Private Equity Is Predatory for the 99% and Crowdfunding Can Help
The wolves of Wall Street 🐺
The voracious appetite behind private equity firms remains largely responsible for one of the “most iconic retail bankruptcies of all-time” — Toys ‘R’ Us — who, pre-Covid, were also the third-largest retailer in the US to ever file for bankruptcy. The current retailer bankruptcy list is growing in real time, making it a moving target. It’s sad because Toys ‘R’ Us was truly one of the jewels in private equity’s crown.
Pre-covid, insatiable capital companies had already eliminated a total of 1.3 million jobs at US retailers, 600,000 of which have been lost in the past decade. In 2019 alone, private equity loomed behind 70% of store closings. For these past handful of years, millennials and Amazon have taken plenty of flak for squeezing retailers out of business; when in reality, the call has been coming from inside the house. Emily Stewart perfectly sums up private equity’s structure: “heads I win, tails you lose.”
As it currently stands, private equity companies operate under very few regulations. Until recently, SEC registration wasn’t a total requirement. Dodd-Frank legislation introduced after the 2008 Recession was the most recent attempt at imposing more visible guardrails. However, private equity firms are still entitled to behave like payday loans for struggling corporations. Companies pay high interest rates and fees to their new owners in the hopes that they’ll guide them towards profitability, raise the capital to pay off their debt and emerge like a more competitive phoenix. Not bloody likely.
Instead, private equity arrangements seem to have killed grocery stores, set the sky high prices of prison phone calls, and even claimed ownership over the (probably) bunny shaped keys of the Playboy Mansion. Then, just to make sure they really got their fill, they (shamelessly) dismembered the bodies of Toys ‘R’ Us and Sears before our eyes.
But hey… to borrow from Tamika Mallory who so eloquently put it during a George Floyd protest speech, “looting is what you do.” So who’s next, JCPenney; Neiman Marcus? There’s already 14 to choose from this year, so have at it!
Crowdfunding starts with an idea
Perhaps the antithesis to private equity, is equity crowdfunding. Instead of being profitability vampires, equity crowdfunding works to help put money back into the community and offers the 99% a chance to invest and build wealth. This ecosystem tends to fund ideas that are outside the narrow VC model, offer a more diverse & inclusive environment, create jobs and boast a faster and 10X higher raise rate than venture capitalism. For many, crowdfunding has been a practical solution for the ‘Valley of Death’ funding gap many entrepreneurs tend to flounder in.
Take it back
At one point, it was very difficult for me to discuss investment opportunities with friends and many folks from the Bronx and Manhattan neighborhoods I hail from. Unfortunately, at the time there was never a real option I could offer anyone. Think about it…investment opportunities usually had minimums too expensive for many “accredited” investors; it was hopeless for the unaccredited. This dilemma filled me with anger and discomfort. In some cases, I became embarrassed and ashamed of my own ability to participate in such investments, but not have the ability to include my friends.
Any workarounds that existed ranged from borderline illegal or very illegal. Sadly, of course, it’s all too common that many poor and disenfranchised Americans across the country — regardless of ethnicity or party (Black, White, Democrat, Republican) — are left with nothing but janky workarounds from which to try to cobble together a meager existence.
Poverty is the one characteristic of life that is truly colorblind, and in doing my part to unify the country, my interest is in offering every American the opportunity to make a better life for themselves economically. This includes the entrepreneur in the small town looking to create and/or grow a business, or the hard working person who’s eager for the opportunity to invest and leave something of value to their kids. We’ve got a lot of ground to make up, so there’s no room for color wars when the battle is financial.
As such, I’d like to thank the universe for the JOBS Act — which created equity crowdfunding. With it and through my holdings, I’ve been able to set up a micro funding program to assist small and micro businesses in poor and middle class communities (Black, Brown or White) throughout America during this Covid-19 crisis (#KeepTheLightOn). But most importantly, with Title III of the JOBS Act, everyone has the same opportunity to strive for a more prosperous life. And while you’ve always had this right, equity crowdfunding now helps to enforce it. #PayMeInEquity
No Social Justice Without Economic Justice!