Crowdfunders who invest in startups or lend to SMEs are following the Brexit negotiations closely, and so are crowdfunding platforms. Who will be our new international allies?
The Times reports today that "Crowdcube Points This Way" (may require subscription_ and say Crowdcube, which already operates successfully in Spain, plans to offer equity crowdfunding in the Republic of Ireland "once the sector is fully regulated."
Linked Finance, a peer-to-peer lending platform, has already been granted a full license to operate in the UK by the Financial Conduct Authority (FCA) and Dublin rival Grid Finance is (ahem) "sucking diesel." And a week ago, we heard that another Irish platform Flender was looking to raise to raise £2m in equity funding in preparation for a UK launch later this year.
Firms with footholds in the UK and the Republic of Ireland will have a viable strategy for serving the EU and UK following Brexit. But others are looking to another old trading partner of the UK - India.
The Securities and Exchange Board of India (SEBI) is in the process of drawing up equity crowdfund regulation that balances with protection of ordinary investors. Peer-to-peer lending, by contrast, falls within the remit of the Reserve Bank of India’s (RBI). According to yesterday's report on LiveMint, both have issued consultation papers a year ago and have been modifying their stances in the light of public discussion and feedback
"Some of the potential benefits of equity-based and P2P crowdfunding are apparent" (LiveMint reports.) "They allow start-ups and small enterprises that may not have been able to access venture capital or credit from the formal banking system to acquire funding, spurring innovation and entrepreneurship. This is particularly pertinent given the preponderance of MSMEs (micro, small and medium enterprises) in India.
"Other benefits are less obvious... It also “resulted in higher levels of business partnership, greater publicity, a stronger customer base, and an easier time finding employees”. Most intriguingly, crowdfunding has the potential to bypass lack of access—often due to caste or gender prejudice—to the trust-based community networks that underlie India’s business networks."
The interesting point for the United Kingdom here is the number of Indian business social networks that involve family, peers, and contacts in the UK.
PaySense, a consumer lending fintech startup with a former senior exec of PayPal on its board, sees huge potential in offering Indians access to credit for small but life-changing purchases like an air-conditioner.
And on the equity side, we hear via Bloomberg that Techstars, a global startup accelerator, has formed an Indian joint venture with ANSR Consulting India, a corporate consultancy firm. ANSR already has an innovation arm called Kyron. and according to India Times, the joint venture intends to open centres across multiple locations in India over the course of the next few years.
We may not be members of Europe for much longer, but the UK's entrepreneurs will continue to foster international relationships.