Will crowdfunding kill venture capital funds?

Thanks to crowdfunding mechanisms now appearing, many venture capital funds will fly out of the market. Then it will be the turn of the private equity industry. Yuri Ammosov

A very bold and interesting thought. I have been watching the development of investment tools for a long time, and it seems to me that Yuri Ammosov is too idealizing the future of crowdfunding.

In fact, now crowdfunding is direct collective investment in high-risk projects, in the hope that in the future the company will “shoot” and private investors will be able to earn significantly more than using existing investment instruments.

What investment tools are there for non-professional investors?

Private non-professional investors have a need for new highly profitable instruments, albeit more risky than deposits. Mutual Funds are already exhausting their attractiveness - look at the ratings, only the TOP-20 show nominal returns of more than 20%, which at an annual inflation rate of 7.8% in June 2014 in the end gives not so impressive results, but at least somehow more noticeable against the background deposits. The more risky and gaming forex market also experienced a stir. It requires professionalism when working with this tool. PAMM accounts have appeared on its basis, within which you have to trust the work of professionals for a success fee.

These tools are united by the fact that during the investment period you can direct your funds to different instruments and portfolios. Those. there is an element of choice, game, participation. Crowdfunding, at the moment, is exactly the same tool, just still quite new.

All this is completely simplified and if you do not consider independent trading in the securities market, which still requires the participation of a broker.

My main conclusion is that investments must still be managed professionally. Even if at the initial stage of development of a certain investment tool only non-professional players will directly use it, then over time, to reduce risks and increase profitability, most of the investments will be managed by those who will work with this tool most professionally.

How else do you earn on investment management?

These are operators and creators of platforms, platforms for participants in a particular market. In fact, it is they who create or “pack” the tool so that it can be used by other players. The main objective of such tools is to reduce transaction costs for managing capital or investments, which makes it possible to work with the mass market. Just with those very unprofessional investors with a “low check”.

But behind this toolkit are not only technology, product and marketing, but also legislation. And here, in Russia, a completely different picture, in contrast to what can be implemented on the Western market.

From the point of view of Russian law, to implement work with direct co-investment (yes, that same crowdfunding) in the company at an early stage of development, was called335-ФЗ “On the investment partnership” . Its main task was to create and regulate a simpler form of relations between private investors than existed at that time. It turned out, to put it mildly, not very. In addition, in the last reading, our lawmakers also introduced a restriction on the number of participants - no more than 50. And an important point - the Federal Law provides for the mandatory role of “managing comrade”.

As a result, this tool has become unsuitable for the implementation of crowdfunding projects and platforms on its basis.

If you look at other available instruments, only venture mutual funds remain, but such funds require significant operational support costs under the laws and requirements of the FSFM.

Thus, we have two points: management of this kind of investment should and will be carried out by professionals; reducing the cost of managing a feast of a large number of attracted small investors in Russia is not yet possible.

Accordingly, in the near future, venture capital investment funds in Russia will remain a virtually no alternative option for such investments. Even though management companies are unlikely to be able to achieve a classic in the Western market payment scheme for their services - 2/20.

But, this is all from the point of view of the current state of the Russian market.

It is clear that the development of technology allows you to work with Western sites, but not everyone. I propose to independently study, in detail, the requirements for both investors and companies that attract investment on foreign crowdfunding venues, and draw conclusions about the availability of this tool for Russian players.

In order for the situation to change in the foreseeable future, a significant effort is required in the framework of legislative activity. And also need “long” investments in the development of demand and related tools for crowdfunding mechanisms. And only then will there be an opportunity to open this investment instrument in Russia. But even then, he will not be able to “get out of the market” venture funds for 15 years.