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Crowdfunding equity – the new age of co-created finance

document Crowdfunding, Distributed Knowledge

The web can challenge conventional business models, says Crowdcube's Luke Lang

Can the 'crowd' provide much needed finance for the social enterprise sector? Photograph: Laurent Chamussy/EPA The web's ability to interact and organise communities of people has been highlighted recently with the emergence of crowdfunding platforms that create a vital lifeline to much needed finance for thousands if not millions of public, private and social enterprises. Although there are now a multitude of crowdfunding sites that allow people to contribute small amounts of money in support of a creative idea or project, in return for rewards, the most recent development – equity-based crowdfunding – promises to become another great example of how web start-ups can challenge conventional business models. We launched Crowdcube this year to give members of the public shares and equity in the enterprises registered on the site that they choose to invest in. It's the world's first equity-based crowdfunding platform, but probably not the last, judging by the swell of interest and enthusiasm we have received from home and abroad. As well as helping great ideas come to fruition that might otherwise never see the light of day, equitybased crowdfunding gives people a stake in the enterprises they choose to support. They don't need to be wealthy individuals, but instead can be members of the public with more than £10 to spare to invest in something that they think will do well or that they are personally interested in supporting. As well as the warm feeling of being public spirited, investors can secure all of the benefits of being business shareholders such as full dividend rights and a share in the future success of the business. According to iBusinessangel.com, only 3% of businesses actually consider equity funding from business angels in the UK. The web-based crowdfunding model could change this since it will make it much easier for small enterprises to seek equity finance from a 'crowd' of people. The model presents a significant opportunity for social enterprises. It enables them to develop a permanent connection with a community of people that are interested enough in their business or idea to invest. The sense of ownership and involvement in a project or enterprise is highly likely to breed a band of advocates who will be positively engaged in its success and keen to spread the word about the project The same possibilities are true for green or clean technologies. Enabling people to contribute money at the same time as have a real stake in the success of a social enterprise can certainly help people feel that they are doing more for society and the environment. Crucially this provides more value to the enterprise than may have been thought possible at the straight finance stage. Crowdfunded equity investment isn't exclusive to enterprises. There's no reason why communities can't use it to organise themselves to create ownership of a valued local service, like the village shop or pub,

assuring its future survival in the process. In some instances the community could pool its resources as well as money to contribute to the daily running of the enterprise. Traditional angel investors, venture capitalists and banks are not known for their generosity, but community investors can be – after all the very nature of most social enterprises means that they are more likely to attract kind spirited personalities. To survive in the current economic climate, social enterprises must avoid relying solely on government grants and handouts and leverage their core strength – the community that they exist to help. The investment market has long-needed democratising and crowdfunding does this by making it easier for anybody to invest. It will give enterprises a better chance of securing funding and engaging with stakeholders as well as a vital boost to Britain's economic recovery. Luke Lang is co-founder of Crowdcube, a new crowdfunding website that provides micro-investors with equity in the enterprises they support.

Summary Luke Lang is the cofounder of Crowdcube, a crowdfunding platform that makes it easy for investors to invest their money in businesses and in return own shares in these same businesses. The model that Crowdcube adopts is a bit more interesting for people that are looking for more than just charity causes so to speak. Depending on the amount they invest through the Crowdcube platform, their return can be even more higher if the business is successful.

Description Crowdfunding is showing that the traditional lending institutions and means of raising money no longer have the reigns as to how far a promising entrepreneur can excel. Instead of being bogged down with bureaucratic red tape, investors can use the model of crowdfunding to take active part in a business and thus become more involved in its development and progress from inception to making the first sale.

Tags: Angel Investors, Crowdcube, Crowdfunding, equity

Posted by Ruth Baxter

Mar 11, 2011 03:17 pm GMT Viewed 3781 times

Author: Luke Lang Source

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