David Gosselin is a partner at DBBMcKennon, a PCAOB registered firm with offices in Newport Beach, Santa Monica, and San Diego, California. He has pioneered equity crowdfunding for the CPA industry. After the passage of the Jobs Act in 2012, David sought to become the national CPA expert and thought leader in equity crowdfunding for the newly created regulation A+ and regulation crowdfunding mechanisms, which allows private companies to file an IPO up to $50 Million from the public.
I recently spoke with David about the growth of the funding industry and the new opportunities it presents for companies during a recent podcast interview. An edited transcript of the interview is below.
Tell our audience a little bit more about yourself and what you do with DBBMcKennon
DBBMcKennon is a full-service PCAOB registered firm. I have been in this industry for the better part of 14 years working with private and public companies. The majority of our business is doing audits for private and public companies. Mostly in the small cap in private markets, so we get to work with a lot of entrepreneurs and emerging growth companies.
You don’t hear about many accountants being involved with equity crowdfunding. Why did you decide to venture into this industry?
I saw this as a mechanism that changed 80 years of securities law. Traditionally in our society, only 3% of our population is considered accredited investors that get to invest in the startups and big companies of tomorrow. Most of the capital appreciation happens with just a small piece of the population. This allows any person from Warren Buffet, all the way down to a worker at McDonald’s, to invest in the same company through these mechanisms. I believe that’s a huge democratization of finance and how companies will be funded in the future.
What is equity crowdfunding?
Traditionally, when companies look to get funded, they go to angel investors or VC firms, and then they eventually private equity and public markets. Equity crowdfunding is breaking down those barriers. Companies can now raise money from their friends and their family, and even people that they don’t know through taking out ads on Facebook or through funding sites. Instead of getting money or funding from a few wealthy people, you can go to your customers, your user base, and ask them, “Do you want to also invest?”
There’s a potential for companies to build communities, both geographically or digitally. It’s a way to take your customers and turn them into evangelical investors. It’s an opportunity to get a lot of buy-in from the people that believe in your products and services.
Does this reduce the amount of regulatory burden for companies seeking funding?
There is a reduced amount of regulatory burden on companies while still making sure that the investors are protected. The authors of the legislation also recognize that there’s some kind of power in the crowd. There’s a lot of knowledge in the crowd. If there are bad actors, there are regulations in place to hopefully catch that, but if there are bad actors, then maybe they’ll be kind of rooted out by the crowd.
It’s shown to be effective in the first two years of its existence, but it’s still hard to get funded. It’s just getting funded in a different way than you traditionally think about it.
So is it still safe to say, “Don’t invest what you can’t afford to lose.”Invest in what you know and invest in what you believe in.
You shouldn’t bet the house on a company that is unproven but make small investments and diversify your risk. I can’t give anybody investment advice for obvious legal reasons, but that’s probably a smart way to go about it is spreading your eggs across many baskets.