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Patronage and the Road to Equity Crowdfunding Hell

Florence, Rome, Perugia

Florence, Rome, Perugia

 

Here is a typical headline …

Equity Crowdfunding: Potential Disaster Waiting To Happen

… and here is a previous blog article I wrote around this type of headline.

The Road to Equity Crowdfunding Hell Through the Rear View Mirror

… but surely motive is also a part of this equation.

Lets look at the definition of Patronage.

Patronage is the support, encouragement, privilege, or financial aid that an organization or individual bestows to another.”

… and further down the Wiki page

“Sometimes consumers support smaller or local businesses or corporations out of loyalty even if less expensive options exist. Their regular custom is referred to as ‘patronage’. Patronage may entitle members of a consumers\’ cooperative to a share of the surplus or profit generated by the coop, called a patronage refund. This refund is a form of dividend.”

Patronage historically has been one individuall supporting another to achieve an agreed outcome.

Galileo benefitted from the patronage of both the Grand Duke of Tuscany, Cosimo II de Medici and the Marchese del Monte. Galileo needed this support al through his lifelong career of being an inventor, a scientist and a mathematician. Pope himself Pope Julius II was the patron for Michaelangelo.

Patronage was practiced as a social institution throughout the 14th and 17th centuries in Europe. Accomplished clients brought added prestige to their patrons. It was perceived as a win-win relationship.

In the pledge area crowdfunding definitely has elements that fit the definition …

Patronage is the support, encouragement, privilege, or financial aid that an organization or individual bestows to another.”

But what about equity crowdfunding. Can we afford to take the stance that it is a recipe for disaster and everyone will be ripped off. Who is to judge the real reason why someone supports a new business. In looking at the thousands of investors that have invested via the ASSOB Equity funding platform I’m sure some, in their heart, believed that they may never see their investment again. I’m sure in many cases this was a conscious and responsible decision they made. They were paying the role of a patron.

As the funding primarily comes from friends, fans, family and followers of the entrepreneur we need to be very careful before assuming that every investor is after a commercial return and is not prepared to lose their investment if the venture doesnt work out.

OK there are some after a financial return, high on hope, that need to be warned and have the disclosure they require but that are not the only investors.

Equity crowdfunding will be able to facilitate patronage at a far more effective level than relying on the Pope and a few rich merchants or royalty.

 

 

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