Crowdfunding sites are open for business, all 600+ of them and never have they been so busy. With a definite recognition, that these peer lending sites can help with kickstarting the economy, on a worldwide basis.
At the point of writing, even in these difficult times, £6.628.2m of funding has been raised in the year to April 2020. Just Park (a parking app) has exceeded its target of a £4m raise in April 2020 by £2m!
Whilst bank rates are at an all-time low, their appetite for lending is going to be lower, unless it’s being forced upon then, due to the government providing security.
The crowdfunding market is still in its infancy but it is growing quickly, offering multiple funding streams from a donation, debt and equity, to rewards and the like. There is something to suit virtually every lending need.
These sites attract not only high-net-worths and institutional investors but also the ordinary man and woman, who want to invest more modest amounts. Whilst the average individual investment is £8,400, most sites have a minimum of £10 investment. This means that the “ordinary man” investor can sprinkle his or her investments over multiple opportunities and so spread risk.
Getting deals done with a crowdfund takes skill though and whilst it’s considerably quicker than a standard lending process, it requires a degree of creativity. Each site has to some extent a different process, with the platform itself offering varying degrees of support. Some sites love startups, others established businesses. Equally, some platforms are suited to B2B and others B2C. Most platforms won’t take the opportunity if they don’t think the pitch has been put together professionally, or they think it’s got a limited chance of success. Some sites have a raise it all or get nothing offer, whilst others offer a more flexible approach.
Whilst raises can be for quite modest sums such as a few £100k or less, there is scope to aim much higher. In 2019 MATE X (a folding eBike) raised $18m, one of the most successful raises to date.
For a successful raise, there are certain essentials:
- A robust valuation (assuming its equity transaction) - part of this will be to provide advice on what proportion of equity to release
- A compelling business plan
- A secured cornerstone investor
- A video
- A campaign to attract traffic to the platform
- An all singing and dancing pitch deck
If this sounds complicated, it’s not, but it does need a skilled team to pull this together. fds have launched a new and already flourishing division to bring about the team that can deliver your raise.
Be part of the future economy by engaging directly not only with your investors but also your customers who via this innovative fundraising vehicle are often the same!
Also watch Jo Haigh's video below for further information on the platforms.