It all started with ‘prog rock’ band Marillion. In 1997, with their most popular days behind them, the British rockers were informed by their manager that they didn’t have the funds to make their next album.
Rather than go and get ‘real jobs’, they sacked their band manager and emailed the fans on their database, securing over 12,000 pre-orders and using the capital to write and record the album that might not have otherwise existed.
And so, ‘crowdfunding’ was born.
Since then it has been used to fund an enormous range of human activity, from the base of New York’s Statue of Liberty to the ‘stokvel’ credit unions of South Africa.
But it is also increasingly becoming an important part of wealth creation and personal finances, and nowhere more so than in emerging markets.
From Shanghai to the Sahara, developing world citizens have historically struggled to gain access to investments beyond their (often volatile) domestic markets.
Even middle-class investors in these locations have been unable to join in the wealth-building investment opportunities that people and households with similar earning power and net worth have enjoyed in the West.
This is one of the things that has led to such a huge and worrying wealth gap between developed and emerging economies.
Many middle-class investors – in all countries – run out and buy a house and try to become rich in a very over-traded market, hoping the market will go up.
By contrast, wealthy people focus on value creation by developing or buying in bulk, rarely waiting for markets to improve or prices to go up, thereby making them robust against corrections.
In fact, 49 per cent of the world’s wealth is held in property, but only 12.9 percent of the world’s population has access to real estate investment (with only 1 per cent retiring wealthy).
But now crowdfunding provides investors in underserved populations equal access to opportunities that are essential for wealth creation.
They now have a real chance at investing in the world’s most stable and lucrative property markets such as the US, UK and Australia – a prospect that only a few years ago was unthinkable.
In essence it allows the 99 per cent to invest like the 1 percent, despite the fact that big business, regulators and the whole investment industry have a vested interest in keeping them invested locally and in less lucrative assets, deeming them to be “unsophisticated”.
Underlying this revolution in real estate investment – which will hopefully lead to a re-allocation of global wealth – are innovations in financial technology.
Fintech has enabled us to develop a platform that cuts out the middle-men and their vested interests, keeping barriers to entry low for investors and creating efficiencies so that this opportunity is now a reality.
And it has enabled these platforms to be delivered in a trustworthy and transparent fashion, supporting the development of safe due diligence systems – such as Wealth Migrate’s Global Investment Due Diligence System (GIDDS) – and globally-focused asset management and analysis tools that can help investors choose the right markets and the right investment partners at the right time.
Challenges to global property development remain and far too many regulators and politicians have not embraced the revolutionary ability of real estate crowdfunding technology.
But an African Crowdfunding Association has now been established and there are very positive developments afoot in China, both jurisdictions where wealth is far too inaccessible and unattainable even for the emerging middle class.
All thanks to a little ingenuity, elbow grease and the wonders of fintech.
Scott Picken is the CEO and founder of Wealth Migrate, a global real estate investment marketplace.