Crowdfunding has become a popular way of raising funding for a wide range of different needs, so we have aimed to give you a brief flavour of what’s on offer in the UK.
The essence of crowd funding and its great strength is that it allows those seeking funding to source that funding from ‘crowds’ i.e. large numbers of people. Each funder provides a small amount of funding, rather than the more traditional approach of seeking large amounts of funding from a few funding bodies.
There is now a significant range of online platforms designed to link those needing funding with those seeking funding. Some of the platforms fund only specific types of activity or recipient e.g.
AngelList – is a platform for startups to raise money and find talent.
JustGiving – allows people to make donations to good causes and charities
Property Partner – enables people to invest in residential property
QuidCycle – helps people escape the debt cycle via Peer to Peer loans at lower interest rates.
Some offer a lot more than just funding services however the core funding services on offer can be divided into three distinct types:
Donation / Reward Crowdfunding
People invest simply because they believe in the cause. Donors have a social or personal motivation for putting their money in and expect nothing back, except perhaps to feel good about helping the cause they have invested in.
Debt Crowdfunding (also called Peer-to-Peer or ‘p2p’ lending)
Investors receive their money back usually with interest, although there may be some projects in developing countries where no interest is paid. Peer-to-peer lending is an alternative to seeking a loan from a bank. It gives some return the investors and as they can choose who they fund there is also a feel good factor for the investor from funding things they believe in.
In common with debt funding, people can invest in things they believe in, but their money is exchanged for shares, or a small stake in the enterprise/business. So, as with most other types of shares, if the enterprise is successful the investment value goes up. If not, the value goes down.
To give you a feel for what’s happening in the world of Crowd Funding here are links to a few recent examples:
If you are seeking funding, Crowd Funding is certainly worth investigating as part of the funding mix.
If you are seeking funding for an innovative company, don’t ignore R&D tax credits
as a potential part of your funding mix - you don’t need to have made a penny in income to qualify.