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This was a big week for the private markets — startup investing in particular. If you know, you know. If you don’t know… Keep reading.
The Business Buzz
Is the end in sight? Hopes for a fast economic recovery were one of the top headlines this week. At a press conference, Federal Reserve Chairman Jerome Powell emphasized that the Fed expects American gross domestic product to expand by 6.5% this year. If it pans out, that would be some of the fastest growth since the 1980s. Powell also reiterated that the Fed is still committed to 2% inflation as the recovery continues.
Meanwhile, the early numbers are encouraging. As vaccination rates climb, Americans are becoming more comfortable with travelling and other used-to-be-normal activities. “The number of transactions for air travel, lodging and on online travel platforms has climbed sharply in recent weeks, and is now at the highest level since the pandemic began,” The Wall Street Journal reported. Employment is beginning to ramp back up as a result. Nearly 380,000 jobs were added in February, and unemployment fell to around 6%. That’s still a lot worse than before the pandemic began — but it’s a start.
The Private Market
It was a good Monday. As of March 15, 2021, startups can now raise up to $5 million from everyday investors through Regulation Crowdfunding (Reg CF). And it didn’t take long for companies to say, “Yes please!” That day Backstage Capital — an investment adviser that focuses on underrepresented founders — increased the max goal of its live raise to $5 million (the round was at more than $4 million at the time of this writing). And content hosting and commerce platform Gumroad began its crowdfunding campaign on Monday. By Tuesday it was already sold out. Not to be excluded from all the fun, one of the main crowdfunding platforms even announced a Reg CF round. Wefunder is doing a side-by-side raise — meaning it’s conducting a Reg CF raise and a Regulation D raise at the same time — via Honeycomb. As of this writing, more than $2 million has already been committed to Wefunder’s Reg CF raise.
Maybe the most exciting thing about the new $5 million limit is that it really establishes crowdfunding as a legitimate player in the startup investing world — on par with traditional venture capital even. And that’s excellent because it also has the ability to avoid a lot of the problems that VC brings.
Banking on bitcoin. Morgan Stanley will now allow its wealthiest clients to access bitcoin via one of three funds. The change comes as a result of internal pressure from clients who have demanded exposure to the cryptocurrency. For now, only individuals with at least $2 million in assets held by Morgan Stanley and investment firms with at least $5 million will have the option to add bitcoin to their portfolios — and individuals will be limited to investments that are no bigger than 2.5% of their total net worth.