Crowdfunding Enters New Era

WIRED: The UK is a “world leader” in equity crowdfunding, with further democratisation set to open up everything from hedge funds to IPOs in the next few years. Speaking at WIRED Money 2015 Darren Westlake, co-founder and CEO of leading investment crowdfunding platform Crowdcube, said the future of crowdfunding in the UK and around the world was “more democratisation”. “Crowdfunding platforms are well positioned” to “put the P back into IPO,” he explained, pointing to the success of Crowdcube’s existing equity system as an example of public interest.

As well as IPOs, Westlake also claimed developments in crowdfunding will allow people to invest more easily in private equity funds and hedge funds. “The crowd is now much bigger,” Westlake said.

 The Exeter-based firm, founded in 2011, has to date raised over £80m in investments for new businesses. Westlake explained that crowdfunding was now supporting bigger companies, with everyone from individuals to venture capital funds such as Balderton Capital getting involved.

And the buzz is driving huge growth. In 2012 the average raise was £115,000 — in the first six months of 2015 that figure passed £500,000.

Part of the reason for that success is regulation. Westlake praised the UK for being one of the first countries in the world to introduce “bespoke” regulation for crowdfunding, quickly creating an exciting market.

 “We’re the world leaders and we should be proud of that,” he said.
E27.CO: Since its inception more than a decade ago, online crowdfunding has been a godsend to both entrepreneurs and artists, turning their dreams into reality. One of the earliest platforms, US-based ArtistShare, was launched in 2003 as a means of helping music artists fund their projects through donations from their fans.

Its first success story was a jazz album by Maria Schneider, which raised US$130,000 and went on to win a Grammy award in 2005. Depending on their contribution amount, fans received rewards ranging from a digital download of the album to being named as an executive producer of the album.

Over the years, online crowdfunding has spread its influence all over the globe, spurring the growth of startups in Taiwan, Brazil, and China. A 2013 World Bank report even predicts that crowdfunding in China could hit US$50 billion in 2025.

It has bankrolled projects such as the Pebble Time watch, which had the backing of 78,471 people to the tune of more than US$20 million. By 2013, the online crowdfunding industry had raised over US$5.1 billion. Read the full article

TECHCRUNCH: Early this week the WSJ reported that the Securities Exchange Commission is investigating the selling of pre-IPO company stock, which has seen a recent surge in activity as companies remain private longer and valuations continue to rise. The SEC also put the clamps on a startup ‘exchange’ that was in gross violation of the securities laws.

The resurgence of unfettered secondary markets is a concern for both private companies and shareholders. Take it from us. We started the first incarnation of this market in 2010 to help private company shareholders find liquidity. We pivoted to a technology focused, company centric solution which has become the industry standard. Still, the growth in the broker market presents a problem that cannot be ignored.

For private companies, unfettered secondary trading perverts employee incentive structures and requires significant financial and human resources to contain. Prior to Title V of the JOBS Act, high volume of activity on secondary markets forced companies to go public before they were ready.  Private companies have reacted with a two-fold response, choosing to: 1) run regular secondary buybacks [or third party purchases] with complete control and privacy, and 2) place significant or full restrictions on transfer in the company’s bylaws. Read the full article

WSJ: Regulators Probe Marketing of Hot Private Tech Shares Read the full article

WIRED: Disruptive technology can help make crowdfunding safer and more successful, that’s according to Céline Lazorthes, founder and CEO of Leetchi and MANGOPAY. Lazorthes business, which aims to make social payments quick and easy, is set to process €1bn (£719m) a year by 2017, having launched in 2009 as an idea she had while at university.

“Building this kind of technology took us three to four years. The experience we have is really valuable.” Lazorthes told the audience at WIRED Money 2015.

The idea behind Leetchi is simple — it allows groups of people to transfer money to an e-wallet, making collecting funds for things like parties and weddings easier. Lazorthes eureka moment came when she had to collect money from fellow students for a university party. The social payments platform allows people to gather together money online and make group purchases. And now its doing big things for crowdfunding.

TECHCRUNCH: Once in a while (a lot, actually), part-time Apple blogger and musician Taylor Swift likes to give to a charitable cause. She likes hanging out with kids who are in the hospital, too. She likes disrupting technology the most.

Swift’s most recent disruptive move was a donation made to a little girl named Naomi, who is kicking the crap out of cancer. It was for $50k, to help with some medical costs that insurance wasn’t picking up, through the site GoFundMe. Only problem was that GoFundMe never thought anyone would donate over $15k at once, so it took a bit of rejiggering to allow Swift to make her donation:

“Taylor Swift’s donation was so generous that it required us to increase the donation limit on the platform,” said Rob Solomon, GoFundMe CEO. GoFundMe’s previous donation limit was set at $15,000, but has now been increased to $50,000. There are never any limits on how much a campaign can raise.

Read the full article