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So where is equity crowdfunding heading? What lies in the future?
Crowdfunding - dynamic, evolving and exciting
Whilst crowdfunding itself is not a new concept, the landscape in which it is now operating is highly dynamic and evolving at a rapid rate. Keeping pace with new information is always challenging and the crowdfunding arena is especially so.
Crowdfunding is increasingly talked about, the twitter chatter is prolific and views, contra-views and diverse opinions abound – all of which is wonderful! The very fact that so many people are engaging in the conversation is indicative of the interest and potential that it has to offer.
All of which can only be for the greater good – an essential element of crowdfunding is communication, increased awareness by entrepreneurs and potential investors, leading to improved deal flow and an uptake in opportunities.
The more we discuss, challenge and evolve, the greater the general awareness and understanding which can only serve to have a positive impact on the wider economy.
So where exactly is equity crowdfunding heading? What lies in the future?
Obviously, we don’t have a crystal ball and the options (depending upon platform type) are various but, in general, we anticipate that crowdfunding, in particular equity crowdfunding, is going to play a much greater role in the early stage and high growth business funding mix.
More importantly, it will be a viable element of the funding spectrum, offering real opportunities and benefits to investors and entrepreneurs alike.
Recognition from areas such as the FCA (with their recent ‘softening stance’ towards platforms), support from Governmental representatives and high-profile industry leaders and entrepreneurs, as well as comment from industry specialists serves to reinforce this vision.
For example, corporate law specialist, Jennifer Malcolm of Pinsent Masons, has commented that “for companies seeking to raise money through crowdfunding, the FSA’s softening stance and potential for increased investor confidence should allow companies to tap into a new source of funding and may help to plug the funding gap between their requirements and the funds available from banks and angel groups”.
Added to this, Lord Young (Government Enterprise Adviser) has stated that “Crowdfunding is a highly innovative and important source of finance for UK businesses.
I am delighted to see that the UK financial services industry and its regulators are reacting dynamically to new models of business finance”.
How can crowdfunding complement and enhance existing funding routes?
Traditionally, early stage funding has been secured from personal reserves, friends, family, angel investors and early stage VCs. We think that there is a significant gap in this model – where are the latent sophisticated investors? Who are they? Do they even know themselves who they are, the role that they could play and the benefits that they could access? They constitute an incredibly interesting seam of potential investors who could access tax-efficient opportunities and are currently often oblivious to the fact!
A moment here to explain the role of the GrowthFunders platform in the wider crowdfunding arena (apologies to those who know this already, but as already stated, information is invaluable and we would like to keep you as fully informed as possible!).
Crowdfunding, via GrowthFunders, is the gathering together of a large group of people – some are entrepreneurs with great ideas and some are investors (see above) who are interested in supporting new initiatives or potential high-growth businesses.
Through the GrowthFunders platform, projects are shared, pitches are made, information is digested and, ultimately, entrepreneurs receive funds in exchange for equity in their business.
So, not actually a new concept, but one which now occupies a new arena facilitated by online platforms, disseminating information and gathering traction through the use of new technology and social media.
Equity crowdfunding - alternative or complementary?
We believe that equity crowdfunding, when operated professionally and diligently, can complement the existing funding marketplace.
There are certain key issues involved in achieving this: investor awareness, investor security, entrepreneurial ‘investability’, deal flow, project feedback and future investment potential.
We propose to address and expand upon these concepts in future blogs (so please do check back often for updates) but would summarise as follows:
By working with entrepreneurs to ensure that they have robust, investment ready opportunities, we can unite them not only with the traditional sources of finance but also with sophisticated investors, angels and VCs.
We will facilitate this by making the flow of deals on the platform as comprehensive and as ‘investor-friendly’ as possible, which could also provide longer-term opportunities for all parties in the form of future funding rounds.
We believe that crowdfunding, when operated in a professional manner, can digitise, streamline and demystify the equity investment process and provide a wider group of investors with access to a range of tax-efficient investment opportunities. Overall, this can lead to considerable benefits for entrepreneurs, growth businesses, investors and the wider economy.
Are you ready to build your investment portfolio? Why don't you head over to our pitch pages and take a look at our selection of tax efficient investment opportunities all with high growth potential.