The concept of crowdfunding isn’t new, but a combination of changing investment habits and the advent of more sophisticated technology - plus a change in legislation in the USA - has seen this method of raising money surge in popularity on both sides of the Atlantic over the last few years. Crowdfunding has provided a route for entrepreneurs and small businesses alike to raise the funds they need to help their projects succeed - without having to resort to selling a large stake to venture capitalists (we’ve all seen TV’s Dragon’s Den, right) or borrowing at potentially unattractive interest rates from the banks.
What this means is that everyone gets the opportunity to support the projects they believe will succeed. We’re no longer reliant on ‘the big guys’ deciding what innovation will look like - and who will be behind it. What’s more, if an individual can participate in a round of crowdfunding, they get the opportunity to buy in at the bottom. Take companies like Airbnb or Uber - they have both grown into businesses said to be worth tens of billions of dollars, but their customers can’t invest. Instead the profits are shared amongst a select bunch of institutional investors, founders and in some instances a number of staff. If either of these companies do eventually sell shares to the public, it’s those select few who were in a position to invest early on who will see the real benefit.
The companies that seek money through crowdfunding are varied. Popular crowdfunding platform Seedrs (https://www.seedrs.com/invest) currently offers investments in everything from apps which help renters find properties, to heath food manufacturers and educational technology developers. And some of these names have the potential to go on to become the next big thing - popular crowdfund offers held in the UK of late have included names like BrewDog, Hotel Chocolat and Monzo.
In the coming weeks, dabbl will be launching its own crowdfunding campaign, spreading the message that ‘anyone can dabbl’.
Like any investment, crowdfunding comes with risks and your capital is at stake. You should also be prepared to hold the investment for several years - as the company grows, you may find it difficult to sell any shares that you own, although some crowdfunding platforms do offer a secondary market to try and match buyers with sellers. There are also guidelines in place as to how much you can invest in crowdfunded projects, although many do come with the benefit of attractive tax break for eligible investors.
There’s a myriad of crowdfunding sites out there, all of which will provide more details on this form of financing for companies. Some of the most popular platforms in the UK market include Crowdcube, Seedrs, Crowdfunder and Funding Circle. It’s always worth a look at the projects they’re promoting as even if you’re not looking to invest right now, it can provide a fascinating insight as to what we might see emerging as the products, services and technologies of the future.
Dabbl Group Limited is an appointed representative of VIBHS Financial Ltd, which is authorised and regulated by the Financial Conduct Authority, under the reference number 613381.© 2016 Dabbl Group Limited. Dabbl ® is the trading name of Dabbl Group Limited (Company no. 09145174) a company registered in England and Wales.