The U.K.’s Mature Financial Disruption: What the Rest of Us Can Learn
I’ve spent a lot of time in the UK lately, and it’s been on my mind even more. I was just there for the AltFi Europe Summit, and for the launch of The World’s First Fintech Book (I happen to be one of the authors), and while I learned plenty, what stick with me now wasn’t something I picked up in a summit or book launch. I think there’s something that we in North American alternative finance and equity crowdfunding fans could learn from UK alternative finance companies, and it’s regarding the degree to which alternative finance is becoming mainstream.
For those of you who have been to London. I hope you have taken the time to ride the “underground” subway system, it’s totally amazing. I do all my travelling in London on the tube, and one thing that really stuck out in my mind while waiting at the stations and on the tube itself the amount of advertising. It’s extensive in any major city’s transportation, but the advertising in the London tube holds a particular place in my fintech-obsessed heart, because of the place of equity and debt portals in daily mainstream advertising.
As I saw the ads on the tube, I would ask people: “do you know what that is?” and 10 out 10 people knew about equity crowdfunding and how it helps start-ups and companies access capital. This was surprising to me, partly because equity crowdfunding isn’t even the dominant sector of alternative finance in the UK, peer-to-peer lending is.
The two most notable brands I saw were Crowdcube and Seedrs. These two platforms clearly understand their role evangelizing equity crowdfunding and helping to grow the sector as a whole. They know that they need to get noticed, be seen and heard over and over again to be successful.
According to the 2015 UK Alternative Finance Industry Report, both the number of funders and fundraisers is increasing year over year. There is no doubt that as an alternative finance market and a market for equity crowdfunding, the UK is far more mature than the US, and competition exists to an extent that the US market has yet to see. Besides working to drive general market awareness, UK equity crowdfunding platforms are pursuing both public and private sector partnerships. They’ve seen increasing involvement from institutional investors, according to the report, but aren’t staying insular, they’re actively pursuing new funders and fundraiser.
By far the UK is much more advanced on adoption. If you’re wondering why, my observations are as follow:
They truly practice it. They are visible. They provide market data. Equity crowdfunding portals in the UK are early adopters espousing transparency as a business fundamental. And it goes beyond that. The industry as a whole is testament to the value of transparency, the data it collects and publicizes relating the state of the market, including the successes and failures of the companies it’s helped fund.
Aggressively Seeking Out the Crowd
There’s no “wait and see” approach for UK equity crowdfunding portals and ecosystem members, or even an “if you build it, they will come” mentality. They’re seeking out the crowd, and doing it actively. My own company, KoreConX, recognized a long time ago that if we wanted to be successful as a company, then we needed to help grow the equity crowdfunding ecosystem by seeking a public audience and evangelizing entrepreneurs and potential investors.
The Brand of the Industry
UK-based equity crowdfunding portals understand the importance of stressing success. One of the well-understood industry-wide risks is a loss of investor trust, and counteracting this with stories of success, as well as pursuing rigorous due diligence practices helps safeguard the reputability of the sector as a whole.
The world needs to look at the UK model and how great its working so time is not wasted on re-inventing the wheel.
Crowdfunding is the CROWD. They need to see you the portal, lets not forget how it all works.
Happy Equity Crowdfunding.
Jason Futko is co-founder and chief financial officer for KoreConX. Prior to KoreConX, Futko co-founded Crowdfunding Alliance of Canada. In addition he was managing director of an Exempt Market Dealer and Chairman of a public investment vehicle in the United Kingdom. Jason has vast experience in financing businesses globally. He has extensive knowledge of international know your client (KYC) and anti-money laundering (AML) regulations.