What next for the new kid on the block – equity crowdfunding?
To find out more about the rise and future of equity crowdfunding, Business Leader caught up with Luke Lang – founder of Crowdcube.
How is crowdfunding changing the lending economy?
Equity crowdfunding provides an alternative funding solution to debt-based funding, such as peer-to-peer lending. On Crowdcube, entrepreneurs can pitch to a diverse group of everyday investors, professional and venture capital firms, who in turn can hand-pick and invest in the businesses they want to back in exchange for an equity share in the business.
When it launched, Crowdcube was the world’s first equity crowdfunding platform. Today, over £490m has been pledged on the platform and more than 700 raises have been completed.
What is next for crowdfunding?
We’re already seeing increased demand from investors and entrepreneurs alike; in the first three months of 2018 alone, an unprecedented 58 businesses secured finance on Crowdcube, with a record-breaking £47.4m invested. As a growing number of companies chose to crowdfund their growth, we expect these unprecedented levels of demand will continue to rise.
Following the recent increase of the prospectus limit, which enables businesses to raise finance without the need for a prospectus, from £4.5m to £7.2m, we also expect to see a growing number of growth-stage businesses using Crowdcube to fund larger rounds.
Are you seeing a reaction from the banks – with them looking to launch their own crowdfunding platforms?
Traditional banks are slow to change. The rapid rise of Fintech firms has driven the industry forward through disruption and innovation and while the big banks are trying to catch up, they haven’t necessarily kept up with these relatively new industries.
For businesses unaware – how can they benefit from crowdfunding to achieve growth?
Crowdfunding is not only an accessible and flexible method of raising finance, it also enables businesses to engage existing networks and establish a relationship with a crowd of potential customers and brand advocates.
There is also the post-funding benefit of being supported by a pool of shareholders that can prove to be a fruitful source of skills, contacts and expertise.
Companies such as Revolut, Monzo, BrewDog, Emoov and Mindful Chef, which have all raised finance on Crowdcube, have demonstrated how the benefits of crowdfunding can go well beyond an injection of funds.