New & Next: The Colorado Capital Challenge

At a recent hearing at the United States House Subcommittee on Capital Markets, it was acknowledged that providing access to capital for most early-stage businesses remains a challenge. This fact is not a surprise because it has always been true. We now find ourselves in a situation that has devolved since the Great Depression when the United States government passed legislation creating a system of consumer protection that encompasses all forms of investment. However appropriate such laws and regulations may have been at the time, they now represent a nearly incomprehensible maze that stifles and impedes innovation.

Imagine a small business that needs a new piece of equipment to expand operations. This business should be able to post this need on an Internet website where it may be matched not only with vendors of new equipment and businesses seeking to sell used equipment, but also with all forms of capital at all pricing levels that may serve to finance the equipment rental, enable cooperative use of the "Sharing Economy" or lead to outright acquisition.

Similarly, anyone may support a local business through the purchase of goods or services or step up their game with a volume purchase, purchase prepayment or even an investment of any size that matches the risk tolerance of the investor with an appropriate rate of return.

This open market, auction style approach would be supported with an integrated artificial intelligence that may guide both the offering and making of investments with real time market data, guidelines fitted to the individual or business and just in time education to enhance the decision making process. Take everything you have heard about the potential of crowdfunding and super-size it -- an online shopping mall that stretches around the world with departments for everything that represents all businesses.

Regulatory agencies may use these same tools to identify questionable opportunities and track bad actors in a manner that doesn't penalize everyone for the sins of the few.

Although these changes will be highly disruptive, there will still be a need for investment advisors, professional services, financial institutions, funds and exchanges that bring value to the marketplace.

It's time to tear down the current capital industry and start over. With the Internet, blockchain technology, artificial intelligence, crypto currencies and the power of crowdfunding, it is now possible to start a new generation of investment markets that more efficiently and fairly match businesses with all available capital sources.

An opportunity of massive proportions exists for Colorado to lead this technology-enabled change and create an ecosystem within Colorado that demonstrates this capability and serves as a pilot for other places. Colorado may become the best place in the world to introduce an innovation and to start a business.

The Colorado Capital Congress PBC, a for-profit social enterprise dedicated to improving access to capital within Colorado, is completing an assessment of Colorado's capital market with proposals for change that describes this economic development opportunity: the Colorado Capital Challenge.

To achieve this goal, the State of Colorado needs greater autonomy from the United States government. At present, all investment transactions are governed by the Securities Exchange Commission. This includes those investments carved out as intrastate exemptions. But not all capital comes from investment. Therefore, change must also encompass banking transactions, grants, donations and other types of capital regulated within the silos of a large number of government departments, agencies and programs.

A new capital marketplace is needed. This marketplace must embrace and include all forms of capital -- not just money, but also people, knowledge, equipment and facilities. This change is needed in order to enable:

1. New types of capital with new characteristics and capabilities that can adapt to new market conditions
2. Participation by individuals, businesses and organizations that span the range of investor sophistication
3. Communication and collaboration between different sources of capital
4. Progression from one type of capital to another as a business is conceived, is launched, grows and matures

This marketplace would eliminate the distinction between accredited and non-accredited investors and other barriers to communications about transactions in capital. Sources of capital may be uniquely identified and matched with unique capital opportunities. Transactions may range from a single dollar to tens of millions of dollars with appropriate costs of administration and regulatory oversight.

Within the framework of a themed innovation district, the people of the State of Colorado may initiate a project to define, build and support a new capital marketplace. Working with a holistic design, currently available and future technologies may be dedicated to this outcome.

Karl Dakin is president of Colorado Capital Congress PBC.