CrowdFunding - Is it the next big thing?

[Scottish Business Owner]

Since i've been away from the forums i've spent alot of time thinking about Crowd Funding. To be honest it's a really exciting concept that seems to be taking hold in the UK. With sites like Crowdcube doing over £2million of funding in it's first year hopefully this is an encouraging sign.

So what's your thoughts on crowd funding? Given the current issues with banks is it a viable model? Do you think people in Scotland and the wider UK will embrace it?

 

[stugster]

I really like the idea of crowd funding. Giving small businesses the ability to raise capital without having to go through the arduous process of filling out the paperwork and giving personal guarantees for loans is brilliant.

 

[Wills]

I'm more of the option funding should be difficult and force those looking for funding to really do their homework and avoid any shortcuts.

 

[Scottish Business Owner]

Interesting comments William What do you mean by shortcuts? Do you see crowd funding as a short cut?

To be honest for all the projects that have been on the various sites and actually got funded it's pretty evident that they have done their homework.

I'd be interested in hearing people's view on whether something like this can work in Scotland. What would it take to make you invest in a project?

Do you think Scots have an in built scepticism that makes something like this a non-starter or do you think it will come with time and as these sites mature and become more accepted?

 

[Wills]

I see it as the peer to peer lending low risk to the lenders for a stake in a business, if your business plan held up lenders would be only to willing to lend most don't as the plan exposes risks and they can use their judgement to decide the risk and prevent businesses wasting investors money in flawed developements. Going to the peer to peer market no single organisation will scrutinise the plan (in the deal a single leaner would) as their individual stake is small this will allow more funding of projects/development/investment that would have failed through other routes.

just my 2p

 

[Tim Wright]

As points out, at a time when raising capital is challenging then inevitably organisations will look for alternative options. Crowdfunding is definitely an option but for all its promise it should not be considered as a replacement of the existing capital markets, its just another part of the mix. We are fortunate it the UK in that we have greater flexibility around equity based crowdfuding than most countries and a global leading platform with Crowdcube. But it has both supply and demand side aspects, so much of the appeal of crowdfunding is its ability to reach a whole new group of potential investors with a different expectation of return. You are spot on regarding preparation though. We, twintangibles, advise organisations on crowdfunding and it is amazing how many seem to think that it is straightforward. It's not - particularly if you are going down an equity based route, and if not then expect a great deal of effort to be a success . People tend to forget that on Kickstarter - the biggest platform still has only about 44% success rate. Most projects fail and for every LunaTik sensation a great many crash and burn. Wills - I am not sure I would echo your view that there is less scrutiny - in many cases I would contend that there is greater scrutiny and that the distributed cognition model is very valuable. That said the lens used and expectation of return of those scrutinising may be very different from a traditional investor model. Certainly there is a good deal of de-risking going on though - it can be a very stable investment.

 

[Wills]

Tim thanks for commenting I can see where the crowdfunding might be of use.

 

[Scottish Business Owner]

Hi Tim,

Nice to see you on the site I think you make some excellent points. You hit it on the head by saying it's part of the mix ultimately.

It's interesting that you think the UK government is supportive of the crowd funding model. I was under the impression that people like Crowdcube were currently consulting with the government about how to make crowd funding more accessible here. Is there any sort of logic for Scotland taking it's own view of this and ultimately trying to create an environment where this thrives? How do you think Scottish people and of course business currently view crowd funding? It would be great to hear your thoughts

 

[theangrydog]

I have been talking this over with my business partner since December, we have a built website for this and are currently working on a Facebook app, as well as iPhone/android apps, we hope to launch in may/june

 

[Scottish Business Owner]

Hi Angrydog,

Forgive me but what is it your hoping to launch? It's not clear from your post above. Any links etc would be really good