Sites like Kick-starter and Indigogo have made great use of the crowdfunding model's ability to help inventive individuals bypass the traditional methods of accessing finance.
Bank to the Future is another innovative website that uses crowdfunding to help businesses and entrepreneurs connect with the investors they need.
Find the Edge's Kenny Goodman caught up with founder, Simon Dixon, to discuss why you shouldn’t be discouraged by the state of the economy and why he's so confident crowdfunding is ‘going to change the world'.
Watch the exclusive interview below:
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Here are some of the discussions between Kenny and Simon:
0.47 – What is Bank to the Future and how does it work? Simon says it basically allows anyone to be an investor and invest in private businesses. It is also a new way for businesses to raise finances.
01.55 – Simon explains his background and introduction to the world of banking – he was told he wasn't educated enough, and has a collection of 96 rejection letters. Explains how he rose from tea boy through the ranks.
04.03 – Simon discusses the differences between raising finance for your own business and for clients.
05.30 – He explains how they raised finance for Bank to the Future – He reinvested money from his last business, and got a group of high net worth investors to commit. At the last minute he was told they wanted a third more equity, and only wanted to pay half as much for it.
07.33 – With hindsight it was the best thing that could have happened. In the end they launched the business by calling in favours and raising funds themselves.
09.11 – Entrepreneurs rather than traditional investors funded them. ‘Having lots of investors, that all invested smaller sums, that all have lots of contacts, that also understand the challenges and journey of entrepreneurship, has really been valuable in getting the brand out there.'
10.20 – Company mission was the ‘democratisation of the investment decision.' Anybody could invest whether they had a £10 or £100,000.
11.45 – It's an investor's market place at the moment, so they want to make it fairer by lowering the barriers to who can be an investor. This means there's lots more investors and entrepreneurs can make fair decisions over who they choose.
12.15 – Kenny asks how it differs to Kick-starter. Discusses the Pebble Watch crowd funding success. They've taken a similar concept and changed it to ‘crowdinvesting'.
15.00 – A major difference is that Kick-starter allows companies to raise funds without giving away equity. Not many companies are in a position to do this.
15.15 – Are people happy to invest in unknown businesses in these recessionary times? ‘It's high risk, high return'.
‘Don't get caught up in the negativity of the economy. All we're in is a shifting economy. In the case of the UK over the last eight years the money supply has literally doubled, so there's more money out there than there has been. It's just simply not making its way to the right place.'
17:17 – ‘We're in a shifting time. People want to see what's happening with their money, there's record levels of scepticism with traditional finance and banking, there's double the amount of money in the economy, and most of the traditional products people have invested in aren't working the way they're supposed to work.'
17:50 – Kenny asks about the tax benefits investors can receive. The government are supportive of investors, and so there are some very generous tax breaks. Discusses the benefits of the Seed Enterprise Investment Scheme (SEIS).
20:06 – Almost all of the crowd investments on the site qualify for SEIS.
21:35 – Simon explains how his company can help entrepreneurs, and who they can help.
23:40 – They don't filter to decide whether individuals have good ideas or not – the crowd – or the market – do that by investing or not investing.
25:00 – Not a place to build a following – it's a place to monetise an existing following.
26:15 – What influences how successful a pitch is on the site? Social proof and whether the entrepreneur can market it successfully.
28.07 – ‘I really believe that this is going to be a mainstream product that's going to change the world.'
29:30 – ‘You're about to see an amazingly large untapped industry emerge, which will be the whole sector of assisting people in crowd funding, assisting people in marketing their crowd funds. When know you've got a very large sector that is about to emerge is when other people start building businesses around your business.'
Listen or download below:
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