Page 125 - Classics Issue

We have all heard about Crowdfunding but few realise what an important role this viral investment phenomena is playing in today’s fnancial world. It all started in the U.S. with a young entrepreneur asking friends and family to chip in to help him start his restaurant. Well they did, and given the success of this fundraising more followed. Many more… In 2012 the global crowd funding industry channeled US$2.7 billion to fund businesses worldwide. In 2014 that fgure was US$ 16.2 billion and in 2015 it more than doubled to reach US$ 34.4 billion. And the trend is showing no signs of slowing down. [source 2015 Massolution Crowdfunding Industry Report]And with the success of crowd funding, there has followed a new breed of company which operate online platforms to connect private investors with entrepreneurs in need of capital. In the UK, platforms such as Seedrs, CrowdCube, and Funded by Me are now well known brands.Crowdfunding has opened an entirely new investment class for businesses seeking fnance – a rich source of much needed new capital. Let’s not forget Dom stated that this investment class has come from nowhere and has not cannibalized existing sources of fnance. However, in order to succeed, it needs to grow up fast.The basic idea behind Crowdfunding has not signifcantly evolved it is still very much a tool for companies to source seed or growth capital and a means for the crowd funding platforms to proft from the exercise. In most cases the interests of the investors is not the highest priority. To illustrate, one of the largest Crowdfunding platforms in the UK, since it started fve years ago, has delivered one company listing from well over 200 initially successful funding’s. They do not have any obligation to manage the subsequent investment nor provide any further services or protection to the investor. This is where it becomes a numbers game – the more companies funded, the more money they make. Quantity and minimal acceptable quality level is the focus which is not necessarily the optimum business model from an investor perspective.Wow all that before the main course... Luckily Dom enjoys his wine and we had a great Gavi de Gavi during this lecture – come on then Dom tell us your story… “In June 2015 we set up the Angel Business Club, which today has over 9.000 members from across Europe with strong beachheads in France and Scandinavia supporting a growing UK market. The aim was to create a community of business angels who paid a small membership fee to cover the costs of procuring and managing investments on behalf of the network and with our collective investment strength negotiate discounted share acquisitions that ultimately cover the cost of the membership fees through the issue of fairly valued free shares to paying members.“Effectively creating a utopian crowd-funding network where the investors and the Club are wholly aligned in curating outstanding investment opportunities that the average person would not normally be able to access as the minimum investment requirements are normally greater than £50,000. Since the start, the Club and its members have provided funding to circa 15 companies of which two have already listed on the London Stock Market. But it gets better; the Angel Business Club platform also offers its members the opportunity to trade their unlisted shares with other members – real liquidity in private stocks.“Our platform is designed to facilitate an ongoing conversation between private investors and company management teams. When a company matures and lists on a public market place, members can sell their shares via a STOCK TRADING TOOL, which negates the hassle of setting up separate stockbroker accounts. Dominic continues, “We are in for the long ride. Our engagement doesn’t stop with an exit or listing, we stay with our initial investments, one never knows what the future holds”.Join the Angel Business Club? That was the question my old friend Dominic Berger said to me on the phone last week which prompted me to accept a lunch invitation to the famous Groucho Club in Soho, London. The Groucho is one of the quirkiest private members club in the world with old school ethics and an unparalleled relaxed cool vibe and eclectic group of members. A great location to meet a great friend with what is undoubtedly a very disruptive but cool take on crowd investing… Dom’s story was fascinating.“I have been observing the Crowd Funding phenomena from the sideline with a growing feeling of concern, about this growing but imperfect business model. What if one could create a funding platform and eco-system (economic-system) where company objectives and investor expectations could meet and meld together to produce result that could potentially be substantially greater than the old model?”125