18th August 2017
Natasha Frangos, haysmacintyre
Gone are the days when private companies were limited to private equity or venture capital when looking for equity funding. The rise of online crowdfunding platforms over the last few years, along with other digital financing solutions such as iwoca and Market Invoice, have completely altered the landscape of options for these companies. Head of creative, media and technology sector, Natasha Frangos, at MSI's London based accounting member haysmacintyre writes for CFO magazine on the rise of crowdfunding.
Research conducted by Beauhurst on 2016 UK funding deals for non-listed high-growth businesses concluded that crowdfunding outperformed private equity and venture capital. Whilst 2016 saw a decline in the total number of deals financed by equity investors, activity on the leading crowdfunding platforms increased. Crowdcube (launched in 2011) and Seedrs (launched in 2012) accounted for 21% of such equity investment in the UK last year. A few years ago, it was typical for crowdfunding to be associated with early stage startup businesses. However as certain platforms affirm their position as a credible route for finance, crowdfunding has been attracting more established businesses, with larger sums being raised. Additionally the market is now starting to see the first exits from investments made via equity crowdfunding, providing a measurable output of the returns from these forms of investments.
According to Beauhurst’s research, Q1 of 2017 has seen a small increase of 2.7% in equity funding in non-listed, high-growth companies. However deal numbers are still 6.72% lower than the same quarter in 2016. The growth has primarily been driven by crowdfunding platforms, with an 11% growth in deal numbers.
As we live in an increasingly digitalised world, institutional money is now entering the equity crowdfunding marketplace and as such larger fund-raisings are set to be more frequent. The interest from the likes of venture capital funds is a result of crowdfunding attracting an increased number of companies that are categorised as “growth stage” rather than seed investment. Crowdcube, the largest crowdfunding platform by deal volume, has said that the number of deals involving institutional investors alongside retail investors had quadrupled in the past two years.
Read more about UK: Crowdfunding – the stable option in 2017
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