We would like to introduce you to the most interesting, as well as successful, crowdfunding platforms in the UK. We will look together at what distinguishes the following platforms and we will analyse them objectively, according to their activity numbers, total money raised over their existence and successfully completed campaigns and projects on the platform.
The UK currently presents the widest range of alternative funding options at a European level for SMEs and the entrepreneurs who are increasingly turning away from traditional financing institutions, as The European Alternative Finance Benchmarking Report casts light on some interesting numbers and the outstanding average annual growth rates we will see later in the article. The Cambridge Centre for Alternative Finance and EY have teamed up to produce this report that highlights the novelty of the alternative finance sector in terms of innovation at both business models and technological platforms level.
Let’s have a more in-depth look at one of the most noteworthy “branches” of alternative finance, the Crowdfunding platforms. The crowdfunding platforms are based on the different types of interaction amongst participants: Equity Crowdfunding, Debt Crowdfunding, Reward-based crowdfunding, Donation Crowdfunding.
Alternatively, we can look at crowdfunding platforms from two perspectives: Financial Crowdfunding -investors are financially recompensed for contributing to the project- (in this category we would then have Equity and Debt Crowdfunding) and Non-financial Crowdfunding –investors would receive either the product, for example, or they could contribute to donating for a project, in which case they would not be expecting any physical or financial reward- (here we are talking about the Reward-based crowdfunding and the Donation Crowdfunding).
The following list offers you a glimpse into the particularities of each of the platforms we analysed, respond to the questions of what they do and how they work, but also pool some hard data on their performance thus far.
Following we are looking at:
Equity Crowdfunding platforms
Debt Crowdfunding platforms
Non-financial Crowdfunding platforms
Within these three categories, we are presenting the most noticeable crowdfunding platforms in the UK, sorted in alphabetical order.
Equity Crowdfunding – in this case, the investors purchase registered securities from mostly early-stage firms.
The Data for the UK: €111m (transactions in 2014 showed a spectacular 420% average growth compared to €37m in 2013), according to Wardrop et al. (2015).
Crowd2fund – is the only FCA regulated platform to offer solutions across 5 models of finance: Donations, Loan, Revenue, Bonds, Equity. Crowd2fund relies on an alternative to traditional finance that offers a fast, fair and flexible solution. One of the latest projects on their platform raised £503,000 offering equity stakes to investors in Rezonence: BBC Worldwide Incubated Advertising Technology.
CrowdCube – is definitely one of the most noteworthy equity (and debt) platforms in the UK, especially given that its user-base comprises a very wide range of investors (from professional investors and VCs to individual investors) backing up both early, as well as growth stage businesses. CrowdCube operates internationally and has some impressive global numbers, but they also provide us with an insight into their UK performance: £1,889,580 (average equity investment), 55% success rate in the last year (290 projects funded by selling £101,376,177 worth of equity stakes). What we found most interesting here is that the most popular sectors are Technology, Food & Drink and Consumer Products, which clearly indicates the appetite of individual investors for investing in businesses they believe in from a consumer point of view. One remarkable success story is The Pressery reaching their £150,000 target in less than two hours. Since 2011, more than 285,000 people have registered with Crowdcube, helping to raise over £165 millionin 407 raises for businesses.
Growth Deck – This equity crowdfunding platform stands out in terms of customer service offered to investors and two strong teams for sound investment review, as well as sector review, catering to the best needs of their investor user-base, as well as businesses user-base. Growth Deck focuses on mediating funding for growing UK companies with a promise of Transparency, Trust, Expertise and Support. The platform currently counts on 3,751 investors.
Seedrs– Despite its name, Seedrs specializes in equity crowdfunding for companies throughout their lifecycle based in the UK, but it is also open to investors and businesses in Europe. On Seedrs, investments start at as little as £10, but the platform has seen 320 deals being completed since launch and is one of the leading of its kind in the UK. It is the UK equity platform with most users and has raised £150 million in total investments to date from 38,000 investors. The platform is highly comprehensive, with a wide range of articles and case studies, trying to provide the best help and information for their high number of individual investors.
Syndicate Room – Our favourite aspect of the Syndicate Room equity crowdfunding platform is the “investor-led model”, which means individual investors can only invest in projects that already have an angel investor or an early-stage investor on board. Thanks to this approach, we see once again the pursuit of crowdfunding platforms of providing fair investment opportunities to individual investors and reducing the inequality of information and subsequent inequality in terms of opportunities that tend to separate professional investors and individual investors in the case of traditional financing. The equity crowdfunding platform has raised £55,394,577, funding 86 projects successfully.
Debt Crowdfunding platforms – This kind of platform implies debt-based transactions between an individual or an institutional investor and existing businesses (mostly SMEs). This kind of crowdfunding platform is seeking to provide a fair alternative for investors and businesses alike to obtain returns and financing at better rates and terms than traditional financing methods. The main difference we would like to point out thus far between equity crowdfunding and debt crowdfunding is that, while equity crowdfunding often features seed-stage or very early stage startups, debt crowdfunding usually provides financing to growing businesses, who have a record of their past operations and development processes and can provide investors with a sound proof that guarantees the business will be able to generate future returns and ultimately pay back the debt financing obtained.
The Data for the UK: €998m (2014) 253% average growth rate (2014 compared to 2013), according to Wardrop et al. (2015).
Funding Circle – The platform focuses on providing an alternative financing method exclusively for small businesses. Although its main activity is in the UK market, the platform provides loans to small businesses in the USA, Germany, Spain and the Netherlands too. The platform discloses numbers such as 55,000 investors in the UK who have lent to businesses, £2 billion across these five markets and an estimated 7.1% yearly return. The average loan amount on Funding Circle is £60,000.
Funding Knight –This British-based crowdlending platform offers three choices for entrepreneurs looking for a loan: a business loan, a property bridging loan and a green energy loan. The platform connects investors and businesses at a rate that works for both. Run by a dedicated team, the online crowdlending platform offers a wide range of articles and information on alternative finance and we think their efforts to educate the audience is benefiting both sides. FundingKnight has financed 224 projects, for a total of £30,712,000.
Rebuilding Society– With numbers such as £9.7 million in loans and more than 150 projects finances, Rebuilding Society focuses on the idea of community and strives to “rebuild society” by cutting out waste and employing money in an efficient way that benefits the society and its actors, rather than the intermediary institution as it is often the case in traditional financing methods.
Non-financial Crowdfunding platforms
The Data for the UK: €34m (176% average growth rate (2014 compared to 2013)), according to Wardrop et al. (2015).
BloomVC – Bloom VC is a reward-based crowdfunding platform that caters for any kind of early stage start-up business, community, arts or culture that needs a small amount of cash to get going. The average “promise” of a member is £46 and through the power of getting together like-minded people, BloomVC has seen 43% of the published projects being funded, out of which 85% have exceeded their targets.
BuzzBnk – Launched in 2011 as the first crowdfunding platform specifically for social enterprises and charities, BuzzBnk has successfully funded 139 projects with a total of £1,051,229. The crowdfunding platform informs us their projects seek to raise amounts varying from £1,000 to £30,000 in units of £10 to £200. BuzzBnk prides itself on welcoming social enterprise and charity projects indifferent of their size. The crowdfunding platform has had projects as small as £600 and as large as £100,000.
Crowdfunder – is the rewards and community shares sibling platform of equity crowdfunding platform, CrowdCube. Crowdfunder defines itself as UK’s fastest growing crowdfunding platform and their numbers verify the statement: 500,000 members of the Crowdfunder community have contributed to turning 40,000 projects into reality and a total of £25 million raised so far. What we have found most interesting is that the Category with the largest number of projects is the Community one (£1,792,751 funds raised so far in this category), which indicates again a strong tendency for like-minded people to gather and initiate, as well as support, projects aimed at improving their lives within the society. The next category in popularity is Business projects, followed by Charities, Sports, Food & Drink and Film & Theatre.
Having seen the types of alternative finance an entrepreneur can rely on at the time of using a crowdfunding platform, we are confident our readers have gained a better grasp of crowdfunding platforms and initiatives and can now align their entrepreneurial interests with searching the right type of funding from like-minded individuals who will be able to support and create a real community around one´s ideas.
We would say crowdfunding platforms (be it equity, debt or non-financial rewards) are as much about the raise of funds as they are about raising awareness and receiving support (not restricted to financial support), issues of great interest to the innovative minds of entrepreneurs and community leaders.