Expert Interview with John White on the Growth of Alt-Finance for Mint

It's hard to believe, given the recent explosion of crowdfunding, that one of the trend's founding fathers, Kickstarter, is just five years old.

Today, there's a growing number of incredibly specialized and innovative sites ready to change the alternative finance game again, says John White, editor-in-chief of Bankless Times, a site devoted to covering the industry.

"There are sites focused on medical expenses, third-world poverty, Olympic athletes, student loans, and dozens of other niches," John says. "You can buy shares in future earnings of professional athletes, revitalize specific communities and receive half your profit in cash and the other half in credit for resort stays."

If you're an aspiring business owner, now is the time to free your entrepreneurial mind and see where it will go, John adds.

Here, John talks about the history of alt-finance and discusses its growing popularity and how it's changed the market. Read on:

Tell us about Bankless Times...when and why was the site started?

The current iteration was launched in the fall of 2012 as a direct response to the financial collapse in the U.S. in 2008, which created a lack of available credit for a wide variety of people and small business owners.

We quickly realized there was no credible journalism being done in this niche. At the dawn of any new industry, there is usually a lack of objective information available, and the potential for fraud and spin is great. We wanted to become the watchdog and town crier for alt-finance.

Who should be reading it?

People in the financial industry looking to understand alt-finance and the impact it is having on traditional funding. Also individuals looking for new ways to get personal credit, or funding for small business endeavors. Real estate professionals looking for an edge in an emerging economy.

Why are you passionate about covering the alternative finance industry?

There are emerging revolutionary developments in an industry that does not embrace change. In talking to entrepreneurs and other stakeholders, we see a palpable buzz, a passion about what they are doing. They see a need and they are filling it, which is entrepreneurship in its most basic form.

Everyone senses we are only at the beginning, with endless possibilities ahead. Each day the people we are interviewing are entering a brand-ew world, and they are shaping that world.

P2P is all about individuals regaining control. Leading up to and during the crisis, we heard many stories about rate fixing, too big to fail, toxic mortgages, and the spreading of risk. No one supposedly saw it coming because the entire system was predicated on the immediate. Make quick money and if things turn sour, move on and let someone else clean up the mess. No one felt any sense of responsibility or obligation to shareholders, the government, employees, or people underwater on their mortgages. Now you are lending $10,000 to Dave in Boise who is renovating the rec room. If you don't trust Dave, you don't lend to him.

We also see very little unbiased reporting in alt-finance and feel compelled to offer a voice of reason and education.

People are regaining the power over their finances through the democratization in crowdfunding, and we can be a part of the movement to bring this to critical mass acceptance, and that is thrilling to consider.

So what is alternative finance? What's the history behind it? What are some examples of where we see it every day?

The concept is really a throwback; it just has new names and the benefit of technology. Crowdfunding, peer-to-peer lending, real estate equity crowdfunding are the new categories... KickstarterIndiegogoProsper, and Lending Club are the marquee names, but there are hundreds of players and sub-genres with more emerging every week.

Kickstarter is likely the most-known of the players at this point. To show you how compressed the timeframe is for this industry, Kickstarter is only five years old. They've already pushed more than $1 billion in pledges.

They say necessity is the mother of invention, and that is true in the alt-finance space. After 2008, credit dried up. You couldn't get a mortgage, you couldn't get funding to expand growth in small business; banks were calling in debt from small businesses because they suddenly felt the risk was too much to support, even when those businesses always made their payments.

Why is there so much interest surrounding the topic today?

There are many reasons for the high level of interest in crowdfunding and peer-to-peer lending. One is that America is slugging through its economic recovery.

Given the high percentage of jobs created by small businesses, everything should be done to create a climate conducive to expansion and hiring, as it will provide the biggest stimulus to the economy and consumer confidence. Yet many businesses are not eligible for a traditional commercial bank loan until they reach a $3 million annual sales mark. For most, this leaves a gap between sales levels they can realistically obtain with the help of savings and personal contacts and the $3 million plateau.

Generally, the bigger the banks get, the less value they see in making these small loans. Something has to fill the gap, and it's the regular people, ironically, the ones who were initially most impacted in the downturn. They have regained some sense of control over outcomes, which is a basic, healthy human need.

We also love the pioneering atmosphere in the industry right now. New achievements are happening every week. There's this pervasive sense that we are looking out on a new world with many, many possibilities. We sense we are on the ground floor of a movement that will radically change the global economy.

There is also an incredible sense of collaboration within the industry. The smart ones know that the more companies that become successful, the better it is for industry entrenchment, so they are cheering for each other and sharing best practices in order for the industry as a whole to gain a wider acceptance in society. They know that is crucial if the industry is going to have a long-term future.

How is this industry affecting individual Americans? What about business owners?

Both have choices they did not have before. Individual Americans can identify with the underdog, the Mr. Smith trying to make it in business against the odds. They want Mr. Smith to succeed because they succeed with him. He's not the big faceless multi-national; he's the guy down the street, with an idea and guts.

Individual Americans are also getting jobs out of it.

They regain control. For $50-$75, which is close to the average support level for a crowdfunding campaign, the supporter gets the feeling of helping someone achieve their dreams. On the peer-to-peer lending side, Americans no longer have to be at the whim of banks and other traditional lending institutions. They know there is something inherently wrong with the credit card and loan interest rates they are paying, and this provides a way out.

Business owners also regain a sense of control, along with hope. The $1 million to $3 million netherworld where initially prosperous companies end up floundering now has a realistic option. On the lending side, they have an option cheaper than credit cards and other forms of capital.

What sorts of questions should consumers and business owners ask when pursuing alternative forms of financing for their ventures? What seem to be the most common pitfalls of these schemes?

It's important to review the success stories in each genre to compare their products, services, and goals with yours to know if you're going down the right road. Don't be afraid to reach out to companies for feedback and's a very collaborative space, and people who have made it through the process and succeeded seem to be compelled to help the next ones just starting out.

You also can't think it's a shortcut to success. It takes a lot of work to complete a successful crowdfunding campaign. "We'll launch our Kickstarter and everything will be fine." It takes no less effort to secure funding through alternative means. In fact, there is such saturation in the market that it may be tougher than ever to stand out and clearly reach people with a meaningful differentiation strategy.

There's also the fact that true equity crowdfunding has yet to mature in the U.S. The stalled JOBS Act has meant a delay in the real spirit of the movement. If the SEC ever gets it sorted, you will see an explosion in activity, and the associated explosion in fraud and scammers.

What are the biggest trends or headlines in the industry today?

Real estate crowdfunding has been embraced by many and is poised to grow exponentially. There seems to be an innate need to own land, and this affords that opportunity.

Technology is also playing a significant role in the development of platforms and ideas. Investor screening and database management are becoming more refined every day. API development is in constant flux.

Can you share one of your favorite recent alt-finance stories?

My personal favorite was Amanda Palmer's Kickstarter. She was really a pioneer, and her TED Talk was emotionally stirring and really captured the essence of the movement.

There are dozens of cool stories out there. The Pebble Watch was also a turning point. But there are campaigns that renew your faith in humanity that really move me.

The Indiegogo campaign for the families of the two Canadian soldiers who were killed in terror attacks was stirring.

Seeing the world coming together for a common goal when their fellow humans need it most shows the potential power of the movement. It inspires us to keep pushing forward.

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