{"id":3202,"date":"2014-02-11T16:29:30","date_gmt":"2014-02-11T16:29:30","guid":{"rendered":"https:\/\/leadershipof.technology\/?p=3202"},"modified":"2014-02-11T16:29:30","modified_gmt":"2014-02-11T16:29:30","slug":"crowdfunding-as-a-solution","status":"publish","type":"post","link":"https:\/\/winningthinking.co.uk\/?p=3202","title":{"rendered":"Crowdfunding as a solution"},"content":{"rendered":"<p><a title=\"Crowd Funding FCA update 19 Feb 2015\" href=\"https:\/\/www.fca.org.uk\/your-fca\/documents\/crowdfunding-review?RRU0215&amp;section=financial-advisers\"><img decoding=\"async\" class=\"alignnone size-full wp-image-12444 alignright\" src=\"https:\/\/www.icebreakerexecutive.com\/wp-content\/uploads\/2014\/02\/crowd-funding-FCA.jpg\" alt=\"crowd funding FCA\" width=\"625\" height=\"773\" \/><\/a>This is my synposis of the Background and challenges that face Crowd Funding as a solution as presented by Knowledge Peers in Feb 2014.<\/p>\n<p>Background Funding UK SMEs<\/p>\n<ul>\n<li>5m SMES in the UK with turnover of \u00a33.3bn sales. Sole traders make up 75% of this, and 2\/3 profitable in 2013<\/li>\n<li>Lending from banks has reduced from 41%-36% to SMESs over the last few years, trend of deleveraging SMEs continues \u2013 high risk<\/li>\n<\/ul>\n<p>Ranked the most popular form of lending is:<\/p>\n<ol>\n<li>Loan<\/li>\n<li>Bank overdraft<\/li>\n<li>Directors loan<\/li>\n<li>Angel investor<\/li>\n<\/ol>\n<p>Common concerns as is<\/p>\n<ul>\n<li>Complexity of documents and banks understanding of the business.<\/li>\n<li>Complexity of evaluating funding \u2013 figure out 4-5 sources; a lot of admin<\/li>\n<li>85% of owners said that personal guarantees are not acceptable<\/li>\n<li>Speed to completion \/ reaching a point of certainty<\/li>\n<li>Loss of control<\/li>\n<li>Terms \u2013 losing control and loss of decision making<\/li>\n<li>Opaque terms, 40% worried about complex obligations<\/li>\n<li>Lack of ownership and oversight of the process<\/li>\n<\/ul>\n<p>Cost is less of an issue<\/p>\n<p>Banks funding is centred on low risk and personal security. Only lend to those that don\u2019t need it<\/p>\n<p>Background to crowd funding<\/p>\n<ul>\n<li>\u00a3263m of debt and equity funding has been raised with crowd funding, of which \u00a3237m is debt, equity \u00a321m, and both \u00a34m. Crowd cube is only 3 years old<\/li>\n<li>Benefits access to funding and certainty in 2-3 weeks, investments \u00a31000 average per event and per investor, 70% of which are HNW individuals<\/li>\n<\/ul>\n<p>Research sample of 120 SMEs<\/p>\n<ol>\n<li>73% of SMES with turnover of gt \u00a3500k, were owner managed by majority shareholder<\/li>\n<li>60% sought funding, 70% were successful,<\/li>\n<li>Cash flow focussed 71% categorised as general growth, 65% general operational<\/li>\n<\/ol>\n<p>Who do SMES contact? 1<sup>st<\/sup> port of call \u2013 people they know<\/p>\n<ol>\n<li>Banks 42%. (Only 64% of owners knew their main bank contact)\n<ol>\n<li>Lack of confidence in what banks were doing, unhappy with the process, banks not taking responsibility<\/li>\n<li>Banks as facilitators e.g. the loan guarantee scheme<\/li>\n<li>Key business contacts 40%<\/li>\n<li>Family trusted people<\/li>\n<li>25% professional services\n<ol>\n<li>Perception is the cost of the advice too high, and a lack of trust, and lack of confidence in advisors<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<p>Crowd funding includes a broad range including selling invoices and is perceived to alleviate the main issues:<\/p>\n<ol>\n<li>Personal security<\/li>\n<li>Speed to reach a decision and assess risk 1-2 weeks initial view Equity can take up to 3m<\/li>\n<li>Taking Control of the process, and good process<\/li>\n<\/ol>\n<p>Better perceptions of Crowd funding<\/p>\n<ul>\n<li>Quick decision upload details 1-2 weeks, better predictability in a shorter time<\/li>\n<li>The terms allow for more flexible payment options if there are difficulties!?<\/li>\n<li>73% consider legitimate, 42% would consider equity and 42% consider loan<\/li>\n<li>Reputation not such an issue<\/li>\n<li>55% consider CF as a good way to access investors,<\/li>\n<\/ul>\n<p>10% are worried about the IP risk, sharing their ideas publically<\/p>\n<p>Balance between investor and business<\/p>\n<ul>\n<li>Businesses performance is the sole means to guarantee payback<\/li>\n<li>Balance between lender and investor.<\/li>\n<li>Are crowd funders storing up problems in their portfolios?<\/li>\n<li>How issues are managed. Is there enough visibility \/ trust \/ approachability?<\/li>\n<\/ul>\n<p>Crowd funding take up in the sample<\/p>\n<ul>\n<li>0% of the 120 SMEs used crowd funding, 76% were aware, 87% of FAs were unaware**<\/li>\n<li>Is CF a threat to IFAs? Or just needs sorting as a RTM?<\/li>\n<\/ul>\n<p>Opportunities for improvement<\/p>\n<ul>\n<li>It\u2019s unclear as to the reality of the different crowd funding options upfront and the process to get on board could be clearer<\/li>\n<li>IP risk and protection<\/li>\n<li>With the introduction of the FSA regulations \u00a0in Apr 2014 the number of players and confidence is expected to grow<\/li>\n<li>Differentiation &#8211; Trustworthiness 63% considered the model trustworthy, 61% said crowd funding same level of trust as FS \u2013 industry reputational damage<\/li>\n<li>DD \u2013 bank type process, how is it managed, can it be simplified, taxation and broader issues?<\/li>\n<li>Integrity and sustainability; 10% Returns for investors seem too good to be true, how about retaining more for the crowd funder to mitigate any risk.<\/li>\n<\/ul>\n<p>Here is a link to the efforts of the USA to regulate crowd funding https:\/\/www.ft.com\/cms\/s\/0\/b80096ba-a3c7-11e3-88b0-00144feab7de.html?siteedition=uk#axzz2vfwnrCAB<\/p>\n<p>For more information direct from Knowledge peers<\/p>\n<p>https:\/\/www.knowledgepeers.com\/networks\/855\/portfolio.html#t582<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This is my synposis of the Background and challenges that  [&#8230;]<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3202","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.8 - 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