Entrants vs. Incumbents: Who Will Win the Future of Crowdinvesting?

I’m en route to the West coast today for the Silicon Valley Crowdfund Conference . It got me thinking about a question I hear from time to time: East Coast / West Coast, who will win the future of crowdinvesting, of online private capital markets?
With the three largest financings in the crowdinvesting sector to-date going to Angellist (San Fran), CircleUp (San Fran)  (San Fran) and RealtyMogul (LA), respectively, early winds point West.

Largest Reported Financings by U.S. Crowdinvesting Platforms

Angellist  $24M Series A / Series B (reported combined total of Series A + B was $24M)
CircleUp  $14M / Series B
RealtyMogul  $9M / Series A
CircleUp  $7.5M / Series A
Mosaic  $6.5M / Series B (according to latest Reg D filing; round still open)
FundersClub  $6M / Seed
Mosaic  $2.5M / Series A
SoMoLend  $2.0M / Seed (no longer operating)
RealCrowd  $1.6M / Seed
MissionMarkets  $1.5M / Series A

A few notes…

“Crowdinvesting Platform:” Website that executes private security transactions through its platform.
Includes only reported financings. Not all financings are reported, and some platforms are self-financing. (eg. Gust,  Fundable, etc.)
Does not include P2P platforms (eg. LendingClub/Prosper), or non-financial crowdfunding platforms (eg. IndieGoGo)
Including only pure-play platforms, we’d want to remove the Angellist financing.
Expect this list to change dramatically in the next six months. Rule of thumb: if a platform’s latest round was more than 12 months ago, assume it’s raising today.

There are some fun East / West matchups, some more direct than others. A few of the top of my head:
East / West

Startups > Non-Curated Gust / Angellist
Startups > Curated SeedInvest / FundersClub
Generalists  EquityNet / Crowdfunder
Real Estate  Fundrise / RealtyMogul
Film Finance  Slated / Junction Investments  
Later-Stage Transactions   AcePortal / NasdaqPrivateMarket

*NPM’s first product/service is focused on secondary markets; but it does have plans to move into primary offerings. AcePortal (backed by NYSE) is non-transactional today, but that may change.
East / West, the Right Question to Ask?
I’m not so sure. For one, even the most successful platforms have penetrated less than .1% of their addressable markets. (Exception: one could say platforms that are making new markets own 100% of them.) So unless you’re an investor deciding which platform to back in a winner-takes-all category (not all are) pitting .05% marketshare against .01% isn’t that compelling. It’s too early.
Naw, the big-picture question to dwell on isn’t Platform v. Platform, it’s Entrants vs. Incumbents. It’s David vs. Goliath. Startup crowdinvesting platforms going after century-old financial services giants.
Now we’re on to something.
Entrants or Incumbents: Who will win?
Let’s role play a little back and forth.  

Entrants  We don’t need your hidden fees.  Retainers? Be gone. We’ll take the deals you’re too bloated to do. And the risks you’re too afraid to take.
Incumbents  Please, go ahead. Think we get out of bed for a couple hundred million dollars? Ha. Our size, our sophistication, we’ll absorb you like a black hole the instance you become big enough for us to care about.
Entrants  Didn’t like 50% of ya’ll go to HBS? Surely you studied Christensen’s teachings on disruptive innovation ? This is how it always begins. Or maybe you wrote him off because he also designed a course—” How will you measure your life? “— to teach the importance of doing something meaningful with your life.  (Ouch!)

Incumbents  Yah, yah. We’ve heard all your do-good nonsense before. But our mandate is to make money, plain and simple. Boat loads of money. And we’re not ashamed of it. Because capital markets make the world go around. And guess what, we built them. And we run them. Without us you are nothing.
As for Christensen and his innovators’ dilemmas? Take a look at those plaques. See them? Founded, 1930. Founded, 1895. Founded, 1865. You see, ya’ll know nothing of building empires. Your competitive moats? Products, branding, team,  “know-how.” Sure, consumers love you, have fun with that. But you’re playing in the little leagues. Our competitive moats? Regulation. The law. (You think the “people” have influence over financial law? Hysterical. How’s your JOBS Act going by the way? On time? Favorable?)
Get it now?  You amateurs play by the law, we write it. And as long as we own the law, you can’t touch us. If we’re too big to fail, you better believe we’re too big to be disrupted. So go ahead, build your little marketplaces. Do your little transactions. Throw as many pebbles at us as you want. We look forward to buying you one day.
And, hey, perk up. When we do, you’ll make boatloads of money too :-).

A heated discussion, eh? (Sorry, up in the air, and can’t move, so perhaps a bit much ;-)
Who’s holding the keys to the online private markets in 2025? While we can’t predict the outcome, we can look at what will influence it.  And I see the greatest influence of all being a single question.
To Sell, or Persevere?
In the next 5-10 years, every successful platform will be faced the same existential question: to sell, or persevere?
Huge, insanely attractive numbers will be slid in front of them by incumbents who are in the market to buy innovation, goodwill, or simply want to limit the growth of a populist industry that makes them look bad.
BigCo1 wants to build relationships with potentially IPO’able companies earlier? Who better to buy than “PlatformX” when it’s transacting $100M/year in early-stage financings. BigCo2 needs to conjure some desperately needed public goodwill? PlatformX, brought to you by… Today the market is too small—and the reputational risk far too high—for many of these Cos to act. But as the market grows in size and develops a track record, becoming a fixture in consumers’ financial lives, they’ll wake up.
And when they do, the numbers they will offer will come straight from the Heavens. (Which, you know, is where some of them believe they’re from .) Sorry, that was a cheap shot. Seriously, though. The numbers will be outrageously big, attractive and persuasive. Some VCs may push their backed companies to take it. Others will support perseverance. And defiantly & proudly fund the war chests platforms will need as they go to war with incumbents.
If the majority of successful platforms sell: Incumbents will win. They’ll buy, internalize and re-factor innovation to their liking. Killing fundamental progress and change.
But if the majority of platforms are pirates—dead set on discovering and owning fundamentally new capital markets—Entrants will win.
Current startup trends, especially in consumer & social internet, aren’t especially promising. This isn’t a dig on Oculus; troves of potentially disruptive startups are choosing to sell early, and sell big. In consumer markets an argument can be made that this (i) accelerates change; and (ii) amplifies long-term impact. Markets are competitive and innovation is  passed to the end consumer. (I struggle with this question.)  The same isn’t true for financial markets: markets are monopolized, nearly fully penetrated, and winners have negative incentive to give consumers better, faster, cheaper products. It’s an option of last resort.
But I’m hopeful. I look at the crowdinvesting sector, and I see pirates everywhere. By nature, they almost have to be. Many left traditional financial services—comfortable, predictable, with huge opportunity costs—to pioneer a new industry, when the payoff was anything but certain. They’re not looking for a quick build & flip: they’re dead set on change.
An Ode to New Capital Markets
In the next decade if the majority of platforms do not sell, they will collectively make up the backbone of a fundamentally new and better capital marketplace. It will span every industry, geography and affinity. Equally accessible, transparent and fair—it will realize the change we so desperately need. 
Our capital markets today are broken. Full of darkness. We do not see them. Understand them. Or trust them . Fewer than 1 in 5 Americans trust the stock market—a marketplace that influences & impacts the financial & social livelihood of every single one of us. How in the world did we get here? Is this just how it is, how it has to be? I don’t believe so. We can change it. We must.
This industry can illuminate the darkness. Build new capital markets that people can trust. That abhors short-termism. Incentivizes long-term investment over speculation. Guarantees not outcome, but opportunity, for every man and woman in this country, from New York City to San Francisco, and every single city and town in-between.
Let’s get concrete here.

It can tell the millions of underbanked small business owners that a top-down risk-model built in New York is no longer their only source of capital;
It can tell individuals, regardless how much they make, that they can finally invest in a market they understand;
It can empower cities everywhere to imagine, finance, and realize the communities they want to see.

I struggle sometimes. Can it really be done? The problem is so big, so entrenched. Will the industry be underhandedly regulated to the edges of true, fundamental financial reform? (Which is happening as the SEC & FINRA make rules autonomously with limited transparency or accountability.) Will it sell into the incumbents and just become another cog in the machine? Or — will a new capital marketplace, one that is truly for the people, and by the people, rise and prevail?
I have hope. And I know it can be done. We’ve witnessed it before.
Twitter et al: we’ve seen how the internet has liberated control over information.
And so it will liberate control over capital next.
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