Crowd-sourced funding - an innovative funding model for innovative business

As is so often the case with digital disruption, the law tends to play catch-up in the face of innovation. The law is currently grappling with how best to regulate crowd-sourced funding. In Australia these deliberations are taking place within a broader debate as to how to formulate a policy framework supportive of innovation and entrepreneurship. This paper will consider how the two objectives might be achieved to the best advantage of small business and the economy. The immense potential of 3D printing may turn on the effectiveness of such policy development. Innovators ofter considerable opportunity for all economies. Micro, small and medium enterprises (MSMEs), start-ups and entrepreneurs potentially have an economic impact that belies their size. Not least of this impact is their propensity for innovation and the facilitation of new employment opportunities; when successful, their success resonates in associated economic growth and increased productivity throughout the economy. Even a small number of highly innovative, rapid-growth businesses can lead to considerable economic benefit. Research emerging from the Organisation for Economic Co-operation and Development (OECD) suggests that governments ought to harness this potential by introducing targeted innovation strategies that are conducive to entrepreneurial culture and aim to increase participation of new business within all sectors of the economy. Neo-Schumpeterian theory supports such policy development but cautions that consideration must be given to the inter-relationship of the triumvirate of: innovation, access to finance and social impact. Innovation is the hearthstone. This paper will explore the triumvirate, with a particular focus on the development of law supportive of access to finance for small, innovative businesses. For these businesses crowd-sourced funding is an attractive and ideal capital raising mechanism since this funding tends to be most successful for innovative products with broad appeal or social utility. The legal challenge is to recognise that the regulation of crowd-sourced funding is not a simple matter of accommodating new fundraising activities within an existing legal framework designed for big business. Rather, the law must re-conceptualise its approach to fundraising consistent with the broader policy ambition of supporting the businesses most likely to need crowd-sourced funding: innovative firms, entrepreneurial business, start-ups and other MSMEs