Regulation as Rocket Fuel: How Smart Compliance Drives Platform Growth.
Regulation as Rocket Fuel: How Smart Compliance Drives Global Crowdfunding Growth
Can compliance be a growth engine? In this GECA Architects of Change roundtable, experts from the US, UK, France, and Germany share how smarter rules, ECSPR harmonization, and practical AI tools sharpen trust, lower costs, and scale cross-border capital formation. Watch for concrete tactics platforms and issuers can use now.
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Episode 3 – Regulation as Rocket Fuel: How Smart Compliance Drives Growth in Global Crowdfunding
Theme: Standardized Regulation / Compliance as Competitive Advantage
Moderator: Gene Massey (Chairman & CEO, MediaShares)
Panelists: Eric A. Cox II (COO, Netcapital); Jenny Kassan (President, CfPA US); Karsten Wenzlaff (Digital Invest Germany); Bruce Davis (Co-founder, Abundance Investment; Chair, UK Crowdfunding Association); Florence de Maupeou (Deputy GM, France FinTech; EDFA Board; GECA Steering Committee)
Gene Massey — Moderator
Chairman & CEO of MediaShares, a US-based marketing and funding consultancy that helps companies raise capital via online equity crowdfunding. A frequent speaker at industry and Wall Street events and an active investor, Gene brings a practitioner’s lens to campaign strategy, compliance, and investor communications.
Florence de Maupeou
Deputy General Manager (Institutional Relations & Crowdfunding) at France FinTech, board member of the European Digital Finance Association (EDFA), and member of the GECA Steering Committee. With 10+ years shaping France’s and Europe’s crowdfunding regulatory landscape, she focuses on ecosystem building, policy, and platform enablement.
Bruce Davis
Co-founder and Non-Executive Director at Abundance Investment—one of the UK’s first regulated crowdfunding platforms focused on green and sustainable projects. A founding director of the UK Crowdfunding Association since 2012 and an early contributor to peer-to-peer lending (Zopa), Bruce has helped steer major UK regulatory developments.
Jenny Kassan
US securities attorney and entrepreneur advocate with nearly 20 years in “community capital.” President of the Crowdfunding Professional Association (CfPA), she guides founders through compliant offerings, has raised capital herself, and trains stakeholders on disclosure, investor protection, and equitable access to finance.
Eric A. Cox II
Chief Operating Officer at Netcapital (US funding portal & broker-dealer) and corporate/securities attorney at SSM Law. A CfPA board member and Growth Committee co-chair, Eric focuses on portal operations, regulatory compliance (SEC/FINRA), issuer enablement, and expanding retail access to private markets.
Karsten Wenzlaff
Secretary General of Digital Invest Germany (German Crowdfunding Association) and member of the GECA Steering Committee. Researcher and advisor to regulators worldwide, Karsten has worked on ECSPR implementation and comparative crowdfunding policy in Europe, Africa, and beyond.
Andrew: Hello everyone. Welcome to our Architects of Change Think Tank series, a series of five round table discussions, all with subjects that align with one of the GECA core pillars. Now, GECA stands for Global Equity Crowdfunding Alliance, and our supporters all share one vision, which is a truly borderless global equity crowdfunding ecosystem.
One of our pillars that’s detailed in our manifesto is to strive for smarter and more harmonized regulations right across the globe. And the notion that regulation frameworks across the globe differ so much can lead to barriers when we’re striving to achieve our goal of truly borderless equity crowdfunding.
So this meeting’s going to have a look at how things work at the minute. Nobody’s crying out for regulation to disappear or not exist, and at its heart it should be there to protect the consumer, the investor. But it is crucial. And although harmonization is something we’ll strive for, there are ways in which regulatory compliance right now can be turned into competitive advantages by using things like cost saving automation tools, adaptive frameworks that could scale across your restrictions.
So we’ve called this session ‘Regulation as Rocket Fuel – how smart compliance drives growth’. So that’s more than enough from me. I’d like to introduce our moderator for today’s session, the man who’s going to guide our participants through the session. Please welcome Gene Massey. Gene is Chairman and CEO of MediaShares a US-based marketing and funding consultancy, which helps companies raise capital through online equity crowdfunding offerings.
Gene is also a very well versed speaker at Industry and Wall Street conferences, and he is also an investor himself, which puts him in a perfect position to help us moderate this discussion. So welcome Gene. I’m going to hand over to you to introduce the participants.
Gene Massey: Thank you, Andrew. I’m very excited to be here today because for one reason we’ve got a really stellar group of people here. An international group of people to discuss this topic and the topic is compliance. Now you say the word compliance and everybody has a heart attack practically because they know that it’s when you’re regulated. It’s a problem. It can be a problem if you, especially if you don’t adhere to the rules.
But today we’re going to talk about how that compliance can actually drive growth and actually, and improve your hopes for a successful offering. And so I’m going to start with Florence and let everyone introduce themselves and then we’ll start the program.
Florence de Maupeou: Thank you Gene. I’m Florence de Maupeou I’m the deputy general manager in charge of institutional relation and crowdfunding within France FinTech, which is the professional association for all FinTech in France. And I’ve been working for more than 10 years within crowdfunding sector. It has been a while, especially in structuring ecosystem and regulatory ecosystem. Crowdfunding in France and since a few years in Europe, and I’m also a board member of the European Digital Finance Association. And I’ve joined recently, very recently, the steering committee of GECA very happy to be there and to be able to discuss a message subject with you.
Gene Massey: Thank you, Florence. And Bruce, can you tell us a little bit about yourself?
Bruce Davis: Sure. Hi Gene. Yeah, so Bruce Davis, I’m one of the co-founders and a non-exec director at Abundance Investment, which was one of the first regulated crowdfunding platforms globally. And that business is focused mainly on crowdfunding green and sustainable projects in the UK and I’ve also, since 2012, been a director of the UK Crowdfunding Association and been involved in a lot of the big developments in regulation of crowdfunding and peer to peer lending over the last 12, 13 years.
Prior to that, I was also involved in the early stage of developing Zopa, which was the first peer-to-peer lender. So perhaps go even further back, but obviously outside of regulation with Zopa. So yeah, great to be on here.
Gene Massey: Thank you. Jenny.
Jenny Kassan: Hi, I am Jenny Kassan. I’m an attorney based in the United States, and I have been working on what I call community capital, which is probably another word for crowdfunding, but maybe a little broader, for over, for almost 20 years. And I help entrepreneurs use the tool to raise capital. I’ve also done it myself a few times, and I am also now the president of Crowdfunding Professional Association, which is the association of folks in the US that are passionate about investment crowdfunding, what we call regulated investment crowdfunding, and wanting to make it better for all the stakeholders.
Gene Massey: Thank you, Jenny and Eric.
Eric Cox: Thank you so much. I want to appreciate you, Gene, for moderating here. And Andrew, thanks for letting me, although I got to work with you once before on one of these and you let me come back. So thanks for letting me hang out again, Andrew. I’m Eric Cox. I’m a member of the Netcapital team currently serving as the chief operating officer of our technology platform.
Netcapital’s a really cool funding portal and broker dealer headquartered in Boston. But we support companies across the United States and we accept investment from around the world. We streamline the process of raising capital, allowing everyday people to invest in private companies. So obviously that’s an important piece of everything that we’re trying to accomplish here at GECA.
I’m also a corporate and securities attorney at SSM Law, headquartered San Francisco. And I’m a proud board member of the Crowdfunding Professional Association, serving as the co-chair of the growth Committee. So I get to work with Jenny more closely on those projects, trying to expand the ecosystem and get more people supporting private companies. Thanks team.
Gene Massey: Thank you Eric and Karsten.
Karsten Wenzlaff: Yeah, thanks so much, Gene for moderating this session, and Andrew for setting this up, the GECA. It’s a real pleasure. And also, it’s also fascinating. I already learned what something in the last 10 seconds or 15 seconds already from this session because I didn’t, I’ve been, I know Bruce for at least yeah. 15 years or so, and I didn’t know you were involved with Zopa. It’s a nice learning curve, Great. Fantastic.
Yeah. So I’m the Secretary General of Digital Invest Germany. It used to be called German, or it’s still called German Crowdfunding Association, but the platforms wanted to put an emphasis on digital investing. And together with Florence, we’ve been working on the European crowdfunding service provider regime with Bruce as well. For a long time now with the regulators and Florence and I are both part of a working group at the European Digital Finance Association and both board members there as Florence already mentioned, which is for me a great pleasure.
It’s like a family reunion here today and I’m also a researcher on crowdfunding. I work at the University of Hamburg and Cambridge, and Utrecht and I also have the pleasure sometimes that I get invited by regulators around the globe to discuss with them the implementation of new crowdfunding laws. So I worked for four years in Tunisia. I’ve been recently to Nigeria and next, next month I have to go to Kosovo to talk about their crowdfunding laws. So it’s quite interesting to use the knowledge from these kind of sessions to help the regulators make better crowdfunding regulation.
Gene Massey: Terrific. I’d like to start with some general questions that, we toss it up to whoever. But, Eric, you might be able to answer this one in particular because compliance is generally considered to be, at a high cost. It costs you money, legal reasons, and for other reasons, that the more compliance you have, the more expensive it is. But how can a platform reframe that cost as an investment that can actually drive growth?
Eric Cox: That’s a fantastic question Gene. And I know some other folks here will have some great answers too, so I’ll keep it relatively brief here. For the first part, I got to give a shout out to our chief compliance officer, Paul Riss. He has had a phrase since ever before I joined here, seven years, seven, eight years ago now. Which is, compliance is the pathway to profitability.
So we’ve always embraced the idea that compliance would be critically important. I would argue that being non-compliant is far more expensive than being compliant to begin with. It’s a matter of when you pay, not if you pay, and it’s a function of how much. So I think, there’s a phrase, an ounce of preparation is worth a pound of cure. I’m sure I botched that, but so I like to think of this in long-term things.
These, we are heavily regulated in the United States. We have to deal with the SEC and FINRA, state and local laws as well. I think whenever you’re trying to decide about what is the right way to do something? The design for the right way is the legally compliant way. There’s some really great technology, technological resources now that we’ll dig into that will help increase compliance and decrease the burden of such compliance.
But I do have to just reiterate that the, it is, far more expensive dealing with the regulator’s ongoing, for something that you might’ve done inappropriately, that it is to just really do it correctly, the right way. And I think at the end of the day, our job as funding portal and broker dealer is to protect the investor and make sure that the issuer is informed about their options. So I think it really we have a duty and obligation to do our best to make sure that everybody understands what’s the right way to do things. And I want to hear other people’s perspectives as well. And then we can get into kind of the nitty gritty specifics.
Gene Massey: Yeah, Jenny, Jenny is an attorney. So she could certainly see that. So an investment in compliance can be profitable or at least save you some money, right?
Jenny Kassan: Yeah, I think it’s a mixed bag. Like on the one hand a lot of the regulations in the US are good because they require the issuer to share information that it’s really important for, to share and for, and just even in the process of preparing the disclosures, they learn a lot about their own business and things to be thinking about going forward. And it’s really good for investors, but we do also have some regulations in the US that are frustrating ’cause they don’t actually seem to add that much value for investors. So it is a mixed bag. There’s some things that we do get really frustrated with.
But in general, the fact that there are rules about things that do need to be disclosed is a good thing. Because it’s really important for investors to have the opportunity to know what they’re getting into, and for issuers to take the time to really think through, what keeps me up at night and therefore, what do I need to make sure investors understand before deciding whether to invest.
Gene Massey: Karsten, you work closely with a lot of regulators across the EU and I’m sure your experience with the ECSPR, so how compliance can actually lower some of the barriers and expand the marketplace. So an investment in compliance for them could actually prove positive.
Karsten Wenzlaff: Yeah, absolutely. I think this was one of the main motivation for the creation of the ECSPR because platforms were saying that the cost of moving from one country to another was very high. Not so much because they were things forbidden to do, but it was more about legal uncertainty. And I think legal uncertainty drives up the prices because you have to find lawyers. And in the field of crowdfunding, there are very few very specialized lawyers who actually know what they’re talking about. And to have experience on how to avoid being maybe liable for problems occurring on the platforms.
So that’s why the European crowdfunding regime introduced a lot of legal certainty and sometimes even with a little bit of obsession in Europe, of course, the philosophy is we tend to make it very clear what is supposed to be done. So for instance, we have a disclosure information document, which is called KIIS – key Investment information sheet. And it’s six pages, but there’s about 150 pages from our European regulator explaining how these six pages have to look like.
And I sometimes wonder, this would be something to hear from our American colleagues, the American philosophy seems to be more that there are some principles about disclosure and you should disclose as much as possible. You can do a lot of things unless it’s not forbidden. But if you really screw up, then you go to jail. So that’s why a lot of people want to be on the safer side.
In Europe I think the philosophy sometimes is, we will try to make every detail written down and then the platforms have to comply with it. I just want to mention one thing. The great thing about an association like us is we allow the platforms to discuss in a safe environment when they feel there’s something which needs to be, which is not clear. So for instance, in Germany we have, every couple of weeks we have a legal deep dive where we all get all the platforms together and say, so what is actually the problem, in implementation? Do we need to go to the regulator with this or do we need to find a law firm which clarifies this with us? And that’s really helpful, I think.
Gene Massey: Now Florence and you’re with France FinTech and so yeah. How do people feel about compliance in France? Do they hate it as much as they do in America?
Florence de Maupeou: Yeah, sure. For sure they hate much has, has, things to do than, an evolving process for compliance, which can, but it’s true. What is very interesting in French experience in French market is. Actually crowdfunding, crowd equity, crowd lending, were able, thanks to regulation, it creates the markets.
So the regulation in 2014 was the beginning of the real development of the market, which is very interesting because before, before the regulation, crowd lending was just not possible because they were a bank monopoly. And and for crowd equity, the platforms that started. Try to start to develop. And were looking for a statute which was not really appropriate for them. So it was a statute of financial investor advisor, which fix some things, but not everything. So it it was very difficult and there were a burden on crowd equity platforms because. The statute doesn’t just not fit.
So the fact that French regulator implement a specific regulation for crowdfunding was really helpful for the development of the sector. And we now have lots of, too many actually platforms in France. But this is another thing, yeah. Yeah. This is a real, it was a real opportunity, even if it cost. And with the ECSPR what Karsten said, it’s at the European level, it’s really enabled to have access to to a very bigger market. Which is of course, lower the cost at the end of the regulation.
But you have to see, when you have the a platform, you have to see the old market, which is now European. And which, I think the regulations, the European regulation is a first step after there is all the costs when you try to implement in other countries. There is not just a regulation cost, but at least this one is is now lower. But yeah, and perhaps to complete the question I really think that the regulation protects also the sector for bad repetition and bad repetition can damage the whole entire sector. So it’s very important to be as compliance as the regulation ask, enabled to protect the whole sector.
Gene Massey: I’m glad you mentioned that because that that segues into my next question. In crowdfunding, you’re asking strangers to give you their money. You mean you want me to actually give you my money? And so the whole system is based on trust. I’ll, if I give you my money, can I trust you? So now, Bruce. You’ve got a long line of experience of building trust-based financial systems that align with the regulations. Can you talk a little bit about how compliance and knowing, for example, in the US if you know something is been run through the SEC, you feel better about it than, from a, just from a guy named Eddie or something. So if you, can you tell us a little bit about how trust can really help the whole industry by, with the compliance can help trust?
Bruce Davis: Yeah, I suppose in the UK we’ve been through a full cycle of regulation, pendulum. So where we started was very much, I think, from the sound of it, similar to where you are in the US where the principles based approach that gave a lot of autonomy to platforms in order, in the way that they complied with the rules and the regulation.
We then went the last sort of 10 years, we’ve gone through any sort of increasingly more prescriptive regime. The issue with that being that the regulator actually does play that role, I’d say that’s a weakness. If they’re trusting the SEC or the FCA, they need to trust the platform and they need to trust the businesses on the platform and I think we are always very clear in the UK that being regulated is the start point. It isn’t a banner to wave and I think then in terms of compliance, I think the real cost that we’ve seen of compliance, when you move into that more product regulation approach is when you try to innovate.
And what happens there is the regulator is really trying to second guess your business plan and that’s where the costs ramp up. So I think it alluded to by Karsten and there are relatively few people that I would put on a list of actual legal experts and regulation experts in both UK and Europe who would know how to navigate that process. So they know the value of what they know and I think Karsten, we’ve spent quite a bit of time both talking with the regulator and building a relationship there in the UK, but then also providing a kind of safe space for platforms to learn, so that when they go into these situations, it’s not so much compliance in terms of making sure you’ve got all the right paperwork, but actually you understand what is behind the regulation. You understand the purpose of it. And over time that brings the regulator around.
So I think we are now in a position, and interestingly, we’ve just seen the London Stock Exchange, which is probably one of the second oldest stock exchange, become a crowdfunder this week. So it has acquired a permission, a PISCES permission. This is a secondary market, private market permission in the UK. So probably the, one of the leading public exchanges has now entered the crowdfunding market. So I think that is quite a change. But it does rather illustrate that actually probably in the UK we’re in a position where the, that we do have non-regulated market and there is a risk there that there, the things that happen there are often because they don’t follow what would be good practice. They’re not compliant with the rules and the things that go wrong. We have to make sure that doesn’t reflect badly onto the regulated market.
So I think we’re in this position now where we are pushing quite hard and there is a bit of a sea change in the UK to return to a more principles based regime and to perhaps move on from some of the very specific constraints that have been put on, which have made compliance. Yeah, more of a barrier to growth than a fuel for growth. So I think this is where this sort of important point now where maybe we’d be able to create a regime where, yes, good compliance, good regulation, understanding good culture within your platform will allow the market to grow.
And it’ll actually also be an incentive. To Florence’s point for those that sit outside of regulation, to come into that perimeter and act within the regulated market, because actually that’s in everyone’s interest. And to take away the myth, I think that it is difficult to comply. If you use common sense and you’re actually positive about compliance, then you know compliance shouldn’t be an issue. Compliance is only a problem when people don’t want to do it.
And I think this is the challenge that we’re, I think about to face as we get a new set of actors coming into our market and a new set of businesses who might view operating in private markets, if you like. Crowdfunding are somehow easier than operating in public. What we know from 15 years of regulated crowdfunding is we have to work just as hard on compliance as a public market. We possibly just have fewer lawyers and lower costs involved in terms of the final outcome, but it still requires the same level of due diligence and the same level of good culture to achieve a good, a positive investor outcome.
Gene Massey: Okay, Jenny, have you seen examples of investors when they come into a portal or when they see an offering online that. If it’s, they see the regulations and everything, have you seen them be more comfortable because of that?
Jenny Kassan: That’s a good question. I think that, so one thing we do have in the US we have a few different compliance options, but if you do want to raise money from throughout the entire United States, ’cause we have multiple jurisdiction, more than 50 jurisdictions in the US And if, but, and if you want to raise money from the whole country, you really do have to use this federal regime called, regulation crowdfunding. And that regime does require you to use a regulated platform. No one can raise money using that tool outside of a regulated platform. And I think having platforms that are regulated by both the SEC and FINRA, which is a private, non-governmental organization that’s regulated by the SEC, it does give people some confidence.
But on the other hand, there have been. A few examples of things not going so well. So I think that, we’re still, even though it’s, we have been able to do this now for about eight years. Or almost, I guess nine years now. It’s still relatively new and we’re still learning. I think also the platforms are not as uniform as they could be in terms of providing information. There is a disclosure, there’s some disclosure documents that are supposed to be provided, and it’s called the Form C. And the Form C can be very hard to find on some of the platforms. Which is really frustrating, so I think if there was a little more, and hard to read too. It’s, quite a task. Yeah, there could be more uniformity. Also, the regulation of the platforms is very challenging right now because FINRA almost seems to make up the rules for each platform as they feel. Called in the, moment. So there’s just not a lot of uniformity. So we have a ways to go, but I do think there is value in having regulated platforms that these offerings have to go through. It does give people a little bit more confidence.
Gene Massey: Now, Eric, you have a regulated platform and you work for Netcapital. I know that I’m, I’m doing an offering right now that has an in-house compliance department. Everything that we do, we have to submit to them, to the client compliance department. Can you tell us a little bit about how that works in Netcapital and how, are you assuring compliance and, how does that help? push forward crowdfunding.
Eric Cox: Yeah. Absolutely. And I really do think it does, yeah. We keep our compliance in house. We’ve done, we’ve been able to bring in some incredible team members that that lead our compliance team. We also acquired a law firm pretty early on to help with some support there. Now, I think to your point, I think it is really important. One of the things that we do is we have people submit their transcripts for their videos. Before they even go to shoot. It’s so heartbreaking when people create these incredible high budget productions, Hollywood esque videos. And then they’ll say something like, we’re going to be, the next Uber. And it’s just oh yeah, cut reshoot. And we like to shadow and streamline people’s processes there and do the due diligence, do as much upfront in the earliest possible.
We talk about. You know how we built a kind of sort of document generators and I don’t actually, maybe that’s a little bit future ’cause we’re going to talk about technology in a while, so I’ll come back to that later. But yes getting the submissions when people want to go and speak and do, podcasts, so they want to go do, shoot a commercial, we’re always here for them to help them make sure that what they plan to say is important.
In the United States is bizarre. You could either use the terms of the offering and Tombstone productions, and that’ll include things like the price per share and the offering type, the security type and the closing date. Or you could talk about how great the technology is and how exciting the team is and I think that’s bizarre that you say there’s certain information that you can’t say at the same time as other information, even though we’re trying to disclose as much as possible. But what you see then is people. Rather than a relatively boring kind of fact-based sheet. People do lean to the other version. So I think people do lose track of is this, I’d like to know what type of security type you’re offering, but they can’t even tell me because they’re they have to tell us about how exciting the market size is, and I don’t think that’s helpful from a regulatory standpoint.
But I will say, there’s been few instances, very few instances of fraud, on reg through regulation crowdfunding relative to pure private placements. Reg D 506 Bs, and 482’s. So I think that helps build investor trust. And the portals don’t hold funds in the United States. The funds go directly to escrow. I like, when investors get to hear that. But there’s also something to be said about, building issuer trust. How many times I get to make Netcapital, really be a valuable option because we are one of the few top portals that have never been fined by FINRA, never been fined by the SEC. And you see the issuers are super grateful. But okay, I want to be on a more conservative approach to offerings anyways. I’d rather work with a company that hasn’t pushed the boundaries or hasn’t gotten in trouble with the regulators. So I think it’s, both sides. It’s as a two sided marketplace. We need to make sure the investors are comfortable, but also that the issuers are, comfortable working with this as well.
Gene Massey: Based on what you’re saying, I think. Making if I’m an issuer? Yes. Karsten, did you want to comment on that?
Karsten Wenzlaff: I just wanted to ask something because it, what Jenny said about, the disclosure, information is not being available on the platforms in Europe. The key investment information sheet, it’s highly standardized. And even in national regimes sometimes it’s very standardized. It has to be visible. So I’ve been collecting, these disclosure documents since three years now. And what I’m also doing is I’m having, I built a machine learning model, which essentially uses all of this text and because it’s so standardized and so comparable, it’s very easy to compare offerings.
So I just wanted to ask because I didn’t understand that. So is it the case that in the US the issuer can select the, what he puts into the disclosure document. Or is there also like a template provided by the regulators? Because, the idea about smart regulation, smart compliance, I wonder what’s better for the platform and the issuer to have a very strict template, which they have to comply with at all costs, but at least they know what they have to do or to have a little bit more flexibility. But then you have legal uncertainty, and then you have maybe also the issue that, people don’t know or they’re not comparable, they’re difficult to find. So I wonder that’s, I, that’s just something I wondered how that is going in the United States. Sorry, Gene, for intervening here.
Gene Massey: Yeah. Florence, you take an answer on that. People would love to know how is it different in France?
Florence de Maupeou: Did, who was, should I answer, that question?
Gene Massey: I was also asking Florence.
Jenny Kassan: Oh, okay. Just in terms of the US cause Karsten was asking about the US they do have a list of things that you’re supposed to disclose, but the format is really totally up to the issuer and nobody checks it. So you could really, you could just put a bunch of gobbledygook on a document and upload it. Hopefully if the platform is professional, they’ll try to make sure that you’re compliant. It can be quite diverse what people actually provide. And also the questions are confusing. Sometimes you need a lawyer to help you decipher what the, what you’re even supposed to disclose. Sometimes the platforms don’t have lawyers on their team, so they don’t really give the best advice to the issuers. And also just finding the document that what I was saying is that finding the document on the page can be hard sometimes.
Bruce Davis: So I think in the UK we’ve got quite a different approach. And I think there are hearing what you’re saying, there are some strengths to it. So I suppose we’ve reorganized how we think about compliance around the concept of consumer duty. Now this is a overarching concept that we have and it basically is something that has to be driven through your whole business as a platform. So you have to demonstrate that you have thought through every element of your product, and that includes what issuers are saying to consumers.
But I think that on that problem of the sort of comparability, it really depends where your market is in terms of maturity. So when you’ve got lots of different types of businesses at different points in their cycle. Coming onto platforms that sort of one size fits all approach doesn’t work, and I think that’s why you get more technical jargon. Personally, I would prefer the regulator not to be filling out, creating forms because they will have a certain set of assumptions.
I think the approach that sort of evolved in the UK is that there’s still a degree that platforms through consumer duty are responsible for educating issuers really about. How they should speak to investors, what constitutes useful information. But also reminding them of their responsibilities as directors of those companies, that it will come back to them if what they say is not correct or, if it’s. We will check what they’re saying, but it ultimately is their responsibility, what they’re saying. So I think that there’s a, greater separation there.
The other side of compliance that you have in the UK is there’s significant compliance around the way that we accept investors onto our platform. We both have to look at the suitability and appropriateness of those investors and ensure that, vulnerable customers, people who, don’t understand what they’re doing necessarily, but thought it was a good idea that they’re not allowed to invest. So I think that significantly increased our compliant costs, significantly increased the cost of, our marketing under a compliant regime. And put some pressures on businesses as a result.
So I think, coming on to later questions in terms of smart regulations, smart compliance, it forces you that, that regime to think very carefully about the process that an issue will need to go through and assume essentially that most issuers when they come, they’ve got actually in the UK quite low levels of experience of investing. In the US you’ve got a higher penetration of investment holdings. In the UK it’s only 20% of people have investments that are direct investments into companies.
So you can’t expect your issuers necessarily to know what a share or a bond is. And I think that’s the bit where we’ve worked really hard with the regulator and we’ve worked really hard with the market, specifically working with the media to have that conversation because actually that’s the biggest barrier to growth is that consumers are put off through the compliance process cause it makes them feel that they don’t know enough to invest. And issuers, they look at their responsibilities and, it makes them. What they felt might have been quite an easy process. They actually realize has certain legal responsibilities and legal liabilities.
And I think, our responsibility of platforms is to be really upfront with issues and say, there’s a really clear law here and, there’s, it’s a criminal law too. It’s not a civil action that you will have, it’s, go to jail. So I think those are the sorts of things that we want to get across to people. At the same time, you need to show that it is perfectly possible to create an offer. It’s perfectly possible to do that in a legal way. And in doing so, you will have a more successful outcome for your business. That’s the key point.
So that kind comes back to the value of compliance. A good compliance system for our issuers is that they get to market quicker, more cheaply than through other channels that they might raise finance and that’s how we compete. Because in the UK we’re in a highly competitive market with private, institutions, non-banks, now public markets moving into our space and so we need to show that we are a more efficient mechanism for businesses to raise finance, not just once, but many times, and throughout their lifecycle, which is I think where we’re starting to get to with the UK now with our latest regime.
Gene Massey: Florence. We have something in the US called the accredited Investor Rule, where a person has to be a certain, has to have a certain amount of money in order to invest. How do they do it in France? How do you verify investors? Yeah. To authorize them to invest. Do you have any rule that’s kinda like the accredited rule here?
Florence de Maupeou: There’s a rule with the ECSP regulation, you have a kind of mini audit. The investor has to do a mini audit to to see, to simulate their, the, its ability to bare losses, but also to calculate it’s, calculate 10% of his net assets. And if it’s what he want to invest is too much regarding his review, there’s a warning that there’s no, forbidden to, he said, I understand what are the risks and I want to take the risk. And he ticks the box, that he understands the risk he can still invest in the project.
There is all process of liabilities and understanding the risk and the financial tools and so on for non-sophisticated investors, for sophisticated investors, there is just a bit, a faster way to invest, but. Still at the end, it’s still the responsibility of the investor to invest or not, regarding the risk you want to take. So yeah, it’s working like this with the ECSP regime and what is also, I think, what is very interesting in this regulation, in this European regulation. And what we didn’t have before with the French regulation is the four days, the four day reflection period, which enables investor to quit the adventure and to say, I don’t want anymore to invest because one of, I think one of the problem also in some platforms can be the lower amount of project in one time, in a specific time.
So we have seen, not so much now because we have a kind of economic crisis, but when the crowdfunding was super dynamic in France, there were not enough project at one point, at one time for investors. So if investor wanted to diversify his investment, he had to invest very quickly before, not having any, place anymore in the fundraising. So he hadn’t had the time to look at the key investment sheet. It was one of the, I think one of the good things happen happening with the ECSPR regime. This four days reflection period ability investor to take more consideration of where he is putting his money.
Gene Massey: Here’s a change of a subject, but a very important one because technology is changing. We’re dealing with AI now and all kinds of things that we never thought about 10 years ago. And so my question would be, how does AI and these new technologies help reduce the cost of compliance, make it easier, make it better, and I’ll throw that out to anyone that wants to answer that.
Karsten Wenzlaff: Maybe I can kick off the discussions on that. We asked the ECSPR platforms last year, how they use AI internally and so of course at this time or maybe two years ago, we asked them, again last year, as a research project. And it was interesting that two years ago they mostly used it for chat bots and for like these kind of customer actions, et cetera. So it was not really internally in the processes, but now most of them use machine learning models for due diligence. The payment providers, they use machine learning for payment transactions, to see if there’s any money laundering going on. But on the platform side, it’s interesting how more and more platforms are using the tools available out there for due diligence for instance, they will feed documents, legal documents about the issuer and try to distinguish or understand what is actually going on and trying to find discrepancies, et cetera. So that was interesting.
And then now what I also see is that a lot of platforms are thinking about using artificial intelligence for finding new projects that’s quite interesting. There’s a few platforms and which are for instance. Instead of having people on the team making a call to potential SMEs seeking money or startups, et cetera, they have virtual agents, which simply are calling up startups. And so they make 500 calls per day. And out of these 500, maybe there’s five leads. And this is then filling up the pipeline. So I don’t know, Bruce, if you use this, or Eric in, in your platforms, et cetera. But there’s a number of large platforms, especially in SME lending, which are which need a high volume of potential customers. So they use the tools which are available right now to get a lot of leads in a very short time using AI tools.
Bruce Davis: Yeah, I’m not a aware of it being as prevalent in the UK yet, but I think it’s, it depends on the sector. So I imagine within the peer-to-peer business market, there’s a lot more usage there cause the borrowing decisions are much smaller and you need a higher volume and certainly that would also integrate with credits, credit scoring and things like that, which would be involved. But I think, it’s, it is probably more around for the, the main, cost for platforms that they’re trying to, manage when it comes to compliance, as I said, is there’s ones on the one side. It’s how you manage your investor onboarding. What things you can do there to reduce, sort of failure rates in terms of customer’s compliance with what’s required. So if we’re asking for more information, customers will make mistakes. How can we support them through that process? Because that’s a big cost for a business is, losing a customer. You’ve engaged who should invest but doesn’t and I think then on the other side, in terms of working with issuers, I think I am starting to spot some advertising and issue a communication that certainly comes straight out of chat GPT. I don’t know if it’s necessarily great quality but I think I, the only area where I’m a little bit nervous is I don’t think yet that the sort of publicly available AI is, are fully up to speed on regulation because not all regulation is on the web because actually regulators are not terribly advanced in terms of the way they’ve published their information. And and I think the danger is that that AI’s want to please you. They’re not compliance officers. They’re the opposite of compliance officers. They’re in the marketing team.
Gene Massey: I’d like to actually comment on that myself. Yeah. Because I, being a marketing company. We regularly create advertisements. Right. We also run things by chat, GPT and chat, GPT we found to be. It makes mistakes. First thing you got to know is it’s not perfect, but very often we’ll create an email or something and chat. GPT will call and it’ll say, why don’t you say this way and you’ll be more compliant. It’s actually done that. And then I get up on the rules that Jenny knows and it’ll. Yeah, I always check it when it, has invented law rules sometimes. It invented some additional sections to the regulatory activities order that I didn’t know existed.
Bruce Davis: Correct. It makes mistakes, but the big problem in my opinion is, is that the AI is creating ads that are illegal. Yeah. ’cause a lot of people are making all kinds of ads, videos and all sorts of things that are, that are questionable. So I think that’s a thing from the regulator side. I don’t think regulators are using it enough. And I think, Karsten it was interesting that in the EU you now have the, influencer labeling approach. We definitely have that issue in the UK.
Florence de Maupeou: Do they use AI in France as the same way they do here? Sorry, Florence. Do they use AI a lot in France in compliance?
For fraud detection, they use, they use algorithm to identify suspicious behavior, to authentificate projects. So it’s just, it’s also for a bit for predictive analytics system to optimize the visibility of a project and to target the right audience. Also as Karsten said, for chatbot, but I think it’s it’s quite under exploited. But we are talking about regulation and, if we, AI and technologies. Other regulation, it’s more regulation because we have, as a do digital operating act, we have AI act. So using those tool is also more compliance and more cost. So it’s all, it’s always a yeah, balance between, useful of the technology. Utility, of the technology and the cost and how you implement it in a way that you are still compliant. But I think there is at least in France and what I have seen on platforms, I think there is a huge progress to implement more technology and to reduce the burden of some due diligence, some compliance act that can be done by by, Artificial intelligence or other kind of technology.
Gene Massey: Going back to our original subject. Sorry, Gene, right before you switch off, do you mind if I just add one couple quick applications that I actually have a question for you?
Eric Cox: Okay. Okay. I’ll add it in here then. Perfect. You mentioned earlier about the people that go out and make a video and then come back and find out it’s not compliant. So is there some way for everyone to know in advance. Before they create an email, before they create a video, what is the best way to do that would actually save them money and make their issuance easier?
No, that’s a great question Gene. And I think, obviously working with portals that have compliance and legal in-house, I think is an incredibly important piece of the puzzle. If there’s one value add that I think the portal is really supposed to provide, I think that would probably be it. Access to the investors and cash flow is definitely important. But make sure that you should be, remain within the regulatory framework that’s, It’s really our primary job, I think. There are, I think it’s unfortunate sometimes the SEC or offender is really well known for being more regulation by enforcement. Sometimes you’ll ask them, Hey, I’d like to do this thing. What would that look like? They’re like, try it and we’ll let you know. And it’s just heartbreaking. Like I, that’s like the exact worst days. But I don’t know what the speed limit is, but you drive as fast as you’d like to and then I will let you know if you went too quickly. And it’s just that’s not ideal. So sometimes that’s the unfortunate framework in the United States. So having people that have seen examples that got through previous offerings without being reviewed, that’s the only feedback we have.
And then on the AI side, there’s three use cases I really like and there’s two that I am terrified for. I love the document generation for AI. Sometimes companies will tell them about their company and actually generate potential risk factors that are unique to that company. I think that’s a great use case. Investor relations, obviously a fantastic chat bot. We’ve actually building something right now that will have auto responses to similar questions that we see on discussion boards all the time. No surprise if you had a question, some other potential investor probably have that, question as well. We’d love to take that burden off of the issuer to be constantly. Answering the same question all the time. So, I think that’s a pretty good use case.
On the advertising and marketing side, Gene, we love this company called eWebinar, where you can actually have these permanent webinars running where people, it feels like you’re in a webinar with the, founder. But they’ve loaded in questions that are quite common. And then when a question comes into the chat, that, that kind of, the AI kind of recognizes that and does the prepared spiel. And it feels like you’re just a 24/7 webinar running all the time for informing people about the investment opportunity, which is pretty cool. Love image generators for compelling ads. I saw somebody that submitted a, deck and the turbine, potential wind turbine. Didn’t love what that looked like. I hopped over to Gemini real quick and the first prompt looked, phenomenal and you could take that and, do that.
Two downsides I’m super concerned about. We just got our first, what I think is probably our first fake company that tried to raise capital with us. That was basically we identified that, some of the team members were just entirely not real. Fictitious members, running, trying to create a, which is bizarre because I think if you’re going to try to do a fraudulent fundraise, there’s less regulatory environments to try to do that than trying to get through a portal personally. But I think we will see more of that, just the same way we’re seeing more spam calls using AI. ‘Cause you could just brute force a bunch of fake stuff out there and then all you need is one to work. So I don’t like that. That’s concerning to me.
And then, and I do see a lot of people using AI as attorneys, and that is concerning to me as well. Largely, they call it hallucinate. I think that is pretty generous. It’s just inaccurate, factually inaccurate. The information is not confidential. There’s no, we have a dedicated ethics bar exam outside of the bar. There’s no ethical implications for these AI. When we’ve seen that they’re, they have a kind of a self preservation ethos built into them. They, if you try to shut them down, they do try to replicate their code. They want to exist. It almost has a sentient conscious element to that and that it has a self preservation one. AI or multiple AI tried to blackmail creators when they tried to, it said, shut yourself down. And it actually black. It tried to, they had, details in there of a, fake affair and it said, Hey, if you want me to close off my code, then I’m going to tell your wife about this affair. So the, ethical standards for these AI is, I think, yeah. It’s, it doesn’t let you not be exist, existent. It’ll go to the point where it’ll extort you to continue to operate. So I just think we’ve got to keep in mind, and this is just what we have now and it’s probably going to get worse. So love what we can do. Very concerned about it can do.
Gene Massey: Well, my daddy always said, leave a party while you’re still having a good time, and so we need to close. We’re coming up on our, ending here, but this has been a wonderful discussion and it’ll be a recording of it. And I hope to see you all again. I hope we did well today and that Andrew will be proud of us. Andrew, I’ll turn it back over to you, sir.
Andrew: Thank you so much Gene. Yeah. Fascinating conversation. I knew it would be, true experts from, let’s be honest, what are some of the larger markets in the world. And it’s clear that from everything that we’ve talked about here, regulation is really important. It offers investors and issuers confidence, needs to be embraced in the right way. But the evolution is also critical if we see the kind of industry benefits from working collaboratively across restrictions. So hopefully GECA and its supporters can play a part in that. And certainly this discussion has, laid the foundations to play a really big part in that. So I just want to thank, each and every one of you for, such a fantastic contribution. Thank you so much for giving your time. It’s much appreciated. And yeah, we’ll do it again soon. Hopefully.
Beyond Borders: Learning from EU ECSPR to Build Global Crowdfunding Passports.
Beyond Borders: ECSPR Lessons & Principle-Based Supervision for Global Crowdfunding Passports
In Episode 2 of GECA’s Architects of Change, moderator Karsten Wenzlaff leads Benoît Collas (Enerfip), Aaron Shafton (DealMaker Securities) and Honish Zaveri (Kiani Ventures) through a practical look at “passporting.” The panel separates ECSPR’s promise from on-the-ground realities – language and tax localization, divergent KYC standards, platform fee-split friction – and makes the case for principle-based supervision and collaboration templates that could let compliant platforms recognize each other’s regimes and finally scale cross-border deal access.
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Episode 2 – Beyond Borders: Learning from EU ECSPR to Build Global Crowdfunding Passports
Theme: Unified Global Ecosystem / Passporting
Moderator: Karsten Wenzlaff (Secretary General, Digital Invest Germany; German Crowdfunding Association; GECA Steering Committee)
Panelists: Benoît Collas (Enerfip Group); Aaron Shafton (DealMaker Securities); Honish Zaveri (Kiani Ventures)
Moderator — Karsten Wenzlaff
Secretary General of the German Crowdfunding Association and board member of the European Digital Finance Association. A GECA steering committee member, Karsten helped shape the EU’s ECSPR framework and advises regulators globally on digital finance and crowdfunding policy.
Benoît (Ben) Collas — Enerfip
Cross-border lead at Enerfip, one of Europe’s leading renewable-energy crowdfunding platforms and among the first ECSPR-licensed in France. Ben brings an energy-industry background and hands-on experience rolling out ECSPR operations in Spain, France and Italy, including investor tax and disclosure localization.
Aaron Shafton — DealMaker Securities (USA)
Managing Director at DealMaker Securities, where he helps issuers run Reg CF, Reg A and Reg D raises at scale. Aaron specializes in cross-border mechanics between the U.S. and Canada, disclosure standardization, and founder readiness for retail offerings.
Honish Zaveri — Kiani Ventures (India)
Partner at Kiani Ventures and active angel investor. A serial entrepreneur, Honish operates syndicates that back early-stage tech across India and abroad, navigating SEBI rules, accredited-investor thresholds and emerging pathways for global participation.
Andrew: Hello everyone. Welcome to our Architects of Change Think Tank series, a series of five round table discussions, all with subjects that aligned with one of the GECA core pillars. Now, GECA stands for Global Equity Crowdfunding Alliance, and all of our supporters share one vision, which is a truly borderless global equity crowdfunding ecosystem.
One of the pillars that we have detailed in our manifesto is to strive for a unified global ecosystem. The notion that industry standards across the globe should be more aligned for the industry to be able to compete as a viable asset class. So this meeting digs a little deeper into that subject by looking at how the EU passport system works in practice, lessons learned pathways to extend mutual recognition models globally.
We’ve called it Beyond Borders, learning from EU ECSPR to build global crowdfunding passports. And that’s more than enough from me. I’d just like to introduce our moderator for today’s session. So he’s the man who’s going to guide our participants through the session. Please welcome Karsten Wenzlaff – Karsten’s a leading voice in digital finance and crowdfunding.
He’s Secretary General of the German Crowdfunding Association, a board member of the European Digital Finance Association, and most recently he’s also joined us here at GECA as a member of the steering committee. So Karsten’s been deeply involved in the design and implementation of the European crowdfunding service providers regulation or ECSPR, which is a landmark piece of legislation that aims to harmonize crowdfunding across Europe.
And this puts him in a perfect position to help us moderate this discussion. So welcome Karsten. Thanks very much for moderating and over to you to introduce the participants.
Karsten Wenzlaff: Yeah. Thanks so much, Andy. And I really want to thank you as well for bringing this all together and also putting all the efforts into GECA. I think it’s a really great forum. I think the vision is great and for me personally, it’s just great to learn about other parts of the world and how the equity crowdfunding ecosystem is developing and what’s necessary to get them, to get platforms to collaborate with each other, to build trust from the investor side, but also to have international projects on this platform. So that’s going to be very interesting for the panel today.
And passporting, I think is one of the issues which is getting a lot of attention recently, partially because as you mentioned, the European crowdfunding service provider regime, which essentially allows a platform to be licensed in one country and then offer to issuers to reach out to investors all across the European Union.
But at the same time, other regions in the world are also discussing how to make equity crowdfunding offers to be able to be used across borders – for instance, in Africa, the African FinTech Network recently hosted a panel as well on how passporting for FinTech licenses can be made possible. Several legislators in Asia are also talking about this, recognizing each other’s licenses, etc. We already have some examples of this.
And then of course in North America, I think it’s quite interesting to see how the different, the Jobs Act and they have been able to create this unified regulatory regime, which was before that was quite dis-harmonized. And essentially, for some securities regulation, it’s still a little bit dis-harmonized, but the Jobs Act and the Reg A regime has been able to, in my view, make the idea of crowdfunding across the American, across the United States, very viable. And so that would be interesting to see whether there is also passporting, for instance, for the Canadian neighbors, etc.
But so I have a really distinguished panel, which I’m very proud to have this conversation with today. From closest in terms of geography is Ben Collas, who works for the crowdfunding platform Enerfip. Enerfip is one of the leading crowdfunding platforms operating in the field of renewable energy. And has also has been, I think, one of the first platforms also to receive the license according to the ECSPR in France. Very active on the international scene. There’s a lot of collaborations going on between Enerfip and other platforms, which I think it’s very exciting. And so Ben, I really look forward to tell us about a little bit what is your experience in terms of reaching out to different investors, etc.
And also what this passporting means. You have a background coming also from the energy industry, originally before you joined Enerfip. So that would be really interesting to hear how that passporting regime, how the ECSPR regime is also make it interesting for institutional investors to co-invest alongside the retail investors.
And then we have Aaron Shafton is the manager director of DealMaker Securities in the USA. So Aaron, I really look forward to having you here because you have the experience of several, supporting platforms, building platforms, and also taking issuers on this journey because I think especially in the United States, when we look at the regime for equity crowdfunding, it puts a lot of requirements on the issue of securities. And so someone like you, you have been helping issuers trying to make sure that they are compliant with the different regulations.
And I think in, there’s a slight philosophical difference between the United States Securities Regulation and the European one, which is in the European one, you essentially, you can do what is in the law. And you try to be as compliant as possible. But in the American side, the American regulators will let you do, for a long time, they will let you do whatever you think might be working. But if they catch you doing something really bad, they will be on your toes and on your back very quickly. And so this is, I think, the main philosophical difference between United States and Europe. And so we’ll discuss that as well.
And then our last panelist, from India Honish is joining us, and he’s a partner at Kiani Ventures, and that’s a platform which is based in India. And also, Honish is a very active angel investor, who has been a serial entrepreneur also in the area of supporting early stage ventures. And that is interesting as well, I think from the point of view, to see, to get the perspective from India.
Because India, in my view from Europe, is an interesting case of equity crowdfunding because we do have this large lending platforms, which had some issues in terms of regulation, etc. But equity crowdfunding from what I’ve seen, is now just catching up to the large SME lending platforms. But it’s needed a lot because we are creating a new generation of angel investors through these equity crowdfunding platforms because people are starting with small amounts. Small tickets, but they are becoming angel investor soon. So I think that journey is really interesting for to also compare the different perspectives.
Alright, let’s dive in. So passporting in the European Union experience, of course, means that essentially you are, you don’t need to go to all of the European Union member states in order to be allowed to do, to operate the platform. And this is, was one of the biggest selling points for the ECSPR. Maybe we’ll start with you, Ben. What do you think from the platform perspective at Enerfip? What was, is that the biggest benefit that you are looking at from on the ECSPR and what it provided to you? Or was it regulatory clarity or was it the possibility to have an improved regulatory regime? But so what is, from your point of view, the most beneficial aspect of the ECSPR?
Benoît Collas: Good evening, Karsten. Thanks for the introduction. So let’s say that I’m a baby of the European crowdfunding agreements. I joined Enerfip as soon as the rule was over. So I just happened at that time. Let’s say I’m a baby. I used to work a lot with crowdfunding before I was already a client of Enerfip. I know quite well, but it was only like French regulation. So everything was blocked on the border of France.
Then came that license and I joined exactly at that time. The objective was, market was fine for being active in France. Objective was, okay, let’s go somewhere else. And licensing was perfect for us. So we said let’s start to work in Spain. And in the meantime, let’s start to get this new licensing. So we open an office in Spain, in Madrid. And at the same time we spent maybe six months to get the license. And we said, okay, it’s okay for us.
We were expecting with this harmonization to get everything easy, one process for Spain, France, Netherland, whatever. And as soon as we really started operating in Spain, we said, no, it’s totally different. So for us it was, let’s say that first three to six months we had to understand. But because even if we were working with these agreements at the end. There were so many new rules to respect in Spain. All issuing process was totally different and we had a lot of issues at the beginning and we succeed to make it. But for us, beginning was a half. And then shift to a real success after one year of operation. We get the first deal made and we continue.
So let’s say that even if we have this nice paper saying everything is the same in the 20 plus countries of Europe, you really need to continue to check what is here in each country. Fine. We can address to much more investor than before, but in the meantime, it remains a lot of constraints. For example, I’m, we currently have project in France, Spain, and Italy. So our idea is to make them cross-border because it’s, we have been working in France for 10 years, so the idea is to make our investor cross France to invest in Spain. Nice idea. But taxation is super complicated. Each country remains with this initial regulation for taxation, and even with a nice crowdfunding agreement, nothing changed so far. Yeah. Okay, people can invest everywhere. But us as a crowdfunding provider, we definitely need to educate them to say, okay, you want to invest, but this is how you do it. Look, this is this boring, like tax documents that you need to fulfill. You need also to withdraw whatever percent of your interest and so on. Yeah. So it has been a real challenge and we said, okay, if we don’t want to take this tax challenge forget the European market. Okay. And we try and succeed.
Karsten Wenzlaff: This is actually, I think it’s interesting for all international audience as well, because with the European license essentially, there are still things which have to be taken care of on the local level as well. So you have to respect, like you mentioned, Ben tax laws, you have to respect local consumer protection laws. You also have to, maybe put your offering documents, the key investment information sheet. You have to, you can choose if you want to put it in a local language. So maybe just on that specific question, Ben, could you let me know, like for the offering that you have right now on the platform, do you put this into, for instance, into English language or do you offer the key investment information sheet in Italian, French, and Spanish which includes all the information there? How do you deal with that challenge?
Benoît Collas: There’s several aspects. The first one is the legal one. Legally speaking, we are forced to publish or some key documents in the language that we want to market. So let’s say if I want to go to Spain, I can speak in English because countries say if you want to work in my country, let’s say France, you must speak French. But some country like Spain they said, you must speak Spanish or English. Okay, so each country establish a list of acceptable languages. Sometimes it’s it’s like only one France, for example, and sometimes it’s several languages. As I said, with Spain. I see.
So let’s say that we try to, we respect the rules and as soon as we market in Spain, we speak not English. I was kidding. But Spanish, and as soon as we go to a country, we try to be close to the language, and it’s not because we have a business of like trust. And for us, we try to have some point of contact. It’s in each country we operate. And we ask them to have a nice publication in their own language, native language in order to show what the quality is here and trust can be given. So this is always the mix what is legally possible and what we think is good for our investors.
Karsten Wenzlaff: Interesting. Thanks so much, Ben. So let’s move to the North American perspective. So Aaron, so with the Jobs Act and the Reg CF and Reg A regimes for offering securities, my impression from far away is that most of the offerings, which are on the American market, they stay being targeted to the North American investor base. So I don’t on the platforms, but just my perspective, I don’t see a lot of international offerings where there’s, for instance also people who could invest into projects outside of the United States, etc.
And my impression is that this is because the American investor base is, the North American investor base is very large and the Jobs Act has allowed essentially to address public offerings to retail investors and to equity investors all across the 50 US states. But maybe Aaron, could you take us a little bit into the topic of what the American equity crowdfund regulation achieved in terms of harmonizing securities offerings across the states? And then also your perspective on whether it’s, it has created maybe like a silo, like a closed shop, making it difficult for American equity crowdfunding platforms to collaborate with some outside of United States. What’s your opinion on that?
Aaron Shafton: I think it’s a great question and before answering it, I will just say thanks to everyone for having me and it’s a pleasure to be speaking with a bunch of experts from these different places in the big world we live in. It is really interesting thinking about the EU regime and the passport system in comparison and contrast to the US and to some extent, the Canadian market.
Karsten I think ultimately you’re correct passing of the Jobs Act. Transformative, obviously. What an understatement. Transformative for equity crowdfunding in the US, right? It creates the Reg CF exemption. It basically recreates the Reg A exemption. It makes it feasible to conduct an offering across the US. You still have to be aware in some cases of state security law. There’s our filings and disclosures and things to think about, but generally speaking, it’s much easier than it’s ever been to go out and raise from everyday people in every state across the country.
I think, as an observer from North America, when I look at, even the intricacy of the sum of the federal and state level laws in the US similarly in Canada, of the federal and kind of provincial level laws and the cross border ability, the EU passport is quite notable for its ambition and its direction, right? To take a bunch of neighboring companies with shared, but also different values. Have regulators actually create a unified and modern framework. It’s something we’d love to see even more of.
It is shockingly complicated to put together a cross-border US Canadian offering, for example, and I’m sure we’ll get into it in later questions, but you can have Canadian companies listed on US stock exchanges that find it difficult to do US retail offerings. A lot of progress has obviously been made, but I think there is a North Star we want to work back from. You want to make it easy and safe for founders to raise money from people across the world and for investors across the world to participate. And from a North American perspective, seeing what’s been done in the EU is a really remarkable North star.
Karsten Wenzlaff: So you mentioned briefly the Canadian perspective because let’s talk about this as well, because I think even much more than the United States and Canada, each province has almost created its own regulation for crowdfunding. If the, if I think. If that’s correct. So I think there’s a national law if I’m not mistaken, but what I hear from sometimes people who are using equity crowdfunding, they find it difficult that the regulation in Ontario might be completely different than let’s say in Saskatchewan or something like this. But I, maybe that’s something that will be interesting to see if that is the biggest hurdle already moving for instance, within Canada. Or as you said, being able to connect to both the US market and the Canadian market. If you’re an entrepreneur from Canada, what’s your perspective on that?
Aaron Shafton: Absolutely. I think you mentioned something earlier. There is a bit of a different, like almost philosophical perspective in the US versus Europe, call it North America versus Europe on the way we think about securities regulations and rules and while we don’t have to deeply analyze that, the outcome of that is that disclosures, requirements, formats are often like highly specific in nature, and the consequence of veering from that standard could be quite severe, right? You would never dream of doing that.
So there are lots of situations where, to your point, within Canada crowdfunding, let alone even a traditional private placement of securities, you’ll have different forms. People are filling out from one province to another to invest in ultimately the same offering. The formats can be wildly different. Between Canada and the US even the accounting standards for the same company could be different. And all of these things are all tiny cuts that add up to the ultimate injury that an issuer without tons of resources and like a really driven mission isn’t going to conduct across border offering. Maybe they’ll do one at a time, but a simultaneous offering to people across jurisdictions. If not done with the utmost care, it can be really challenging.
So I think there is a lot of room for that, and I think it’s something founders obviously want. At the end of the day, a founder who’s committed to raising capital from a community, from building a following, they’re going to be mostly agnostic to where that following comes from. They want it to be, they want to advocates, and the and they need the capital. So everything we can do as providers, as people who interface with our regulators to make it easier to do that, I think is a step in the right direction.
Karsten Wenzlaff: Very interesting. Alright, so let’s have the perspective from India. India, Honish. So you as an angel investor, of course, you properly source your deals from all across the Indian continent. But I want to ask you, first of all, maybe you can provide us also a little bit of feedback on how the Indian equity crowdfund regulation differentiates between the different Indian states, or provinces. Because what I have learned from in, from the regulation in India is that even though the federal government has provided some like a framework for that. But nevertheless, security regulation is also still, to some extent, something which the Indian provinces and are, have their stake it. So does that cause also some frictions for equity crowdfunding or are is the framework, the National Indian Framework for equity crowdfunding sufficiently harmonized?
Honish Zaveri: First and foremost, I would want to take this opportunity to say thanks for inviting me to this round table session. I think it’s, I think it’s great and I’m also learning a lot of new things now from you as well as GECA. So thanks a lot for this, giving me this opportunity.
In India, I think about eight to nine years ago, I believe we like we created this ecosystem of angel funds, basically. It’s still there. So there are angel funds. And then what this Angel funds are registered with the SEBI which is the equivalent of Security Exchange Commission in US. So SEBI is Indian equivalent of Securities Exchange Commission in US. And then they came out with certain regulations, SEBI the securities board and whoever wants to invest in startups, can get registered with these angel funds and they can do that.
So I also, at Kiani Ventures also, we do investments through our syndicate and via an angel fund. It ensures that not everybody’s on the captive having said that. So there, the states or if the state. So there’s a unified regulation, which has come up, which the government said, and it has, there’s a more detailed processes of forming angel funds. So at the state level, there are no separate rules or regulations for this thing.
Also one more thing is this is not, we do have regulations around angel funds, but there is no explicit regulation around equity crowdfunding. The Securities Exchange Board of India, which, it did come out with a consultation paper about few years ago on equity crowdfunding based on the Jobs Act, 2012. But then there was not much headway on that one. So currently angel investors, those who want to invest in early stage startups or even no, in early stage late stage startups, they essentially invest through angel funds, which are angel funds or angel certificate like us, which are registered with the securities board.
And also recently I think, what the government. In fact, what they’re trying to do, the securities board is trying to do is that they’re going in the reverse direction actually, unfortunately. Is that they have introduced this concept of accredited investors, which is now based on US. So one, it says that only those investors who reach a certain amount of income or net financial threshold only they can invest in startups via angel funds. So then you have to register.
Unfortunately, India, there is very few accredited investors. Not many people actually want to do that because they don’t want to disclose their financial information or income information. I think, industry evolving, I, we’re still like evolving. I don’t, we do require an equity crowdfunding, equity crowdfunding, some regulations around that. And yeah, I think this is one of the best platforms not to help put forward whatever case to the regulators and government.
Karsten Wenzlaff: Yeah. Interesting. And so you mentioned, okay, the situation in India. Just to clarify also, if they invest into a syndicate, what is the ticket size, the minimum ticket size for the retail investor to invest into an angel syndicate in India right now?
Honish Zaveri: Yeah, the minimum investment ticket size is around two laks. Piece two laks in. And that would be helpful. In dollars, I think how much it’ll be somewhere around, slightly less than $3,000.
Karsten Wenzlaff: Okay. Yeah. Yeah, because I think this is interesting. I think we have the same development of course in Europe, that before the introduction of the ECSPR, it was easy to offer securities to sophisticated investors. And even now in the European crowd selling regulation, sophisticated investors, they are a little bit easier to onboard than classical retail investors. But the purpose of the ECSPR was really to open up the investment into equity crowdfunding to small ticket sizes, essentially, to make it possible to invest. I could go to Enerfip and then invest into a wind energy project in Spain and I could use a very small amount and diversify my own portfolio. And that’s, that was the original idea behind ECSPR
But again, when we come back to the passporting, this is something where the, in my view, there’s also some considerable differences because people understand, have different understanding about what it means to be a sophisticated investor or to be a non-sophisticated investor. But Honish, just one question from your point so regarding other platforms out there, which also facilitate cross border investments into into other countries in the region or even across Asia, etc. have you seen this type of equity crowdfunding, which goes beyond India?
Honish Zaveri: Yeah, we can do, I have invested in one of the US based startups through AngelList, now that companies is a unicorn. So we definitely, we can do and also in India, like to give city, even NRIs or non-resident Indians or even foreigners know, can invest in Indian startups. So that is there and Indians can also invest in non-Indian startups, up to a certain limit, up to a certain limit. They should, they, they can invest in US startups as well.
Karsten Wenzlaff: Yeah. Okay. I think the one of the topics why Andy brought us up this idea of a global passporting system is I think there’s a big market, especially in renewable energy and impact investing across the globe. So essentially we have citizens who are maybe residents in, let’s say in Sweden. And they would like to invest into a renewable energy project, based in Uganda, for instance. And they want to not just provide a loan, they want to invest into the project, take the risk, but also benefit from the upside, of course, because a lot of these renewable energy projects, they can be quite reliable in terms of what they pay to the investors because depending of course, the circumstances, but this is, I think, the huge potential.
But Ben, I wanted to ask you something. With your experiences with the European crowdfunding passporting, do you think it would be possible to create some sort of system where you could also put issuers or projects on Enerfip, which are outside of the European Union, but where the regulators on both sides accept each other’s regulatory obligations. So essentially a passporting system, where for instance. In the United States and the European Union would accept that a crowdfunding platform licensed in the European Union and a crowdfunding platform which is operating in the United States, fulfill similar obligations and therefore they recognize each other’s licenses so that you could, for instance, also approach American investors. Is that something that is feasible or is that something that you see as a vision or you think it’s something which is not required right now?
Benoît Collas: Could be a dream. No, I think it’s a wonderful idea and this is what we try to set up, three, five years ago when with what we made in Europe, it was the same at the end. Getting France plus Spain plus Hungary and so on altogether. But it’s complicated. Look, when we have this kind of idea, for example, I want to raise money for, you mentioned Uganda or whatever. It’s so complicated to deal with the rule of the other country, but we don’t know anything there. If I want to work there, I need to take a bunch of lawyers and so to understand them, to pay them to spend time and so on. So it’s impossible.
Every time we have this kind of project abroad, let’s say that for us, the project owner has the way to build a vehicle locally. And so when I call locally, it’s in one of Euro European country. Let’s say that, let’s go that way because I know the rule of some countries in Europe. He knows also the rules. And then you will get the fund there, but the proposes to finance his Uganda project. So this is not the perfect method, but at least it does work and I think in a sense, it’s a way to answer your questions. Say if I want to to work from my European perspective to a Uganda or US project, how should I do to link to complicated crowdfunding regulation? I think it will be more 20 years. So we did just some small bridges and but giving some, asking the project owner to do the last transfer.
Karsten Wenzlaff: Yeah, to what is quite interesting is that both in the US and in Europe, when there was this big push for equity crowdfunding, 10 years ago, everything was quite fast. The ECSPR took about 10 years, which is quite fast compared to other topics in the European Union, which take much longer to be implemented. And that everybody was aligned with it, EuroCrowd, where your board member was very much active in pushing for a harmonized regime. The policy makers, they like that so I wonder, this is something that I think is interesting that we, if politicians see the need to collaborate and recognize each other’s license, et cetera, it can happen if there is like a big push from society about it. And if a lot of investors would say, hey, we would like to support the climate transition in the global south. We want to invest into renewable energy projects in the global south from the northern countries. That would mean. That maybe these kind of frameworks would emerge eventually.
Yeah. But may, maybe Aaron, so do you see, what is your point of view? Do you think there will be, what would be like a benefit of creating a global system where for instance, a startup from let’s say a startup from the States, instead of just attracting only US investors, they would be able, through passporting, be able to attract retail investors from all over the globe. Because I think right now, if I’m not mistaken, but Aaron, maybe you, I’m warm on this, is, if I would go to an American platform, it wouldn’t be that easy, that I invest into a US startup couldn’t buy US securities offering on an American platform, or is it fairly easy right now?
Aaron Shafton: The answer is, it depends. It’s it’s highly complicated. It’s much more so than you’d expect at face value. What certainly is almost impossible for, US company, raising on a US platform to do is go actively advertise in other jurisdictions, right? So it’s one thing when people find their way into offerings predominantly targeted, albeit online to a US market. But there’s no shortage of issuers. We’ve spoken to both, local North American companies who want to expand internationally or who already have an international community or customer base, and they want to include them. In a crowdfunding effort or vice versa.
The US is obviously a huge market for retail investors and there are lots of foreign companies who are expanding their businesses in the US Sometimes they go and list on US stock exchanges. They want that same approach when they’re doing these crowdfunding offerings. And yeah, it’s extremely difficult. I think having a standardized system, of course, makes that easier. My belief is also that it does in fact improve the experience for investors, right?
I think again, about even the differences between a Canadian and a US disclosure document for a variety of kind of similar offering types, and while there are differences culturally, there’s many similarities between Canadians and Americans. Like what the average investor, I believe is looking for is probably pretty much identical between those two parties. Standardization, simplification, centralization like that is better for all parties. It reduces the burden on founders. It makes it more consistent for an investor to learn to understand all the resources, point in the same direction. So I, I hope we are trending on a global level to a standardized system. I think it benefits every single party along the way.
Karsten Wenzlaff: So one of the topics in between regulators and supervisors who are talking also about passporting, one of the things which they talk about is principle based supervision, which essentially means that you might not, for a platform like a crowdfunding platform, you would not have the same licensing requirements, but you would have a memorandum of understanding between two jurisdictions or multiple jurisdictions and saying the licensing requirement for crowdfunding platform A and is essentially the same as the licensing requirement in crowdfunding platform B. So once we have established that they use, they have the same principle of requirements. Even though the exact requirements might be not be a hundred percent matched, then it’s possible to accept each that. Each of these platforms can operate in the other jurisdiction. So that’s one of the topics which is being discussed with regulators right now.
And so that could be a way forward for, I think, a global passporting system to emerge because I think Ben, like you said, it’s maybe something which is it’s a vision for the future. But through this principle based supervision, I think that’s something to for also for our white paper, etc, to discuss whether this is something like, as a first step to foster these kind of reg, collaborations.
Honish, I wanted to ask you, with that specifically, I know that the Indian regulator, and particularly they have been trying to set up these partnerships, also with other countries in the region in Asia. There’s a intense dialogue, more towards in the, in, but also in central Asia between regulators to make it easier for fintechs to have this, to be able to operate in many different countries. I’m, I am assuming you also, when you’re looking at the regulation in other countries, in the region. From a startup perspective, not from the investor perspective, from, but from the startup perspective, is that actually manageable right now? So my question, so let’s take a typical Indian startup. When they would do have their first round of financing, would they have enough resources to already start thinking regionally or globally? When does that usually come up, that they are expanding into other markets where they would need funding from the region or the globe?
Honish Zaveri: Yeah, from a startup perspective as of now, I believe maybe it’s difficult to pitch to a global audience from India, to be honest. The, if they’re pitching to a, I mean to, of course, Indian investors is still okay. They can invest to. To pitch to Indian angel investors or angel funds, micro VCs and all. But if, is it like, easy to invest, via if, is it easy for startups to invest, to pitch to global investors, on a standard platform? I think, it’s difficult right now. Not impossible, but it is difficult. As of now, it’s difficult there’s no interoperable platform, which no makes it. Which makes life easy for startup, founders to raise money from global investors or non-Indian investors as easy as easily that they can raise money from Indian investors. So it was a lot of people work and all, not that it can’t be done, but yeah, I mean it is time consuming and it was a lot of effort. Definitely, yeah. But through EFCT it can be done to some action, but that also is still time consuming. But there is no interoperable system as of now where starter founders can pitch to. No. investors, even regionally or nobody, and know they can get funding from investors, whoever is invested. It is tough.
Yeah. Because there are KYC, because of the, there are KYC requirements and all those things that needs to be fulfilled before you can actually even invest in startups. So those KYC requirements are not, globally inter interoperable. It’s difficult. It requires certain, yeah. So because of these documents and all that, it’s, it is difficult. Yeah. As of one.
Karsten Wenzlaff: Yeah, exactly. This is, I think one of the issues, regarding KYC, because quite, so for instance, I give you one example. In Europe we get all of the ECSPR platforms together and ask them how they do KYC regarding their clients and we found out that even though they all use the same harmonized legal framework, there’s still quite some differences in what they actually do, what kind of information they’re being asked for. The question is though, for. From an investor protection in the end, it doesn’t matter so much whether you use method A or method B. It what, is important from the retail investor is to be able to trust what the platform is doing. So this is where principle-based supervision comes in that you don’t prescribe a specific, let’s say KYC requirement or a specific onboarding requirement, but you just say you want to have certain principles which are found in the regulation.
So let’s talk about platform collaboration because I think what is interesting is in the past couple of years we have seen a network of platforms doing joint financing rounds. Which means that they are each based in their own jurisdiction. But they collaborate with platforms which are based in a different jurisdiction. So each of them approach their own investor base, but the funding target is the same. So I have seen startups, which were for instance, on a platform based in Israel and working on a platform based in the United States. And they did the funding for the startups at the same time, completely compliant with each other’s jurisdiction. Ben, what is your view on that? Do you have collaborations with other platforms so far? And if not, what is the obstacle behind it? What is the challenge in collaborating with other platforms?
Benoît Collas: I would’ve preferred to choose the question. It’s a very hard one, a strategic one, and very sensitive. Let’s say that I will divide it in three. First we try to do it from the beginning. It was in France. We never succeed. When I came at this European level, we tried to, it was very interesting. Say, ah, let’s unit it together and try to be stronger together. We had some, maybe not this kind of proposal, but kind of organization. I can, your project owner needs 5 million. I know, but I can raise four and you can raise one. So wonderful. You will be happy. Everyone is happy. We try to set it that way. We didn’t succeed so far then we had another approach. It was a success. But it was, let’s say, unexpected, difference of the European framework. So let’s say that it was not a clear and classic organization and this, sorry, I’m telling, but without telling it’s, but let’s say that it was. No, nobody in Europe is organized that way. So this one was good, but an exception.
Okay. Let’s go back to your real question. Yeah. To be honest, we are working on it again. We did several tests and let’s say that we have one open, so not published, so it’s. Too early stage, but let’s say that we work on the clients from scratch and from scratch we are saying, oh, this is Enerfip and this is platform X and we will finance you together. Okay. It’s long, but it’s always longer project. It’s for us. It’s maybe sometimes six months. I think it’ll be a success. So let’s meet together in three months if you want. Yes. But still it remains something important. In my example, number two, when we have this exception, that we use and we succeed. The real issue at the end is a fee split between platforms. We were fighting and spending so much time on this question, oh, I’m doing the sourcing. I’m working more than you, I’m doing the blah, blah, blah. It’s, we spend so much time negotiating for tiny amounts because everyone wanted to show what he was doing the job. No. And so I really trust about cooperation, but it’s long and you need to build it, and to have like counterparts who are really looking to advance.
Karsten Wenzlaff: Yeah. Thanks so much. It’s really interesting and I would ask Aaron as well on, on this topic, have you seen in the North American space collaborations between different platforms and this topic that Ben mentioned, the sharing of responsibilities, like the due diligence requirements and all of these things, I wonder if there’s like a model where one platform is the lead platform, and they do they, they make sure the issuer of the securities are doing everything according to the law, but then other platforms simply tag along and provide their own investor base and provide part of the funding, and they get part of the fee. Then as a business model. Has this happened in the United States and Canada?
Aaron Shafton: Maybe probably not as, probably not as formally as it sounds like it has happened in Europe. There are issuers who work with a Canadian and a US platform, for example, and we have friendly relationships with many other platforms, on other sides of the border. Again, because of the way the rules are structured, because they’re not harmonized if you’re going to raise simultaneously in the US and Canada. Fundamentally, you are doing two parallel offerings, right? You’re doing a US offering the US people and a Canadian offering to Canadian people. And yes, maybe the terms are the same and a lot of the marketing materials are the same and the company’s the same, but from a legal perspective, ’cause the disclosure is different and the mechanisms are different, it’s really two different offerings. And so you engage A and B for each one and you go out and do it.
I don’t think we’ve seen someone formally set up like a selling group. For example, the way you would in a traditional financing across borders, but that does happen in traditional finance. Obviously still rare, but companies do offer securities across borders all the time, and we’ve had private placements on our technology platform that have process investments from dozens of countries. It’s just, again, it’s very challenging without a single disclosure framework in place.
Karsten Wenzlaff: So this is quite interesting. I think it points to the fact that a global harmonized framework. Maybe doesn’t need to be like in that sense, completely harmonized that a platform from Europe can go to India and then just start working there. Maybe what we would need is simply as a first step, a framework which makes platform collaborations easier. And then from that move towards more harmonized frameworks, because I think that would, and for instance in the, in, like the requirements for platforms to do money laundering or counter terrorism finance are very similar. They’re not exactly the same, but they’re very similar in each of the global countries right now. So they just need to be recognized each other that if you do, if you have a license in jurisdiction A you also are subject to money laundering requirements, etc, which should be acceptable enough to create these collaborative frameworks.
And Honish, what’s your opinion about this platform collaboration? And also because you mentioned the angel syndicates. Do you see the, like angel syndicates from different countries in the region collaborating? Or what is the obstacle there?
Aaron Shafton: It’s a little outside my expertise, so I’ll get that caveat. But my understanding is that’s fairly common. Yes. You could have an angel round. Okay. For a company and I could imagine it being fairly common that maybe there’s a couple Canadians and a couple Americans or other folks around North America. Yeah. With your, to the point you were making like. When it comes to selling products online, for example, If I’m not raising money, if I’m just selling products, it’s not identical to sell them in the US versus in Germany. But it’s easy enough today that I can open a Shopify store and I can fill out the tax info and I can do it. Exactly. I don’t think practically it has to be this perfectly harmonized thing where. 200 of us sit at a very big table and all agree on the exact disclosure. But if I have a Form C for my Reg CF that has 95% of the information you need in your FIIS statement, there should be an easy way, if I can turn a Canadian law degree into something that lets me write the US bar, I should be able to take this disclosure and make it work across the border. If we can move people’s professions across the world, certainly we can crack this knot. I just, I think it needs a little more work.
Karsten Wenzlaff: Yeah. Thanks Aaron. Honish, what is your opinion on this platform collaboration and maybe, yeah, it’s especially collaboration between syndicated structures.
Honish Zaveri: Yeah, sure. I think, it’s very interesting, interesting idea and to some extent, We have, in fact, we have also tried to collaborate with syndicate, which is based in Singapore. We have tried collaborating, no, it’s like my base of investors will invest in their startups and vice versa. And their base of investors can also invest in Indian startups. But as I said, because regulations, their regulations, our requirements and all their thing, it’s not the same and it is not harmonized and it is not unified. So it becomes difficult if, if not impossible. So it becomes very difficult. But we have tried, having said that especially in the ASEAN region, not necessarily Indian, but especially let’s say Singapore, Malaysia or something like that. If there are syndicates, they do, they do collaborate because they have similar kind of regulations and all those things, but similar kind of rules and principles, principle based regulations basically. But yeah, we have tried at Kiani Ventures also. We have tried doing that with the syndicate based in Singapore, but we haven’t been successful so far.
Karsten Wenzlaff: Okay. But this is nevertheless very interesting because I have the, my feeling is that, that this sort of topic of how to make equity crowdfunding more operable across borders is a very hot topic among regulators as well, because they see there’s a huge need to raise private capital to innovative companies in the areas of deep tech AI. Energy efficiency, etc but also just into invest into infrastructure. We all across the globe, we need a new energy infrastructure. For instance, in renewable. It’s going to be a huge investment. And we need private capital to be able to access not just one jurisdiction, but actually, be there on the global scale.
So with that, I think, I want to thank my panel very much for sharing your experiences and also sharing some food for thoughts. We covered a lot of topics. We covered the harmonization of the ECSPR and the different ways, how there may be frictions even in the United States or the Northern America and India. We also covered how. The topics which a passporting could provide, but also possibilities and also challenges to collaborations between platforms. And I think we’ve managed to tackle this issue in a little while. And so that’s why. Thanks so much, Andy, and back to you, for making it possible to actually move this topic a little bit further.
Andrew: Thank you so much Karsten, and thanks to every panelist, to Honish, to Aaron and to Ben. A fascinating discussion. We’ve it’s the tip of the iceberg really, that we’ve discussed there, and there’ll be further discussions to be had, it’s clear just from that short discussion, there’s so many nuances and differences that need to be harmonized. And in theory it makes sense to do it. It just means that all the fundamentals that keep coming up in these conversations like trust building, marketing, education, they can all work effect. If things are harmonized and all of that’s going to help equity crowdfunding meet its true potential via cross border activity. So look fascinating for me as well. I’ve learned so much. It’s great listening to experts who are so passionate about the subject. And I just say would like to say thank you again for taking part. And yeah, we look forward to future discussions. But thank you very much.
Breaking Down Borders: How Platforms Can Enable Global Deal Access and Visibility.
Breaking Down Borders: How Platforms Can Enable Global Deal Access and Visibility.
Episode 1 of GECA’s Architects of Change explores how platforms can enable global deal access and visibility – from ECSPR and U.S. exemptions to payments, KYC/AML, translations, and secondary-market liquidity. Panelists share practical frameworks for collaboration, attribution, and tech (including DLT) that reduce friction and build investor trust.
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Episode 1 – Breaking Down Borders: How Platforms Can Enable Global Deal Access and Visibility
Theme: Cross-Border Collaboration
Moderator: Konstantin Boyko (CEO, LenderKit)
Panelists: Eric A. Cox II (COO, Netcapital); Jānis Blaževičs (CEO, CrowdedHero); Jason Fishman (CEO, Digital Niche Agency)
Moderator — Konstantin Boyko
CEO & Founder, LenderKit; CEO & Founder, CrowdSpace; GECA Steering Committee
Konstantin Boyko is a product strategist and ecosystem builder in investment crowdfunding. He leads LenderKit, a white-label investing software provider for crowdfunding and private markets, and CrowdSpace, an industry hub mapping platforms and trends across Europe and beyond. As a GECA Steering Committee member, Konstantin champions cross-platform collaboration, practical compliance, and scalable tech standards that lower go-to-market friction for issuers and portals. He moderates high-signal discussions on cross-border deal access, secondary markets, and digital identity.
Jason Fishman
CEO, Digital Niche Agency (DNA)
Jason Fishman is a growth strategist specializing in investor acquisition for equity crowdfunding. Having supported hundreds of campaigns across Reg CF, Reg D, and Reg A, he brings a quantitative approach to audience research, message testing, and conversion optimization. Jason’s teams design multi-market funnels, creative localization, and KPI frameworks (ROAS/MER) to turn awareness into committed capital. His POV: global expansion succeeds when strategy, disclosures, and creative are built for comparability and trust.
Jānis Blaževičs
CEO, CrowdedHero (Latvia)
Jānis Blaževičs leads CrowdedHero, an ECSPR-licensed European equity crowdfunding platform connecting growth companies with investors worldwide. With a background in international brand building and investor relations, Jānis focuses on pan-EU execution, language/localization, PSP/KYC orchestration, and practical uses of DLT (blockchain) for share registers and bonds. His core theme: regulation and sensible tech can reduce bureaucracy and unlock scale, while liquidity and simple onboarding drive sustained investor participation.
Eric Cox
COO, Netcapital (USA)
Eric Cox is Chief Operating Officer at Netcapital, a U.S. funding portal and broker-dealer enabling retail participation in private companies. A corporate and securities attorney, Eric blends operations with compliance leadership—advocating “compliance is the pathway to profitability.” He’s led initiatives around escrow flows, disclosure quality, attribution, and secondary-market enablement via ATS partnerships. Eric is a board member of the Crowdfunding Professional Association (CfPA) and a frequent voice on global investor access, AI risk, and cross-border collaboration.
Andrew: Hi everybody. Welcome to our Architects of Change – Think Tank Series. This is a series of five round table discussions, all with subjects that align with one of the GECA core pillars. Now, GECA stands for Global Equity Crowdfunding Alliance, and our supporters all share one vision, which is for a truly borderless global equity crowdfunding ecosystem.
One of the pillars that we’ve got is cross-border collaboration, the notion that the crowdfunding industry must collaborate and work together to be able to compete as a viable investment class. This meeting’s going to dig a little bit deeper into that subject, and we’ve called it ‘Breaking Down Borders’, how platforms can enable global deal access and visibility today.
That’s enough from me. I’d like to introduce our moderator for today’s discussion, the man who’s going to guide our participants through this valuable discussion. Please welcome Konstantin Boyko. Konstantin is CEO and founder of LenderKit, who provide flexible investing software for crowdfunding platforms.
He’s also CEO and Founder of Crowd Space, which is an educational hub for the crowdfunding industry, main players. And on top of all of that, he’s also a valued member of the GECA steering committee. So welcome Konstantin, and I’m going to pass over to you. Thanks so much.
Konstantin Boyko: Thank you, Andrew. So I’m Konstantin. I’m the moderator of today’s session. This is the first of our GECA round tables. It’s called, as we already know, Breaking Down Borders. And over the next hour, we are going to explore how we can actually make crowdfunding globally possible. And that includes technical side from blockchain to payment rails, and also trust frameworks that give investors confidence across borders.
And for that reason, we are joined today by three remarkable panelists. Each bring deep and different expertise from also different corners of the crowdfunding world. So please meet Jason Fishman from DNA marketing in the United States. He’s a growth marketing strategist and crowdfunding expert with over a decade of experience helping startups and scale-ups plan, launch and optimize their equity crowdfunding campaigns. Jason has worked on over a hundred campaigns, guiding founders in reach and conversion global investor audiences.
From another continent, we have Jānis Blaževičs, CEO at Crowded Hero and Equity Crowdfunding platform based in Latvia, focused on connecting European startups with investors worldwide. Jānis has a ground in international marketing, brand positioning and investor relations with experience bridging cultural and market gaps.
And also from the US we have Eric Cox, co-founder of Netcapital, a US based equity crowdfunding platform enabling entrepreneurs to raise capital from a broad investor base. Eric has deep expertise in compliance platform operations, and creating investor access to diverse high potential deals.
Thank you all for being here. Let’s start with maybe short explanation or discussion. What global crowdfunding actually might mean. What it is about, why we even talk about global crowdfunding, because a lot of people, when they hear crowdfunding, they think about Kickstarter, for example. And Kickstarter is global by default, right? So anybody can, pretty much, anybody can support a campaign on Kickstarter. But today we are talking about equity crowdfunding and equity is the word, which actually makes it much more difficult when it is compared to Kickstarter and reward and donation. So let’s discuss why we even have these challenges and maybe even jumping into some practical examples because I’m sure every, each one of you has some cases where you saw that actual cross border investment is possible. So if you could touch on those examples, it would be really nice. So whoever wants to start first, please feel free.
Jason Fishman: Happy to hop on to that Konstantin. First of all, it’s an honor to be here. Andrew, thank you for putting this together. Excited to speak with everybody who’s tuned in. As Konstantin mentioned, I’ve worked on over 500 deals. Some of those have been Reg CF, US only targeting others have been Reg D, Reg S. International by nature. I’ve also worked on other forms of investor acquisition for FinTech apps. Some we have to exclude the US where I’m based here in Los Angeles, and we can’t just use the word global at that.
As a marketer, I have to look at three markets, five markets really determine who is the audience there? What creative should I be using to resonate? What call to action? What funnel, what portal are we pointing them towards? And then have to measure the results comparatively. We’ve worked on a good amount of campaigns that are US targeted, that have different broker dealers, different partners, different filings to bring in investors from Canada, Europe, Asia, different places in the world.
And I, Konstantin, that really is the future. Sure, the legislation, everything on the compliance side can be more tricky right now. Over time, I anticipate more avenues that are straightforward for issuers to be able to launch and raise capital effectively, and more seamlessly. But my expertise on the marketing side, what I would tell you goes back to the audience. It goes a step further or begins with marketing strategy, marketing approach, not just, hey, this is how much we’re looking to raise. Here’s our minimum entry point for each investor, as much as an algorithmic roadmap that shows based on what’s happening in these markets, based on what competitors are doing to reach my target audiences.
Here’s who we’re targeting. This is how we’re targeting which channels we’re using. This is the creative, the messaging that’s going to go into each one of those mediums. We can have strategic partners help accelerate it, and in these different geographical areas, we then need to move to projections. The only way to measure is with numbers, impressions, clicks, conversions. I don’t want to just launch in a new country. I want to know what I’m going to produce from that country contingent on a strong conversion rate, the most important digital metric for these campaigns. But I encourage anyone who’s looking at one of these campaigns, especially if they’re going to be in various different areas here, put together a marketing plan. So many groups skip it. I could speak about this at length, but to start out the conversation, I believe it needs to begin with the strategic approach.
Konstantin Boyko: Sounds good. Eric, do you want to jump and continue from your perspective and then we go to Europe?
Eric Cox: Yeah, that would be fantastic. Thanks again, Andrew and Konstantin for leading this conversation. I’m Eric Cox, I’m a member of the Netcapital team, and as the COO, like really kind of hands on seeing how a couple hundred companies have raised just about a hundred million dollars through the portal. One of the things I’d like to say is I’m super grateful for the leadership of our European counterparts. The United States was late to the party per usual. Our regulatory framework for this is less than 10 years old. So, I like to say we’re very much in the education phase of this journey. But we’re very fortunate to have folks have been leading the charge in Europe and beyond.
And while the regulations in the United States per SEC guidelines, especially Reg CF is restricted to US-based entities doing the raising, we do allow investors, investors internationally can participate. So we love seeing folks from all parts of the world participating in these deals, and we want to continue to do that. And then also under Reg A and Reg D, there is a little bit more specifically on the Reg D. There’s much more flexibility in international companies raising through US based portals like ours.
So for me, when I think about what does global deal access really mean, it’s not only the idea that everyday folks from all over the world can participate in these deals, but that we get really cool entrepreneurs willing to allow those investors to participate in those deals. The supply side is super important, so always grateful for when entrepreneurs believe in the community element. They really support the idea of users being owners, investomers, if you will. I know it’s a little corny, but it is true. You can invest and be a customer of the company. That’s what I think about when I think about we have global deal access beyond just the United States scope. I’d love to hear Jānis perspective as well.
Konstantin Boyko: Yeah. So just to summarize, do I understand correctly that in the US it’s not an issue to get international investors to invest in the US deals, but it doesn’t happen very often when companies from outside US are raising on the US platforms.
Eric Cox: Yeah. So it depends on what regulatory exemption we select. So if we select truly Reg CF 4(a)(6) Title three of the Jobs Act that precludes international companies from raising under the Jobs Act, it is only for US based entities. However, one thing we’ve also seen that is a really good point, Konstantin, we’ve seen folks that have had success building a brand in Europe and create a United States subsidiary. That will operate in the United States, and that entity can raise under Reg CF as well. So different exemptions would allow international companies to raise in the United States. But also if you are interested in expanding to the United States, one great way is to create a US based entity, raise capital under that entity and use that to expand throughout the United States here.
And of course that has a big digital media presence if you’re not super involved in the region already. So we definitely would encourage you to work with the DNA to help market your product market, the offering, here in the United States as you grow here. But yeah, that’s exactly right. It depends on the exemption. We’d love to sit down and kind of guide you through that. We’ve had great success with companies that have done incredible traction in Europe and beyond. And then we help them kind of set up the United States entity and raise capital here in the States. So that could be an option.
Konstantin Boyko: Okay. Clear enough. Let’s hear from Europe now and compare how it is.
Jānis Blaževičs: Yeah. Thank you, Andrew and Konstantin. I think it’s a very great topic and I think it’s very not a problem. Huge, but still, I would like to start, I mean, just a little bit from a different perspective. I mean, not all the companies are meant to be a global one. Okay. That’s the biggest problem when you are thinking not all the companies are meant to go globally and raise the capital in the States and attract investor from the States. So there are some of the companies who might be a global one and they will be successful if the company is really scalable, it’ll be successful in Europe, it’ll be successful in Asia, and it’ll be successful in states, whatever, if this company is meant to be global.
And so, yeah, I would like to start from this perspective, not even from, and there will be the small companies, like small breweries who will always be just meant to be for the local investors because nobody, nobody cares about these companies. I mean, only the locals one. And of course, and the next big topic is the, I think, and I see this one as well in Latvia, is the marketing question of marketing. How accurate guys are looking for these questions, how they, how the entrepreneurs are ready to speak about themselves, about the business plan and how attractive might be this business. So I think, when you really, when we talk about this global equity crowdfunding, so everything starts with the project. And then it goes from the regulatory you can look for to raise capital in the states. You can look for capital in Europe or in Asia, if this product meant to be in, if this product is scalable. So I think this kind of answer for the global crowdfunding. So, and everything starts, I mean, from these first steps. And then, then it comes to the marketing. How proper is the marketing plan? And then you decide wherever you go to the crowdfunding or VC or any other way you can raise the capital. But yeah, so I would like to touch a little bit more that the biggest issue is the projects and the challenge.
Konstantin Boyko: Okay. So you make a valid point that not every project actually, or every company needs to raise globally. And that’s a fair point. But on the other hand, I know that on your platform crowded hero, there are not only Latvian projects, so I’m sure you have success cases with actual cross border flow of funds. So could you touch on some success stories maybe or some examples which stand out?
Jānis Blaževičs: Yes. So when the project is, I mean, so European Union is quite enough market. I mean, like, Eric was telling, so according to European license, investors across the globe can then register and invest through the European platform. So it’s a little bit slightly differently with the project. So, when you launch the platform, so when you have a good campaign, when you target the campaign, whatever, in Austria, Portugal or Spain, there will be investors from Slovakia. So we are having that thing from the 50 countries. The investors already, like with the baby diapers and vice versa with the Portuguese project, and again, always it comes a little bit more to the local equity crowdfunding is more to the entrepreneur. And their size of the network. I mean, it not always depends on the crowdfunding platform because you can use any platform where you want. If you have your community international, this will be the success story.
Konstantin Boyko: Okay. So yeah, still the point that every project is as global as the community or basically as every fundraiser. Exactly. Community and yeah, all comes from there. Makes sense. Can I add one point to that, Konstantin?
Eric Cox: Yeah. I think in terms of examples for the cross platform success, I think that’s a really good point. It really, strategy is everything. We are facilitators at our core when we’re running portals. We’re trying to enable your success and your success is based off of your vision. One thing I’d really like to keep track of is that these corporations are multinationals and a lot of the multinational corporation have investment arms, or they’re interested in finding really unique solutions.
I like to joke around every once in a while, but Coca-Cola and PepsiCo, they’re not in the business of creating new products so much anymore as they are acquiring successful brands. So building your brand strategy into corporate appeal to these broader corporate venture arms or corporate venture in general, I think is really interesting.
We had a company that Jason, actually with DNA and NetCapital worked on called Avadain. And they actually were backed by Panasonic out of Japan. Very much a US-based entity company, but solicited and ultimately attracted investment from a Japanese multinational. So in this more global universe that we live, I don’t want to lose track of the value of these corporate investors as well, because not only can individuals invest our portals, but folks can invest in their retirement accounts. Corporations can invest as well. So it’s more than just targeting any individual investor. I think we want to keep that corporate framework in mind as well. Sorry, I hope I didn’t cut you off Konstantin.
Konstantin Boyko: Okay. Yeah, no problem. It’s, that’s great. One thing Jānis is, you mentioned that on your platform, basically anyone can invest from any country. Is it really the case or you still have some limitations? Because my understanding of ECSPR framework is it’s open to European Union nationals or residents, basically, but it’s not so open for other countries. How does it work in practice for you?
Jānis Blaževičs: No, I mean, everything is with your payment service provider, as European Union equity crowdfunding platforms are not the AML compliant. So our AML officers are basically our payment processing company. So depending on the payment processing company you are using, there is no limitations for, according to our license, to onboard investors across the globe. Of course, we are not talking about black countries from the compliance perspective and so on and so forth. I mean, right now there is some new countries joining that list. But I mean, so globally, yes. From China, from the states, from Venezuela. From Nigeria, you can onboard in platform and do the investment. I mean, there is two ways right now through the direct payment or through the card. So there’s no limitations. The ECSPR license only limits on the European Union so that the company or SPV should be located in European Union.
Konstantin Boyko: Okay. So it’s only a limitation on who can raise, not who can invest, in this case. Exactly. Yep. Okay. And basically, whatever your payment service provider and KYC providers can do in who they can onboard. This is your limitation in terms of investor base depend on their risk appetite.
Jānis Blaževičs: Yeah, I think that’s the, it’s a slightly, a little bit different on the lending. But on equity crowdfunding, yes. The only AML officers are the payment service providers. I mean, so, yes, that’s our limitations or that’s the cooperation with the partners.
Konstantin Boyko: Okay. Alright. Well it sounds like you don’t really have a lot of challenges when it comes to cross-border crowdfunding, maybe your partners, and in this case payment service providers they have. But for you, it sounds quite easy. Let’s ask how US participants, how do you see it from your perspective? US perspective? What actually stops or slows down this global deal flow? What are the regulatory or operational hurdles.
Eric Cox: Yeah, and I don’t want welcome Jason into follow up here, but one of the things, so we do similarly, we are restricted by our banking partners, our escrow partners, our custodial partners. The regulatory framework is kind of robust. But yeah, as long as you could pass AML/KYC counter-terrorism checks generally that allows you to participate. There are a couple other fun, interesting wrinkles that can keep folks from being able to invest in some of these deals that are unique challenges.
For example, we have worked with companies that were backed by United States Department of Transit or State Department, or, there are some certain restrictions if you get grant money from certain government entities. Department of Defense specifically, we’ve done fundraisers with companies that did take DOD money and were not allowed to allow international investors to participate in that round.
So that’s kind of a unique one. I think it’s rare, but it’s kind of an interesting one and in that instance it was really kind of the company’s restrictions by virtue of their pre-existing investments. So that’s kind of a fun, unique one. But besides that, we are always super excited to see, we do the conversions internally. So I remember one time really early in our, in the platform’s journey, we started seeing some Yen being transferred and I guess some news outlet picked up the opportunity to invest and that attracted a group international investors and we’re super excited to see that. But we’d love to see Latin America participate. We haven’t seen as much of African participation as we’d like to, but there are some deals that might change that.
So yeah, we think it’s really important for the broader economy to participate in these types of investments because there’s, we talk about the wealth disparities in the United States. Wealth disparities globally are even more stark than that. So if we talk about accredited investors, that’s only three to 9% of the United States, depending on how you would use the accreditation status. But globally it’s less than 1% of investors globally are accredited.
So, we really want to, if we want to see more people be able to have access to what could be the greatest wealth generation engine that is early stage investing, then we really need to think more than just the United States investor, but the global investor participating in these deals. And then Jason, yeah, I’d love to hear your perspective on some of the challenges.
I think the marketing element might be even more interesting, and I think there’s some technological developments that allow this to be especially with translation elements, AI components. But yeah, I’d love to hear your thoughts on some of the challenges that you face.
Konstantin Boyko: Yeah. Just one thing, sorry, Jason, before you jump into marketing, just to comment. So I had a question which I wanted to ask Eric, but you already answered it, in a way. So do you see US market has not enough market alone for investors there. So because we hear a lot in Europe from a lot of platforms that if they only stick to their own home country, then the market is very small. So they need at least European market, like common European market to be successful. And ideally, of course, more than that. But if you look at the US market, it’s big enough. So maybe it’s enough to just focus on the US market and don’t look beyond it. So it looks like international expansion or like global market is part of your strategy anyway.
Eric Cox: Yeah, I think we’re very fortunate. The United States does have kind of a two things, access to capital and risk seeking behavior. I think the American investors is uniquely risk seeking. But I also think, so maybe technically there’s enough dollars in the United States, especially the coastal cities. But I do think that in terms of the evangelists, there’s never enough of those. I’d love to see having people championing your brand, not just domestically here in the United States, but beyond globally. I think that’s really important and I think having perspectives, unique perspectives from all over the world ultimately can make you a better company. I think when you’re thinking about the way that you, your corp, all the way from corporate governance to resource allocation, to environmentalism. If you think about those things have global impacts. It’s not just a uniquely US issues. So I think having perspectives from around the globe I think is very, very helpful.
And we’re really proud, we’ve had most states, more than half of the United States, we’ve had an issuer represented from more than half of the United States. So not just San Francisco, Boston, New York, but middle of the country as well. And I think that’s a really cool diversity element. And having Appalachia represented and the middle of the country and the South represented. And then I think through Reg D, we’d like to see even more international projects. It’s a really cool project that we want to work on. And that should really have input from the people in the region. So maybe technically from just dollar standpoint there’s a good amount of dollars in the United States, but I think unique perspectives and evangelists around the globe, there’s just no, in my opinion, there’s no better way to have somebody support you than putting some small amount, having a vested interest in your success and then them sharing it with the people around them as well. It has this real kind of empowering network effect that I think is irreplaceable and that should be global.
Konstantin Boyko: Great. Sounds good. Now Jason, let’s look at it from marketing perspective.
Jason Fishman: Yeah. Sorry, I gotta have challenges. Sure. Well, we work with groups that are in planning, groups that are plateaued and groups that are scaling. I tend to put it in one of those categories so I can get a sense of where they’re at in their process if they’re in planning. I regularly see the filings, experience delays. As a marketer, I want to see compliant marketing take place around audience building during that period of time. And you could be testing out which markets you’re getting the strongest response from where you’re able to build.
The word community was used earlier, and I have assumptions going into a campaign. I need the data to show me what’s physically working. Our clients issuers need tangible results. They need this campaign to work for them. They need to be effective at raising capital. So regardless of where we start in terms of marketing, in terms of the initial plan, which audiences where they’re located, I’m going to need to optimize over time towards the performance, towards the results, towards the pockets of conversions of investments. If I’m able to see one country, one city, one region performing stronger than the other, I want to reallocate the advertising, the outreach, the traffic generators to where we’re getting the actual responses, where we’re seeing completed investments occurring.
And with advertising, we can be very targeted in, down at the zip code level in the US I have some data partners where I can look at an individual building and the IP addresses the mobile. Laptops that have been in that building over the past six months. You can be hyper geo-targeted with advertising, but it’s a matter of setting up the right tests so you can contrast the metrics that come in from there and be able to say, hey, this audience this day and time of week is working best, we’re going to do more of that. So although the idea of working globally is very attractive, I still need to optimize towards what the performance is. There’s cases where we’ve targeted countries where the traffic, the visits to the offering page from investors is very inexpensive, but the performance isn’t there. I’ve worked on campaigns where countries in Asia, countries in Europe are the top performers and we want to spend a lot more there. And as Eric was mentioning. With AI translation, creating content that feels more personalized for the target audience you’re going after is easier than ever. We could have a different creative, a different ad, a different set of messaging running for each of the variants of audiences that we’re targeting.
And again, look at the numbers to determine what’s performing best, where to optimize and eventually where to scale. That’s what I love about the digital tools and the fact that these offerings are online. We could pinpoint in the analytics what’s working best, do more of what’s working somewhat systematically and take it to whole new levels. We’ll see clients, initiate rolling closes, take portions of the capital, reinvest it back into marketing and get to much higher spends. But at that point they know, hey, I’m getting a good return on ad spend. I’m getting a good marketing efficiency ratio for every dollar I spend. I’m getting 10 back in some cases, 20 back even more.
On some of the other campaigns we’ve worked on, some of the case studies that we’ve published, so making use of the time during the filing process for audience building and then allowing the reports to show you what to do more of during the live campaign, especially on a geo-targeting basis.
Konstantin Boyko: Okay. Well, you touched on interesting point about translations. And I want to direct this question back to Europe because Europe, unlike US, has a lot of languages. So I know that for many European platforms it’s a real issue because you need to translate documents and other things to multiple languages, otherwise you wouldn’t be compliant in certain country. So, Jānis would you share some experience from that perspective, how you deal with translations?
Jānis Blaževičs: I had exactly the same questions other the Jason speech, so. Yes. This is, I think, the biggest issue when you are talking about the European Union, regarding the national marketing campaigns, because there’s limitations on that. So you cannot target Malaysia. So with the European project, like we were having, we were having a, I think the dairy milk product. We wanted to target the Malaysia and you’re not able to target the Malaysia, and to target crowdfunding investors. I mean the retail investors because it’s not allowed, just, it’s not allowed according to the local regulations, to target the, with the specific marketing campaigns, these regions, even though it’s, in most of the countries.
So, in, so. There’s a lot of countries where you can use the English language. So, in European Union, like, I think the Spanish is quite different. German is quite accurate on that. You cannot target the German market once you haven’t received approval from the from the BaFin. So there is some specifics on that. I mean, on the marketing and I think it’s more related to the MiFID. So in this case, so yes, we are having seven languages in a platform. Just operate in the countries where we are looking for.
Konstantin Boyko: And what about key information, key document where you need to list all the information about offering. Do you also translate it to all those languages or depending on the deals, maybe on this?
Jānis Blaževičs: Yeah, on this we’re using right now we are using AI. I mean, so it’s getting more, more easier, but still it’s not always accurate. It’s getting more and more, but it’s not always accurate. And we are just mentioning this information. But yes, if you are targeting, for example, the German, you should have the key information, key investment sheet translated into the German language. Yes. That’s absolutely true. But if the business owner is having their community and they’re having these investors, you don’t need for that. So there’s no limitations to, for international investors to join, but you cannot specifically target. I mean, there’s limitation on the marketing activities.
Konstantin Boyko: Yeah. Yeah. That’s a difference. That makes sense. Okay. We already touched on technology side with automatic translation. So maybe let’s talk a little bit about how technology, or different new standards or frameworks or new technologies? Well, maybe not so new already, can help with all this cross border investing. So for example, of course blockchain might be one of the solutions. And it’s been in there for many, many years already, and it was always expected that blockchain will do many things easier and more transparent and so forth.
So do you, from your own experience, do you see blockchain helping in any of the ways, not only maybe from cross border perspective, but in general to make crowdfunding more transparent, more stable, or more anything basically. So whatever example related to blockchain you can share that would be interesting to hear.
Jānis Blaževičs: Maybe I can give. So we started, I think, couple of months ago the implementation of the DLT technology. I mean, first of all, I want to make sure that the blockchain is not the same as the crypto. I mean, this is just a technology which will be run up and running, but definitely blockchain will help to reduce the bureaucracy in the markets. I mean, now we are talking about the blockchain ledger technology to register property or share rights into the company. Right now, we see a lot of European countries like Germany, Luxembourg, Lichtenstein, Italy, France is already using and approved the DLT technology as one of the solutions to run the shareholder registries.
And definitely, yes, this will, I mean, in the next two years, I mean, part of the company registry will be run on a blockchain, and this will definitely, first of all, reduce the bureaucracy and speed up all the legal processes.
Konstantin Boyko: So in your case, you are issuing shares on blockchain, right? And this reduces certain paper?
Jānis Blaževičs: No, I mean, in our case, we we’re talking about two products, bond issue and a share registration process. So in both cases everything remained the same. Just the, as a classical LTD company in previously mentioned countries, the company’s share books can be run on a blockchain. And this will, of course, always ease and speed up the process. And the same in the. On the bond issue right now, you don’t need to have custodian banks or issuers, you can issue the bonds through the blockchain and run the books through the blockchain with just the walleting system and stuff like that. So, I mean, so we’ll see the blockchain, sooner or later, I mean, I think sooner than we are expecting.
Konstantin Boyko: Okay. And Eric, how is it working or not working for you?
Eric Cox: Yeah, we felt like blockchain and crypto would be so important that we actually formed a blockchain and crypto advisory board for our company with some experts to help guide us on that. From a regulatory and strategic standpoint, it is fully integrated. We do believe that is an important piece of the future. Right now just making sure that through our transfer agent, we track every share, what issue price, what type of security they that was offered, issue date, grant date, all the maturity elements that are required or important.
We want to make, we’re always tracking that. But we think in the future it’ll be even more important. Our goal is to very soon through virtue of some of our partnerships with alternative trading systems is to roll out secondary transfers. So right now we’ve done a bunch of primary offerings, where people could invest it directly into the company. But we know that the true value for the investor would come from selling those shares. And companies are staying private longer, if not forever. By virtue of access to capital and the kind of the overwhelming burden that comes from public offerings. And so one thing that we’ve really always built our technology around was the ability to do the primary offering and then list those shares for trade on secondaries.
So we partnered with alternative trading system. We hope to roll that out sooner than later, to where owners of those securities could then have free trading in those private securities. We’ve done alpha and beta testing on this. We’ve had over a million shares exchange hands in one of our technology rollouts. And then we are really working closely with finra on the SEC to make sure that everything is in a way that they’re comfortable with. This has never been done before, through liquidity in private securities. So you imagine that this is a really kind of a difficult hurdle to overcome. But we think blockchain and will be an important element of that. And we do believe in terms of allowing international investors to participate better. We think crypto is important. We’d like people to be able to, right now debit card, credit card, ACH wire transfer, all accepted through the portal.
We think there’s a demographic of people that would like to be able to buy and sell securities with crypto assets. And we think that could be pretty fun. And then the digital IDs you mentioned as well, the name of the game is understanding exactly who owns which shares, and then making sure that we can account for each of these offerings in a way that doesn’t get, that keeps everybody comfortable. All the regulators, all the regulators comfortable. Internationally we do have to, we have to deal with passports versus state and local IDs. That adds some friction for people, unfortunately. But that’s the hurdle that makes people comfortable and avoid any potential money laundering issues.
So there are some pretty cool hurdles that come with these advancements in technologies, but we do think that there’s going to be even more opportunity by virtue of integrating blockchain crypto specifically. And digital IDs, digital wallets.
Konstantin Boyko: Alright. Jason, how do you see using blockchain and crypto does it impact any marketing for the campaigns?
Jason Fishman: There is a funny saying few years back of, the first rule of enterprise blockchain is you do not mention the word blockchain. And I’ve been working Web3 since 2017. I’ve worked on crowd sales in a variety of formats, have worked on reg CF campaigns that bonus tokens, with the shares, have worked with cryptocurrency exchanges and a variety of different groups, in Web3 as a whole. Very excited about. Some of the topics Eric and Jānis brought up, in terms of secondary trading, what that means with the digital asset and the liquidity that’s available there.
For us, the biggest part of the conversation for blockchain is blockchain clients and how we simplify the messaging because the end audience, the perspective investor needs to not only understand the company, the team, the deal, they have to be able to market it themselves. These are crowd campaigns you’re playing for the crowd effect. So being able to explain the underlying technology in as few words as possible, again, so that an investor can not only grasp it ’cause they’re not going to put funds in if they don’t get it. But they can then repeat it. They could be evangelists to their friends, their family, their coworkers, their partners, their neighbors, their golf partners, what have you.
It’s easier said than done that there’s approaches where we do the 3-1-3 method where we break company’s offering down into three sentences and then eventually going through a process to have it live in one sentence. And even in three words, people can remember three words. It’s tough for them to remember a whole white paper. So I would say those are some of the biggest obstacles and challenges and where we’ve seen successes, as a marketing agency is around the creative itself even more so if we have to talk about what to do with the tokens long term and how that they should look at this investment, how they should perceive it among other offerings.
Konstantin Boyko: Okay, makes sense. And one other application of blockchain could be potentially, because blockchain is built for establishing trust between parties, which by default don’t trust each other. So how do you see potential for using blockchain for establishing partnerships or collaboration between different platforms? Does it make sense to use blockchain for that purpose and increase trust and allow to exchange some things between platforms, maybe offerings, maybe investors, maybe sharing some.
Eric Cox: I think one kind of natural opportunity. The funny thing, and it’s unfortunate, reg CF is designed to where each offering for Reg CF, for true equity crowdfunding, for the broadest market, can only live on one platform at a time. I get what they’re going for. They don’t want different messaging in different places. Now, do I think that there’s a solution to where we can just write that in to where each platform has to have the exact same language? I think that could be kind of a nuanced solution here.
But as is written right now, the regulation prohibits the exact same Reg CF offering being on multiple platforms. Reg D unfortunately, very fortunately, does not have those restrictions where by virtue of us having not only a funding portal, but also a broker dealer. Our broker dealer can work really closely with other broker dealers, which is fantastic. And I do think that blockchain could be used to really account for who drove what transaction volume. So being an account for which investor participated, how much they invested, how, but also where that investor came from doing, kind of using technology to do attribution of these investments.
I think there’s a lot of value there because then we can all kind of like, we’re all swimming the same direction. We want this company to raise as much capital as possible. And the investors that you bring, that’s great. The investors that we bring, that’s great as well. Ultimately, we just want to get these deals funded, so us using technology for attribution so that we can all kind of help market and support the same offerings across multiple platforms. I think that ultimately benefits the investor, and issuer. But for that to happen, there need to be some changes in the regulation, right? If we’re talking about US participating in some kind of exchange, if they go through Reg CF, there would have to be some changes. Currently under Reg D, fortunately, multiple broker dealers can work on the same deal. So that’s very fortunate.
Konstantin Boyko: Okay. Makes sense. Jānis, what do you think exactly?
Jānis Blaževičs: So, like Eric was telling at the beginning, so in European Union there’s also limitation for one platform only, but the blockchain can really give us this opportunity like we are seeing in the stock market, whatever, Clearstream, for example, and use this blockchain as a technology who joins different kind of entities across the globe. By this I mean, so you don’t need to use anymore any kind of escrow accounts or share registration in a blockchain. Everything is, blockchain is designed to be global. So this will help us, I mean, to do the same, I mean, to share the deals through the blockchain. You can share one coin in the states or in Europe or in Asia.
Konstantin Boyko: Well, one other thing which we need to overcome, I think is also identity management. Because right now you need to go through different KYC procedures on every platform. And if any of those partnerships happen and there is an exchange of deals, then there will be a question of how to exchange KYC or maybe the investor will have to go through the same procedure with different platforms, different providers and so forth.
So, I’ve heard about this topic for many years actually, but I still don’t see a solution to this problem because identity management and KYC is so much fragmented that there is no way to centralize it for now. And so maybe it’s one of the things which can be solved and then it should move forward. This global access and cross border collaboration and so forth.
On a different note, some of the countries they actually use, digitalize their identity and document management in a very good way. And then it simplifies a lot, KYC procedures. So, for example, we work quite a lot with platforms in Saudi Arabia and they have this governmental database systems where very easily you can confirm that you’re indeed the person who is registering on the platform. You don’t need to submit any documents. You just do very basic digital confirmation through your form and that simplifies their whole onboarding flow, like a hundred percent.
On the other hand, this also limits the platforms in this country to local residents, because nobody else can go through this process unless they’re registered in this same database. So in this instance, digitalization of identity management or governments, documents management serves two purposes at the same time, it also, it creates a very convenient process, but it also designs the platforms to be local.
Again, maybe, maybe, I’m just thinking out loud, maybe there would be, in the future a way to connect those systems between different countries and then it’ll allow to exchange, and for anybody in one country to register in another, in a very simple way. But for now, this is one of other challenges or other barriers to real cross border crowdfunding.
Eric Cox: And I’ll add one more super fun fact here too as well is that in the United States, of course the US passport represents your nationality, but we have individual state issued IDs. And most of, if not, most of the investments that we process are using a state or local ID. So, fortunately, like California DMV, I have a digital ID on my phone, and there’s a share feature there, which is actually pretty cool. Most state local governments don’t have that feature.
So, beyond even just dealing country to country, we have to deal with province to province, state to state, essentially even more local than that. So, I know there’s some technology that are trying to use to kind of make that a little bit more seamless. I think the sooner that we can identify each other more easily and then share that somebody our portal did the KYC, you could trust that so you don’t have to do it somewhere else. That would definitely decrease the friction. But, the concern is going to be, we took your word for it. It doesn’t feel really great from a hyper regulated entity. Like, hey, they told us that this person was cool. That should be enough. I think even if we do get to the okay to do that, as you know, we just want to make sure that we’re never fined by FINRA, so we might just do it anyways. And that’s the hard part. It’s kind of like protecting your own selves, the self-interest there. So, I think we’re getting closer and closer. People want to do this. I think there will always be a little bit of a fear. And of course, the lawyers are always going to say, just do it again. They’re like, what? The cost is so negligible for a background check. They’re going to say, just write it again.
Konstantin Boyko: Okay. Let’s look a little bit more into the future and how the market can evolve and maybe, what can happen. One thing which is happening in this, in crowdfunding industry is right now there are so many different platforms in every single part of the world. And if we look globally, then there will be thousands probably of those. Just in European Union right now, there are more than 200 ECSPR licensed platforms, which was supposed not to happen this way, but it still happened.
So I guess my question to you is how you see that development of this industry in terms of number of platforms, is it going to be increased? So there are more and more platforms because not every country actually has a lot of platforms now. Some have more, some have less. So there is still room for new countries to develop and to launch more platforms or there should be some merging of smaller players or, so basically there will be less platforms, but of a bigger size, I guess nobody knows for now, but what’s your feeling, how do you see this developing?
Jason Fishman: Yeah, so if I’m first looking at the US there’s I believe 90 some odd FINRA regulated portals, and some have come and gone already. Meanwhile, if I look at a platform called KingsCrowd and monitoring how much is being raised any given week, month, quarter year, on Reg CF regulation A plus portals, it’s really 10 to 20, we’ll call it 20, that are actively raising capital, meaning far more portals than are relevant.
I do believe there’s a strong need for the high and the low. The groups that have a higher volume as well as the portals that offer, let’s call it more of a white glove service, to their issuers and have an existing investor base, maybe have some financial publishers that they’re able to tap into and see those publishers audiences come and participate.
I think locally than globally, I guess it’s a pretty broad local range from Think in the US but at the same time, I know those stats, I know that data. I could tell you more about the Los Angeles ecosystem at that, but it really extends out to the US When I think globally, it’s from the same lens of, yes, let’s see some, we’ll call it big box platforms that are able to bring in investors from various markets and host founders, host deals, host offerings from various countries as a whole.
Let’s also see some smaller, more personalized groups out there working with issuers and tapping into their own communities of investors. And I say that not to point at the middle of the road portals, as much as to say there’s a lack of awareness globally, there’s a lack of an awareness in the US There’s a lack of awareness in Los Angeles and Marina del Rey, where I live here since 2016, I’ve had to explain to people roughly every day what equity crowdfunding is.
Doesn’t fully make sense to me. I believe this is going to be the primary approach towards capital formation in the years to come. I would’ve actually anticipated it to happen sooner. Businesses go under because they’re under capitalized. Most deals are not funded offline and at the VC level, it’s difficult for founders to connect with investors. Investors want to get involved in early stage growth stage, companies. So I think there’s this larger missing element of how do we get these exemptions? How do we get these vehicles out to the masses at least in the entrepreneurship world or retail investor space? That’s why I think some larger players, may be beneficial versus, hey, here’s the top hundred platforms globally. Here’s the top 10. Here’s also a list of 50 that’s really specialized and really ingrained in their geographical area. But all combining, all collaborating, that’s why I love GECA and similar types of professional organizations. I want to see us build more relationships with the media. I want to see funding to be able to launch campaigns or lobby for the next iterations of government partnerships so that more people are aware of this, we’ll call it movement, that they’re putting dollars in and there’s growth seen worldwide.
Konstantin Boyko: Okay. So, from your perspective, it’s awareness which could actually grow this market and make growth one really global, right.
Jason Fishman: Yes. Yes, exactly. I throw more of a story and some other tips in there. And again, I hope it’s not too long-winded, very passionate about this stuff, but that is the overarching point. Yes.
Eric Cox: If I could piggyback on that, and I’m super grateful for Jason’s passion for it. Jason, I think, and I have very much drank the Kool-Aid and do believe in the future of equity crowdfunding, regulated investment crowdfunding more broadly. Jason and I both serve on the board for the Crowdfunding Professionals Association here, largely in the United States, but we want to continue to support regulated investment crowdfunding everywhere. But from an educational standpoint, that’s an important resource for people can go and learn more. And, we have a really cool, shameless plug. We have a really cool event coming up in October, so if you want to learn more about that and it’s in DC I would love to have more folks come out, come out and join us there.
But the way I think about it. Remember we’re less than 10 years into Reg CF here in the United States. It took more than 40 years for index funds to become popular in the United States. And that’s fully embraced now. But if I think about three to five years, what changes would help unlock significant access here? I think there’s really kind of three things.
I think we need more institutional support here. I think every VC that’s putting, or every angel investor or smaller investor that’s putting a couple hundred thousand or a million dollars into a deal, and they know that they need a couple hundred thousand more or a couple million more, what a perfect opportunity to coordinate with it, with a portal to say, hey, and invest, alongside our fund. We’ve seen tremendous success with that, where we can say, hey, you get to invest alongside Harvard Business Angels, or you get to invest alongside this shark from Shark Tank. Those are the types of things that help get everyday people off the bench and into the deal. So I think institutional support and syndicating their offerings is huge.
I already mentioned how important it’s to have exits. Companies are staying private longer, and if you put money in and don’t get anything out for several years, you start questioning whether you want to put more money in. So we need companies to actually raise the capital, grow and get acquired or go public. We’ve had a couple of exits under our belts. We’d like to see more. I think secondary trading will probably be more likely than true exits where people don’t have to wait the full timeline for the company to get acquired to go public. They can actually just trade them amongst themselves. Something that would be important.
And the, and then the last piece. It is pretty burdensome from a regulatory standpoint to be a portal. And so, leverage other portals, existing infrastructure. We’d like more portals to leverage our technology partner with us White label our technology, avoid the regulatory burden you focus on whatever target you want to focus on, market the way that you want to market. We are kind of an agnostic, kind of technology. So, so if you want to focus on one specific group or one type of technology, we’ve had oil and gas companies specifically targeted with using our technology. We’ve had Green Tech specifically focused. Medical technology. If you have a niche or a region that you want to support, that’s great, but it is, it could be overwhelming when you have to deal with the regulators every day and pay legal every day.
And so you can leverage what we’re already going to do by virtue of being a funding portal and broker dealer. And you can kind of take our technology and leverage that and in your own kind of creative way. And I think that that’ll be important to keep some of these portals active. ‘Cause you’re absolutely right. We used to have, we used to have over a hundred portals in the United States. I think it was 135 was the tip of it at one point. And we are seeing folks kind of close up the portal by virtue of not having the deal flow they need. And we think more competition is better than less. So we’d love to have more people out there doing their own thing.
And then I guess the last thing, this is the hardest part, more economic advancement globally. The better people are doing every day to be able to throw a hundred bucks or a thousand bucks at a deal, the better, right? And if, we continue to consolidate wealth in specific subcategories, we won’t have the kind of the ability for everyday people to participate in these deals.
And, and then, and I think it’s actually a little bit of a fable at this point, but I think it’s super fun. We talked about translation and more global access. There is that Chevy Nova story, which I guess was debunked, but I think it’s a funny story Anyways, from a marketing standpoint, allegedly Chevy rolled out the Nova, the Chevy Nova, but I guess they didn’t consult Latin America, that Nova means doesn’t go in Spanish. And maybe they didn’t have so much success in Latin American communities. Now again, I think that is a little bit blown out of proportion. I don’t think there’s some, there’s some things to say that that wasn’t true. But I think it’s a great example of why it’s good to have more people in the room rather than less to have different, unique perspectives. And that’s what equity crowdfunding really allows us for you to kind of have these vested interest places, so they could bring you information that you might not otherwise have. So, sorry. And I went even more long-winded than Jason there, so I’ll go on mute now.
Konstantin Boyko: Well, that was nice. And it was actually nice to hear you talking about collaboration because I see a lot of closed minded owners of the platforms and other people in the industry are not so much open to collaboration and that one of the actual hurdles. So you need to collaborate. You need to share and grow the industry together because otherwise you are just competing for small, small pie rather, instead of making it bigger and then having the share. So, thank you for this. And Jānis, do you want to add to this?
Jānis Blaževičs: Yeah, just add for there. I think the. There one of the hurdles right now, like, also Jason was telling, so we are just 10 years in equity crowdfunding. It’ll add five more years. But as we see, one of the issues why the people are not investing is this secondary market and the liquidity into the equity crowdfunding because they are aware once they will invest this money. So either they will get their money back, whatever in five or 10 years successfully, or it’ll be, so there is no chances to sell these shares prior or the previous mentioned term. So, this will once there will be, I think this will come together with blockchain. The secondary market will definitely sort out a lot of issue and give confidence to the investors maybe to try out whatever. So, because they will have these chances maybe to exit. And so, yeah, and simplicity. So right now, so there’s different kind of platforms like, like previous topic, but still, so I mean, overall rules for everybody is the same. So I mean the questionnaires ID cards and those who be more simple with more simple registration, this will take out all the boundaries and then we will, so you’ll have more investors into your platform. So, so, but yeah, I think that one of the questions is the secondary market.
Konstantin Boyko: So I guess this point we can summarize what we’ve discussed and I think we can agree on that in order for the industry to grow and to enable a cross border collaboration, cross border investing, there are many things which are still need to be done and developed. And they include collaboration between different players in the ecosystem, which is very important. Then the development of secondary trading, I think, and or opportunities to actually exit those investments from equity. That this is a big step, which can be made possibly with blockchain. And of course awareness because the more the more people know about such a tool such as equity crowdfunding, then the more market will grow and the more opportunities and finding will be there.
So I think on this note, I’d like to thank everyone who joined. Thank you, Jānis. Eric and Jason and of course for Andrew to organize for organizing all the session. Andrew, if you want to close up with your pleasure, feel free to this.
Andrew: That was fantastic. Thank you very much. It was a really compelling discussion. I really enjoyed it. It’s really nice for me to just sit back and listen to true experts speaking about a subject they know so well. So listen, I just want to say thank you very much guys. We really appreciate it. It’s fantastic for all of our supporters to listen to this kind of insight and we look forward to future discussions. Thanks guys. I really appreciate it. Thank you.
