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Busting the Blockchain Hype

Updated: May 2, 2018

The following post was published by Tony Boyd in the Financial Review on May 11, 2016.

This month is shaping up as a turning point for start-ups in the US because May 16 marks the beginning of a new law to encourage crowd-sourced equity funding under a law called the Jumpstart Our Business Startups Act (JOBS Act). 

This could well be one of the few lasting legacies of the presidency of Barack Obama, which ends in January next year.

The Act permits companies to offer and sell securities through crowdfunding up to an aggregate amount of $5 million.  It is designed to assist smaller companies with capital formation and provide investors with additional protections.

Reward-based Crowdfunding has been used globally for a long time, however, Title III of the JOBS Act created a federal exemption under the securities laws so that this type of funding method can be used to offer and sell securities.

One Australian who intends to be first in the queue is Michael McAlary, a Sydney-based entrepreneur who has advised banks and non-financial companies as well as state and federal governments on complex finance issues. McAlary plans to obtain crowd-sourced equity funding for an innovative financial product called Aspire, which allows you to invest while paying off a mortgage.

Aspire allows you to invest without having to outlay any more funds other than your minimum monthly mortgage payments. It can be used to pay off your mortgage early. It is possible that if the market performs at historical averages the investment balance will outstrip the outstanding loan balance by year 22.

The product was launched in Australia in late 2014 through McAlary's company WealthMaker Financial Services. But it struggled to gain traction because the big four banks refused to support it.

Chanticleer believes that this looks like a classic case of the banking oligopoly strangling innovation in order to protect its own patch. But armed with his unique product and US patents for his product, McAlary is taking Aspire to one of the world's largest home loan markets.

He is confident of winning crowd-sourced equity funding when he launches the product at the Finovate conference in Silicon Valley this week followed by the US Secondary Mortgage conference in New York the next week.

McAlary says the US business culture is incredibly supportive of innovative products unlike Australia.

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