Will crowdfunding kill venture funds?

Thanks to the crowdfunding mechanisms that are emerging now, many venture capital funds will fly out of the market. Then it will be the turn of the direct investment industry. Yuri Ammosov

Very brave and interesting thought. I have been watching the development of investment instruments for a long time, and I think Yuri Ammosov too idealizes the future of crowdfunding.

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

What are the investment tools for non-professional investors?

Private nonprofessional investors have a need for new, highly profitable instruments, even if they are more risky than deposits. The mutual funds are already exhausting their attractiveness - look at the ratings, only the TOP-20 show a nominal yield of over 20%, which, given the annual inflation rate of 7.8% as of June 2014, as a result gives not so impressive results, but at least somewhat more noticeable on the background deposits. More risky and forex gaming market also experienced a stir. It requires professionalism when working with this tool. PAMM accounts appeared on its basis, within which you have to trust the work of professionals for the success fee.
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These tools are united by the fact that you can direct your funds to different instruments and portfolios during the investment period. Those. there is an element of choice, play, participation. Crowdfunding, at the moment, is exactly the same tool, just still quite new.

All this is quite simplistic and if you do not consider independent trading on the securities market, which still requires the participation of a broker.

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

How else do they 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 “package” the instrument so that they can be used by the rest of the players. The main task of such a toolkit is to reduce the operational costs of 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 realized on the western market.

From the point of view of the Russian legislation, the 335-FZ “On investment partnership” was called to implement the work with direct co-investment (yes, that very crowdfunding) in a company at an early stage of development. Its main task was to create and adjust a simpler form of relations between private investors than the one that existed at that time. It turned out, to put it mildly, not very. In addition, in the last reading, our lawmakers also introduced a limit on the number of participants - no more than 50. And an important point - the Federal Law provides for the obligatory role of “managing comrade”.

As a result, this tool became 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 substantial operational support costs within the framework of the legislation and the requirements of the FFMS.

Thus, we have two theses: management of such investments should and will be carried out by professionals; reducing the costs of managing a large number of attracted small investors in Russia is not yet possible

Accordingly, in the near future, venture investment funds in Russia will remain practically the only option for this type of investment. Even though the management companies are unlikely to be able to achieve a classical 2/20 payment scheme for their services on the western market.

But, this is all in terms 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 all. I propose to independently study, in detail, the requirements imposed both on investors and companies that attract investment in foreign crowdfunding sites, and draw conclusions about the availability of this tool for Russian players.

In order for the situation to change in the foreseeable future, a substantial application of efforts is needed within the framework of legislative activity. And we also need “long” investments in the development of demand and related tools for crowdfunding mechanisms. And only then there will be an opportunity to open this investment instrument in Russia. But even then, “venture from the market” venture funds for 15 years, he still can not.