The UK crowdfunding industry is without a doubt one of the most impressive and active markets in the world. By the end of 2014, UK crowdfunding was worth £3.56 billion, accounting for three-quarters of the amount raised by Europe.
In the UK equity crowdfunding has become a credible alternative for businesses to raise growth capital. With the odd notable exception the lion’s share of successes have come from a couple of equity platforms.
Great – problem solved – businesses now have a more democratic way to raise equity. Platforms will consolidate, some will fail and we’ll end up with a couple of giant equity crowdfunding platforms to dominate the world.
But let’s rewind – I presume we’re all in agreement that opening up early stage investment to a wider audience (who understand the risks obviously) is a good thing. Using the Internet to mobilise friends and family investment just seems like a pretty obvious thing to do. It doesn’t seem terribly efficient to do pitch after pitch to angel networks at golf clubs up and down the country – this is 2015.
Other Than The Internet Bit – Why Did We Need These Platforms Again?
Before equity platform’s existed (2011 in UK) the costs associated with preparing a financial promotion were prohibitive. Advisors were used to pricing for an AIM listing and wouldn’t get out of bed for less than £50,000.
I was told by a senior executive in Brewdog that the first Equity for Punks raise (2010) cost around £100,000. They were only trying to raise £500,000 in the first round – so that’s quite a gamble as they were on the hook for the £100,000 regardless of success.
The platform will bring a crowd of investors with an appetite for high risk equity investment. The platform will raise awareness about this niche asset class and give people an easy way to back companies they believe in.
The platform will select the best of the best and cut through all the rubbish. The platform will undertake due diligence and prevent scams.
Yes All Sounds Great – But Is That What We Got?
Costs – Yes – We got a low cost alternative.
Crowd – Erh maybe a bit. The public have now heard of crowdfunding. There are London Underground Tube Adverts. And there are undoubtedly some fans of particular platforms that get tempted by that weekly newsletter.
However, I don’t think any of the Platforms would argue that they bring the crowd. In order to be successful crowdfunding it takes an awful lot of effort on behalf of the company to find and bring their own crowd.
Curation – Again a bit. Depends on the platform.
An Alternative To An Equity Crowdfunding Platform?
Why not enable companies to equity crowdfund from their own website? Some companies may not wish to sit alongside a salad dressing and beer pitching for investment. Some may not want to get lost in the crowd. Some companies may prefer that all that marketing effort gets people to their website not a crowdfunding platform.
At ShareIn, we had a pivotal change of direction at the start of this year from being a platform to a technology solutions provider. We tick the box on cost. We don’t pretend to bring the crowd – we enable companies to equity crowdfund themselves. We don’t curate but we ask for evidence of any facts the companies present. We ensure compliance with FCA regulations.
Companies don’t have to comply with Platform Rules as there is no platform. By the way I’m talking about rules that help Platforms business models not necessarily in the interests of either investee companies or the crowd. We ensure the FCA rules are met. The rules I’m talking about are progress bars, time limits on how long the pitch is live, how much money you bring with you at day way (typically 30% of your target), displaying investors names etc.
We’re not attempting to replace equity crowdfunding platforms we simply want to provide an alternative.
Now And Next
ShareIn successfully ran the first ever equity crowdfunding campaign that raised funds directly from a client’s own website in the UK, EU and US simultaneously. King’s College spin-out Reminova will make exciting announcements about that very shortly.
Shifting from West to East, ShareIn has announced that we are launching the first equity crowdfunding solution to enable Chinese investors to invest directly in a UK company – again from their own website.
ShareIn wants to provide an alternative to the equity crowdfunding platform option and open up UK companies to two of the greatest economies in the World.
(Well we can start there – next stop the globe!)