Last month, I was invited to be part of a panel hosted by the Chartered Financial Analyst UK Society and co-organized with CFA UK Private Equity Special Interest Group. The event focused on securities crowdfunding and its evolution in the UK and in the USA, both from a legal and a business perspective. I was joined by several well-known founding members of the UK Crowdfunding Association.
The questions covered topics related to crowdfunding such as our views on financial regulations and how they differ between the UK and the US, best practices for managing a funding round online, and some of the pros and cons of crowdfunding compared to other more traditional fundraising methods. One of the most interesting debates was on the new relationship between crowdfunding or other online investment marketplaces and larger funds, investment banks, or government grants.
There are certainly proponents of crowdfunding who hope that these funds will never be a necessary or even desired part of the new online funding ecosystem: the thought is that crowdfunding is part of a far broader societal trend that is in opposition to the concentration of power in the hands of a few, be they governments or investment banks or any other small group that holds significant control over entire industries. By this view, crowdfunding will be the catalyst for businesses finally to break free from the endless cycle of bank loan or credit card rejections and instead jump into the arms of those who really care about them – their customers, fans, supporters, friends – never to return to the bank manager again.
Equally, we have seen that in the UK, through its Business Finance Partnership Scheme (BFP), the Government has started to participate in the emerging ‘alternative investment’ sector by directing funds through a handful of UK-based platforms focused on business lending. In addition, we’ve also seen how clients of larger funds are asking how they can get involved in this sector both in the UK and in the US, at a time when interest rates and the public markets are sluggish.
In our view the long-term sustainability of these online platforms will require a relationship with the rest of the financial ecosystem, although the precise models are yet to be determined. For investors looking to invest wholesale into equity crowdfunding as an asset class there is no easy method today, and we see that as an opportunity to stitch together platforms driven by the crowd and the new wave of larger funds that want to get into this market.
There are certainly proponents of crowdfunding who hope that these funds will never be a necessary or even desired part of the new online funding ecosystem: the thought is that crowdfunding is part of a far broader societal trend that is in opposition to the concentration of power in the hands of a few, be they governments or investment banks or any other small group that holds significant control over entire industries. By this view, crowdfunding will be the catalyst for businesses finally to break free from the endless cycle of bank loan or credit card rejections and instead jump into the arms of those who really care about them – their customers, fans, supporters, friends – never to return to the bank manager again.
Equally, we have seen that in the UK, through its Business Finance Partnership Scheme (BFP), the Government has started to participate in the emerging ‘alternative investment’ sector by directing funds through a handful of UK-based platforms focused on business lending. In addition, we’ve also seen how clients of larger funds are asking how they can get involved in this sector both in the UK and in the US, at a time when interest rates and the public markets are sluggish.
In our view the long-term sustainability of these online platforms will require a relationship with the rest of the financial ecosystem, although the precise models are yet to be determined. For investors looking to invest wholesale into equity crowdfunding as an asset class there is no easy method today, and we see that as an opportunity to stitch together platforms driven by the crowd and the new wave of larger funds that want to get into this market.
About the author - Paul Higgins
Serial entrepreneur with an operational background in finance and technology companies. Paul was previously responsible for the development of the Crowd Valley product suite as part of the Grow VC Group.
Paul is a regular speaker on new financial models and crowdfunding and has been involved in working with Crowd Valley’s pioneering customers across the financial services sector, as well as advising global institutions such as the World Bank and national regulators such as Italy’s CONSOB.
Paul has over a decade’s experience working in various operational, sales, marketing, and product roles within technology companies, including two B2B startups that have achieved eight-figure exits following 100% year-on-year growth. He started his career in product development and testing roles at IBM’s Hursley Research Lab in the UK before going on to eBay, UBS, and Barclays.
Paul holds an M.A. (Hons) in Computer Science and Philosophy from Churchill College, Cambridge University. He has lived and worked in Texas in the US and Portugal, and speaks fluent Portuguese and French.
Serial entrepreneur with an operational background in finance and technology companies. Paul was previously responsible for the development of the Crowd Valley product suite as part of the Grow VC Group.
Paul is a regular speaker on new financial models and crowdfunding and has been involved in working with Crowd Valley’s pioneering customers across the financial services sector, as well as advising global institutions such as the World Bank and national regulators such as Italy’s CONSOB.
Paul has over a decade’s experience working in various operational, sales, marketing, and product roles within technology companies, including two B2B startups that have achieved eight-figure exits following 100% year-on-year growth. He started his career in product development and testing roles at IBM’s Hursley Research Lab in the UK before going on to eBay, UBS, and Barclays.
Paul holds an M.A. (Hons) in Computer Science and Philosophy from Churchill College, Cambridge University. He has lived and worked in Texas in the US and Portugal, and speaks fluent Portuguese and French.
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