THE BLOG

Working The Crowd

31/10/2016 14:09

For too long, some of the best ideas have been held back because it's been too hard for them to raise money. With the economic tightening since the major debt crisis of 2007/8, and the increasing financial uncertainty of Brexit, borrowing money has become even tougher for entrepreneurs.

We all know that one of the most important elements of getting a business start-up off the ground is securing funding capital. So how best do we get entrepreneurs the capital they so desperately need, whilst leveraging the optimism and foresight of the SME community? The answer increasingly seems to be, ask the crowd.

Crowdfunding has huge potential to really level the playing field for start-up companies. Investment has traditionally been in the hands of big finance and private equity firms, but the rise of crowdfunding platforms and peer-to peer lending has ensured that capital is no longer the preserve of the 'financial elite'.

Crowdfunding is certainly democratising finance; some people have even argued that crowdfunding has the potential to rectify the gender gap in entrepreneurship. According to data collected by the platform CircleUp, female entrepreneurs are almost ten times more successful in raising capital with online platforms than with traditional banks.

The crowdfunding market has seen huge growth over the past few years, from $1.5 billion in 2011 to $34 billion in 2015. Kickstarter in particular, has become synonymous for crowdfunding; leveraging over $2bn for over 90,000 different projects.

We are already seeing individuals and companies using crowdfunding in diverse areas such as drug development, where medical charities and patients put up funds to research cures for rare diseases, or in the gaming industry where gamers seed-fund computer games they like the sound of where they are rewarded with special characters, items, etc.

This method and logic can equally be applied to global business start-ups. Just like in the popular TV programme Dragon's Den, now every budding investor can use these crowdfunding platforms to assess a new business project on its individual merits and decide whether to finance it based on a certain reward or share.

Our latest venture, LEOcrowd, is a platform that links project creators to a community of financial backers who are passionate and excited about new ideas and who will fund projects in return for a reward or equity. Just like our work with digital currencies it's about leveraging peer-to-peer networks.

Last month in fact we recently hosted one of the UK's premier crowdfunding events in London. Delegates were given the opportunity to meet like-minded business owners and hear from renowned public speaker and author, Mark Earls, on the psychology of the 'crowd' in business. It was inspiring to see so many entrepreneurs sharing their innovative ideas and knowledge of how to raise financial capital.

Not only does crowdfunding give entrepreneurs a new avenue to diversify their investments, but it also provides people starting out with a vital stream of capital. What's more they won't have to go to a bank to do it. Using the crowd, start-ups will be able to draw upon global currencies, and importantly digital currencies like Bitcoin, LEOcoin and more.

Crowdfunding could really break open the investment world where people and communities could feel they have a real stake in a company and its success, and what better driver of success than success shared. Until recently the gift of investment has been in the hands of big finance and private equity firms - but not anymore.

Fundamentally crowdfunding platforms are changing the way that business is being done; by stimulating the economy, providing opportunity to business funders and fostering enterprise across the world.

Comments

CONVERSATIONS