EXCLUSIVE: EquityNet CEO On Why The Fed Won't Raise Rates In 2015

Long before Kickstarter, Indiegogo or Rockethub came around, there was EquityNet.

It’s a business crowdfunding platform that’s been around since 2005. With more than 50,000 members, approximately $250 million has been raised by its entrepreneurs.

CEO Judd Hollas told Benzinga that the money raised isn’t just equity, it’s wide-ranging.

“It’s a mixture of equity business capital, debt capital and other forms,” he said.

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In addition to being CEO, Hollas still functions as both an analyst and money manager in the public markets. He recently took the time to sit down with Benzinga and share some of EquityNet’s forecasts for 2015.

The Fed Will Not Raise Rates

BZ: What are some of your predictions for the upcoming year?

JH: “I guess my number one would be the Fed Funds rate, and other interest rates for that matter, would likely stay static through 2016.”

BZ: So you don’t think the Fed will raise rates for not just one, but two years?

JH: “Yes. If you look at the TIPS (Treasury Inflation-Protected Securities) markets and other prediction markets based on people betting their money, nine months ago they were expecting some possible increase in the first half of 2015. Now, they expectations of the market generally is that they are going to stay pat for at least 12 months longer.

BZ: Why do you think the market is forecasting that timeline?

JH: “Two things are influencing that predictive view. One is that there is still a debt overhang worldwide from the financial crisis, particularly in Europe. Europe and Japan are in such low inflation rates that they are bordering on the risk of deflation, and deflation is a horrible animal -- much, much worse than hyperinflation.

And so governments are starting to think about more stimulus, more monetary and fiscal stimulus, to hedge the risk of deflation, because it’s so damaging. Ask Japan.

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"Now what’s compounded that in the last few months has been the price of oil. The price of oil having declined so much will only lower the rate of inflation worldwide, which again amplifies governments’ concerns about the deflationary risk.

"For all those reasons, the Federal Reserve is going to put off raising rates for longer than we thought before. The European Central Bank will likely be more bold, hopefully, for all of us in doing all kinds of stimulus."

Increase In Crowd-Funded Transactions

BZ: What other predictions do you have for 2015?

JH: “Let’s turn our attention to mainly to crowdfunding. We estimate that next year, in 2015, over $20 billion in funding transactions will occur globally through crowdfunding platforms like EquityNet and hundreds of others.”

BZ: That’s a huge number.

JH: “That is globally. Now, that is a prediction. I’ll give you the historical numbers. in 2012, a bonafide $2.6 billion occurred through crowdfunding platforms. The number for 2013 was $5.1 billion. Those are based on actual surveys. 2014 isn’t done yet, but it is estimated that it will probably be about $10 billion. Looking at those numbers -- 2.6, 5.1, 10 -- that’s doubling every year. Some long-term estimates are assuming our industry could do $300 billion by 2025.”

BZ: What’s causing the industry to grow so quickly?

JH: “It’s three main factors: Funding success rate is high on crowdfunding platforms, the cost to obtain the capital is lower and the speed to get the capital can be faster.

"The cost makes sense. If you take out someone who is in the middle like a bank, and you let the people with the capital interact directly with the people that need the capital, you are taking out a whole cost structure there.

Of course, we are paid, too. We are an intermediary, but our cost is much lower than the human-intensive process of a bank."