Seedrs recently received an investment from Neil Woodford's Patient Capital Trust and Rothschild-backed Augmentum Capital. Crowdcube received an investment from Numis. So why have these city firms invested in Equity Crowdfunding?
There is an estimated 5.2 million businesses in the UK which employ 25.2 million people, and have a combined turnover of more than £3,500 billion.
Small firms account for 99.3 per cent of all private sector businesses in the UK. http://www.fsb.org.uk/stats
The possibilities for small firms raising capital by selling shares through equity crowdfunding is endless.
AIM, the alternative investment stock market, was set up for smaller businesses and has raised more than £24 Billion for over 3500 firms since 1995. https://en.wikipedia.org/wiki/Alternative_Investment_Market but it comes with a cost. According to experts set up an AIM listed company could cost an estimated £500,000.
For many SME’s this is out of reach but a good equity crowdfunding campaign could cost nothing more than hard work and a success fee paid to the crowdfunding site if you hit your target, however it rarely costs nothing. A good campaign could set you back around £5000 but it's still far cheaper than going to AIM.
In the world of AIM and the LSE you have hundreds of brokers representing investors. In my experience what happens on the ground is replicated on the internet. Seedrs and Crowdcube are leading the way in the equity crowdfunding market but there are several competitors biting at their heels and more being established everyday with serious investors such as John Moulton backing Investing Zone.
Syndicate room, Angels Den,and Venture founders are increasing in size month by month and are keeping up with the growth rate of the bigger players.
At businessagent.com we are being approached on a weekly basis by newly established sites,in keeping with my prediction that this is not a 1 horse race. The diversity of the market calls for a variety of offerings and the need for an independent regulated marketplace such as businessagent.com is being reinforced every day.
The city isn't the first and certainly won't be the last industry to be affected by the power of social networking and the internet. The insurance market, the travel industry and the music business have all changed dramatically as a result. Already some smaller companies in AIM are looking towards Equity Crowdfunding as a more efficient way to raise funds.
It appears City professionals are in denial, like their counterparts in Music and Travel before them, arguing against the viability of equity crowdfunding, yet it is expanding at over 400%. Yes there will be mistakes, there will be upsets, but in my opinion the future of stock markets includes equity crowdfunding.
So why has Numis invested in Crowdcube and Rothschild in Seedrs? Both companies are correctly predicting the change from traditional markets to equity crowdfunding and have recognised the industries vast potential. Change is coming to the finance sector, and they aren’t about to be left behind.
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