Equity Crowdfunding enters Public Markets

Equity crowdfunding, a name given to a process where retail investors use online platforms to make investments primarily in start-ups, had a record year in the UK, a trend driven by various tax breaks (including SEIS) and light touch regulation. In percentage terms, equity crowdfunding is today the fastest growing component of UK’s alternative investment scene, growing (albeit from a small base, see figure below) by 410 per cent between 2012 and 2013, according a report published by Cambridge university, Berkeley and Nesta.

In March this year, UK’s Financial Regulator, the FCA, has made its first attempt to oversee the sector, stipulating that only experienced investors can invest largest sums and that backers can only invest up to 10 per cent of their investable assets. It did so acknowledging the fact that crowdfunding is industry well positioned for growth, and it will be a space we should expect further regulatory developments.

It is also interesting to observe how crowdfunding is slowly and selectively entering the public markets using specialised niche platforms to raise more capital. There are just a few sparse examples today, however it is something worth keeping an eye on as the industry grows.

In October, Chapel Down winery listed on smaller companies market in London raising £3.95m through crowdfunding. Triodos Renewables, a green energy company, is seeking to raise £5m in its second crowdfunding share issue. As of this morning, they have raised just over £2 million from 53 backers, and they are doing so via a technology based platform Trillion Fund which prides itself as being a crowd financing platform for renewable energy projects.