Member Article

Bdaily meets the crowdfunders

It’s finance week on Bdaily and we are looking at the landscape of funding and investment, from both sides of the table. Here, Bdaily asks Luke Lang, co-founder of crowdfunding platform Crowdcube, about this new form of financing that’s making headlines.

A lot of people are talking about crowdfunding as an alternative to heading to the bank, why is this?

I think peer-to-peer lending or debt crowdfunding could be deemed an alternative to bank lending. The harsh reality for many start-ups and early stage businesses is that finance from the bank has never really been an option due to the high risk nature of the investment required. This, combined with traditional business angels being more reticent to part with their cash has stifled the growth of many businesses and sectors. Equity crowdfunding websites, like Crowdcube, tackle this perennial funding gap by democratising investment, giving ordinary people, not just the wealthy, the chance to invest in UK businesses in return for share equity.

What does crowdfunding offer that more traditional forms of financing doesn’t?

Equity crowdfunding enables entrepreneurs to access ‘new money’ from the masses to finance their business, without having to rely on the whim of one or two wealthy individuals.

This paradigm shift means that investing in start-ups has become more accessible for ordinary people as the personal wealth required to join a traditional business network is prohibitive to all except the upper percentile of the population. Crowdfunding smashes down these barriers, allowing people to invest from as little as £10, although the average amount invested through crowdfunding websites is much higher, over £2,000 on Crowdcube.com for instance.

Traditional business angels are also seeing the benefits as they can spread their investments further to create a more diversified portfolio in unlisted businesses.

What was the inspiration behind starting Crowdcube?

Having experienced first-hand the challenges of raising finance for a business we felt that there had to be a better way; a way of breaking the reliance on traditional business angel networks that we thought was out-dated and out-of-touch. We simply wanted to help entrepreneurs because we are entrepreneurs ourselves.

Secondly, we felt really passionately about giving ordinary people the chance to back great British businesses. Why should it be the preserve of the wealthy; why couldn’t everyone be a business angel? This is when we coined the phrase ‘armchair dragon’.

How has crowdfunding changed the dynamics of start-up culture?

Crowdfunding has help to give start-ups more optimism. Finance has always been a frustrating barrier to entrepreneurs when getting their ideas off the ground. Crowdfunding is by no means a Shangri-La, it still takes a good idea, hard work and tenacity, but it does give businesses renewed hope that they can secure the cash they need to turn their dream into a successful business.

What’s the future for crowdfunding?

Our vision is two-fold. Firstly, we intend to make equity crowdfunding the preferred routeto finance for generation early stage seed finance. Our challenge right now is to raise awareness among the start-up community. The industry is still less than two years old and we’ve made great progress, but more needs to be done to elevate crowdfunding in the nation’s mind-set.

Secondly, we want to introduce a new generation of people investing in unlisted UK companies. The US has a much stronger culture of equity funding and we want to develop this mind-set and enthusiasm in the UK.

Take a look at some of the other finance week content including: A day as a bank manager.

This was posted in Bdaily's Members' News section by Tom Keighley .