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In the search for clues as to how new financial technology might alter equity capital markets (ECM) and eventually transform the way companies raise money, sometimes it pays to peer down from the heights of multi-billion dollar rights issues, accelerated book builds and syndicated IPOs.
So far, radical change is mainly evident in the way start-ups and smaller companies raise equity.
New investing platforms such as SyndicateRoom have sought to democratize the process, giving retail investors access to start-up fund raising and breaching the wall that used to protect the juiciest pickings for a club of connected insiders.
SyndicateRoom brought a crowdfunding approach to early stage investing, ensuring that retail investors coming through its site fund only start-ups sponsored by professional angel investors – so ensuring an element of selection and filtering – and get to buy exactly the same class of shares on the same valuation terms as these professionals.
However, while incentivized by tax breaks, early stage investing is a notoriously high risk hobby. It is ideally suited to those with the wealth, patience and risk tolerance to build portfolios, knowing most start-ups will fail and the survivors will keep coming back for further funding, which investors must either provide or accept dilution.
