Springfords LLP blog

Some news, views and comments about everything and anything, relevant and irreverent.

In with the In Crowd

27 May 2015

Funding the dream isn’t all about finding banking based backers anymore. It’s about finding the crowd who share the dream too.

From post-it notes to flat pack furniture. We’d all have readily accounted for a spot of venture capital on hits like those if we had known at the time how successful these would be.

A while back, venture capitalists and business angels were the only high flying birds with the overview to swoop in on a fledgling entrepreneur’s idea. Now, anyone with wings of desire can flutter by and flock to the phenomenon of crowd funding.

Not surprisingly, the whole flight relies on the internet. The dark ages of trekking round one plush office after another, being sneered at by dragons in their dens, is no longer the only way of raising funds for cash strapped creatives. If you’ve more than enough ideas to change the world, and are a world away from enough funding, there’s a friendlier way to make them happen.

Today, a visit to the nearest workstation and a click on a crowd funding website is the shortest journey a shy starter-upper needs to make. There, hopeful entrepreneurs meet with fresh-faced funders, ready to come on board at the ground floor, and ride together to the top. It all happens on the strength of an investment that’s big, small, modest or even micro-sized.

If you’re thinking about joining in on the crowd, you’ll not be alone. The model is less fringe and now more of a multitude. With a plethora of crowd-funding go-betweens to choose from, anyone with £10 and a good idea to support can be rubbing shoulders with inveterate investors putting up six-figure sums. For creatives with the ideas, it can be a record breaking way to get the backing in a hurry, cutting the funding cycle from years to days.

One start up, recently featured in the Sunday Times, raised nearly four million pounds from tens of thousands of investors in less than forty days. The phenomenon is transforming the UK funding landscape. Among the crowd of crowd funding clubs there’s one that claims to have almost 170,000 registered investors, and experts say the UK’s flock of funders could be raising over £4bn this year alone.

So success all round. But before you jump in, heed a word of caution. There’s different types of crowd funding – equity, debt and reward being the main ones – some are tax efficient and others not … plus there’s no guarantee getting in on the ground floor of an elevator will lead you to the upper stories of success – you may not get your money back. For every post-it note, there’s a pad full of ideas on the back shelf in the stationery cupboard, with their founders and funders well and truly unstuck.

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Some news, views and comments about everything and anything, relevant and irreverent.

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