One of our online colleagues based in the states hosted this discussion which we find fascinating. Most of the comment relates to funding in the US however, the content is relevant to the UK market. One could argue this is just someone’s opinion but Beer & Young’s MD, Nick Young, sees a lot of similarities in terms of the anticipated future of UK crowd funding.
For established trading businesses the crowd funding model is unlikely to work very often and it is best to talk to experienced advisors (for example Beer & Young) if your business needs urgent capital.
I've posted many Discussions on several Groups and my comments have morphed into an "almost" White Paper on the status of private investors shifting to from Wall Street and start-ups to SMEs. I hope you find it informative and by all means please add your opinion to the discussion and by all means agree or disagree with my findings.
Crowdfunding was and still is illegal in the US, but CrowdFinancing has always been legal, just unknown.
I've spent 5 years researching the subject of financing and funding private-sector businesses and it's never been so bad. I've been on both sides of all sorts of deals in 40 years, but Crowdfunding does not attack the #1 problem which is entrepreneurs/CEOs trying raise funds being woefully ill-prepared. Investors talk about this all the time behind closed doors, but it's never disclosed. Would it help if they explained it? Probably not.
I had a long call last week with someone who was a serious angel investor in an earlier life that now mentors start-ups, he commented that 90% of the college-grad entrepreneurs that he sees can't be "coached"! They are either so in love with their idea that they refuse to consider that the investor is taking any risk, or lack the experience to know what they don't know. Crowdfunding makes this situation far worse resulting of a new business being successful highly unlikely.
A really interesting comment I overheard regarded the inability to acquire follow-on funding with the stock owned by a "naive crowd". It's bad enough when it's friends and family money.
Most savvy investors right now won't invest in any business unless there's revenue and that's pushing them towards existing small to mid-caps doing deals banks can't or won't do that produce a collateralized, verses equity, 10-25% ROI. Before an irate angel investor climbs on me, less than 1% of accredited investor are angels according to published data. Think about that, 99% of private investor don't invest in the private sector, at least as angels. I can't find on the 99%, but I know it's huge compared to start-ups.
I see 100 start-ups a day and I tell them a select few they can try raising money, but most to use their own money to buy a business, use private investor money to bridge the sale, use private money to grow the business, then if your start-up idea still looks good then go for it using only your money. You'd be amazed how "coachable" they become when they have skin in the game.
Crowdfunding was and still is illegal in the US, but CrowdFinancing has always been legal, just unknown.
I've spent 5 years researching the subject of financing and funding private-sector businesses and it's never been so bad. I've been on both sides of all sorts of deals in 40 years, but Crowdfunding does not attack the #1 problem which is entrepreneurs/CEOs trying raise funds being woefully ill-prepared. Investors talk about this all the time behind closed doors, but it's never disclosed. Would it help if they explained it? Probably not.
I had a long call last week with someone who was a serious angel investor in an earlier life that now mentors start-ups, he commented that 90% of the college-grad entrepreneurs that he sees can't be "coached"! They are either so in love with their idea that they refuse to consider that the investor is taking any risk, or lack the experience to know what they don't know. Crowdfunding makes this situation far worse resulting of a new business being successful highly unlikely.
A really interesting comment I overheard regarded the inability to acquire follow-on funding with the stock owned by a "naive crowd". It's bad enough when it's friends and family money.
Most savvy investors right now won't invest in any business unless there's revenue and that's pushing them towards existing small to mid-caps doing deals banks can't or won't do that produce a collateralized, verses equity, 10-25% ROI. Before an irate angel investor climbs on me, less than 1% of accredited investor are angels according to published data. Think about that, 99% of private investor don't invest in the private sector, at least as angels. I can't find on the 99%, but I know it's huge compared to start-ups.
I see 100 start-ups a day and I tell them a select few they can try raising money, but most to use their own money to buy a business, use private investor money to bridge the sale, use private money to grow the business, then if your start-up idea still looks good then go for it using only your money. You'd be amazed how "coachable" they become when they have skin in the game.
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