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UK Crowdfunding

Published: 16/12/2016

Seedrs, the UK equity crowd funding platform, has recently announced another hugely successful year amid planned expansion into Europe.

Having completed 122 deals by the end of Q3 Seedrs has beaten its 2015 figures, and now more than £160 million has now been invested into campaigns on Seedrs since July 2012.

Seedrs tells us they are the “UK's top equity investor in private companies”, however they are not the only player in the UK and crowdfunding is rapidly growing in popularity, with new platforms coming into the market. If you need cash for a project – it is seriously worth checking them out.

As digital technology continues to develop at astonishing rates, Crowdfunding has evolved into four main types:

  1. Donation-based – individuals donate money to causes or projects, classically to support a significant or life-changing cause, such as health or charitable issue.
  2. Lending-based – individuals lend money to project creators who then repay the investors back over a period of time (may also be referred to as debt crowdfunding).
  3. Rewards-based – this is perhaps the most familiar form, where the crowd contributes towards a campaign in exchange for a reward. The reward is usually the product that is being launched/developed and it means a business starts off with a book of orders. This type of crowdfunding tends to focus on a cool idea, e.g. last year the Pebble Smart watch used the crowdfunding site Kickstarter to raise funds; they aimed for $500,000 and got $20.3 million from 78,471 backers.
  4. Equity crowdfunding – is where individuals invest in a business in return for shares in their company. Where it differs to standard, early-stage investment in that it allows 'every day' investors to participate and not just elite groups made up of extremely wealthy individuals. Equity crowdfunding tends to be targeted more towards technological, industrial and professional businesses and services.

How the money is to be raised and for what product/project/service then naturally dictates which site you would choose, here are a small selection of UK sites:

Crowdcube - is an investment platform, whose top 3 sectors are technology, internet business and food and drink. Their site says that the average amount raised per project is £440,242 over 238 individual investors. Broken down by category, their investors are 44% everyday; 37% high net worth, 5% sophisticated and 3% advised (19% pre-categorisation). www.crowdcube.com

Crowdfunder – calls itself “the UK's best crowdfunding platform” and says that “You could be a community group, a start-up, a great cause, a charity or an organisation in need of some funding.

“You might be working on your own. It might be something we’ve never seen before.

“You can raise money through donations or by offering rewards, or with community shares”. www.crowdfunder.co.uk

SyndicateRoom - comes under equity crowdfunding, but is restricted to sophisticated investors and high net worth individuals. They tell us “members invest alongside experienced business angels (the professionals when it comes to equity investments) who negotiate the economic terms for the funding round and invest a significant amount of their own capital”, they go on to say “all of our investors get the same class of shares as the lead investor on the deal.” So as an investor you get the same terms, together with the expertise of the business angel. www.syndicateroom.com

Spacehive – is the “funding platform for projects that make local places better”.

“Spacehive provides a single portal where people with project ideas can build support from their community, ensure their plans are viable, pitch for funding from the crowd and our partners at the same time, and share the impact they've created. For the councils, companies and grant makers that partner with Spacehive it's a powerful way to attract, support, and showcase projects they love.”

Current projects include funding for WW1 Heroes Wood in Manchester, a children's play area in Lambeth and sustainable food hub in Cambridge. Since their launch in 2012 they have raised £6.05 million to date for projects in 370 cities, towns and villages. www.spacehive.com

RateSetter – is a peer-to-peer lending platform that matches investors who have money to lend, with people who want loans for projects or things that they want to buy. They advertise yields from 3%, with loan interest from 3.9%, however, “RateSetter is a marketplace where the rates are set by investors and borrowers.”

“RateSetters have lent £1,586,681,700 without a penny lost.” www.ratesetter.com

For more information check out The UK Crowdfunding Association, formed in 2012 by fourteen crowdfunding businesses – they aim to:

  • Promote crowdfunding as a valuable and viable way for UK businesses, projects or ventures to raise funds
  • Be the voice of all crowdfunding businesses in the UK (donations, loans and equity) to the public, press and policy-makers
  • Publish a code of practice that is adopted by UK crowd funding businesses.

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