What with the dizzying pace of change in the alternative finance world, it appears as though decades ago, but just a couple of years in December 2013, when I launched BA to an unsuspecting world I had a couple of that which you might call ‘heroes’ – namely the founders of Crowdcube and Seedrs. After all, these guys have already been largely accountable for triggering the alternative finance revolution that’s still under way today. They laid not just the foundations but also the footings for an amazing industry that’s changing the lives of entrepreneurs all around the UK by enabling them to realise their business visions.
To express I have the most respect for those guys would be an understatement. They’re pretty much the source of my boundless enthusiasm for anything and everything to do with equity crowdfunding! There’s always a ‘but’ at the conclusion of a sentence like that – and here it comes!
Lately, when I go through the way they’re running their businesses I can’t help feeling a trace of disappointment… I’ve started getting the sensation the revolutionaries have swapped their red berets and combat fatigues for red braces and pin-striped suits. In place of blazing the trail for our most imaginative entrepreneurs by providing a ground-breaking option to the rigid mindset of the financial establishment they seem to be slowly merging in to the establishment! I say this because it would seem if you ask me that they’re now turning down more businesses than previously, they’re not at as open or collaborative as they used to be and are cherry picking what they deem to be the best company investments.
Simply to be clear – it’s not too I blame them. They wish to protect their business and It’s obvious how this happens. It’s not merely the fear to getting things wrong; the fear of failure, it’s also the fear of outside pressure, reprisals from the press and remaining legally compliant, especially with recent events like the collapse of Rebus that was funded on Crowdcube last year.
For me this method takes most of the romance and exhilaration out of what we’re all trying to do – the fear of reprisals, not enough openness and sharing goes against everything I thought equity crowdfunding stood for. Worst of, it puts the energy to purchase exciting new ideas in the hands of the ‘In crowd’ and limits the exposure to retail investors (the man in the street) from those opportunities.
In short, I believe this really is stifling the development of equity crowdfunding and I do believe they will attack it head on, rate the companies they’re funding on both investment and altruism. Don’t be frightened of backing the wrong horse; it happens. Open your doors to aggregators offering opinions and ratings, let the crowd develop into a crowd don’t crush it.
Of course, it’s not an unfamiliar scenario, as companies make the tough transition from fired-up start-ups to corporate entities with outside powers holding the reins and the purse strings. Nevertheless the truly great innovators have always understood that you sacrifice collaboration at your peril Wefunder. When Apple, for example, opened its doors to app developers through the App Store their business changed overnight… When Google created its ad display network it’s revenues soared exponentially…
And anyway, or even collaboration, what is Crowdfunding about? Equity Crowdfunding is all about creating a genuinely free market, an unbiased place where people trade and where ratings and feedback are shown to companies, and Crowdfunding sites alike. To help keep the flame of inspiration burning I believe the whole community has to be able to communicate and share ideas with total freedom. In my own view meaning every business involved has to embrace openness wholeheartedly; has to collaborate enthusiastically; has to welcome collaborators and aggregators of a variety and has to open their books and let everyone see their failures as well as their successes. That could sound daunting but a feeling of community is important here if we are to make a sustainable liquid market and our regulator needs to support us not stifle the growth due to fear of failure.
It would be fantastic to be able to offer sensible advice online and a needs to promote the fact this is not investment in traditional terms, the chances to getting rich are pretty slim (not impossible I may add!) but it’s fun, it’s tax efficient and you are helping visitors to fulfill their dreams. If you buy shares with this specific train of thought the industry’s reputation won’t be suffering from failure. The initial idea was about spreading risk, concerning the masses investing small amounts to make a big pot. There are an incredible number of SMEs that are seeking investment and the major crowdfunders are touching a matter of mere hundreds. The market leaders ‘ve got to avoid harping on about investment as the term could insinuate you will get a return.
Equity Crowdfunding should really be marketed with more altruistic values. Yes a small percentage of these companies is likely to make it and they will possibly make it big, but almost all I’m unfortunately will fail. This doesn’t make it bad, it creates jobs, gives great ideas an opportunity, in most cases is a good tax write off with SEIS/EIS and in the event that you spread your risk and purchase a lot of companies one could be the next Google. All in all you must feel well about your investment you have helped someone get one step closer to their dream and in doing this you might fulfill yours by “possibly” choosing that 1 company that works out to be the next Google.