more details, investors are going to get more education. There’s more platforms out there today, you know, sure. Sherwood Neiss is publishing reports. Kings Crowd is publishing reports. And there are others, like them, that provide new reports, education. So you are going to need to step up the game, just like where we were in 2012, to 2015, to 2015, to where we are now. We keep improving things. And in order to improve things, we need to look at the veil and say, what do we need to do as an industry to make a change? So that’s one of the two things on what’s next. We need more participants to support this massive growth. If the rate keeps going the way it is. Now, we need more companies doing investor acquisition. You are the companies that help bring the awareness that companies need. We’re gonna need research. Research. That’s right, research will be the major frontier that’s coming up next, for all of us. We’re gonna need aggregators, places where it gets centralized, where investors will go to one place and be able to look at opportunities and go to where they need to go to make the final investment. 

 

But more importantly, I cannot stop driving this message. Let’s not forget about democratization. To allow everyday citizens to invest directly in a company. Let’s not take that away from them. Because they will take us from a billion to 10 billion and more, if we just treat them the same way. Today, there is no reason. There are many providers providing the technology today to help companies manage this information in an efficient way. But what’s even worse is that we’re putting something in front of an investor that quite often doesn’t have the tools or the mindset to understand what it means for them. And the private market is going to continue to flourish. Because of that, globally. I have spoken in so many different countries. And I’ve seen the impact that got started by the Jobs Act Sherwood Neiss, Douglas Elena, we’re going around all over the world teaching countries. UK, Dutchland, you know, Netherlands, Chile, Argentina, everywhere Mexico. Helping those countries implement regulations just like the United States. It’s a global phenomenon, you are 100% Correct.

 

But we have the responsibility. The responsibility is this. We have been given the gift to raise capital from everyone. We have been given the gift to allow everyone to participate on our terms because part of the JOBS Act is to keep the ownership of our companies. But that comes with a greater responsibility. You have all these individuals who believe in you. As a founder, whether you’re a minority founder or any type of founder, you have a responsibility to them. You need to make sure that you create a roadmap to be able to do that. So you can go back and go back and again and again to grow your business. 

 

I hope all of you today will enjoy the rest of an amazing week that has happened here today. Equity crowdfunding week. We will celebrate it again a year from today. And we will have even further explosive growth. But we need to keep reminding ourselves constantly. What got us here, what we need to do to keep improving it. And let’s not lose sight. Let’s not lose sight of why we got here. Don’t get greedy, because as soon as you get greedy, you are no different than the people that took it away from your parents or anybody else in 2008. Do not get greedy. There’s enough for everyone to flourish in this market. 

 

It’s gonna be a great journey. I’m already 11 years in and I’m loving it. I see it. I remember all the different participants that started then the ones that remained today have that same vision. They know what it takes to actually be part of it. For all of those who have been there that long. Go back, remind yourself why we’re doing this. For the funding platforms. Let’s not forget about the individual investors. Let’s not forget what the impact could be. We want to democratize. We want to make it better. I want you all to have a wonderful week. Thank you so much for this afternoon. This morning to give me this opportunity to speak to all of you. And if you have any questions, please feel free to reach out to me. I’m easy to find. I am on LinkedIn. I am on Twitter, and I’m on Facebook. My name is Oscar Jofre. Powering the private capital markets. Have a wonderful week.

 

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