It's new, it's fashionable. It's been on the telly. Richard Branson is taking an interest in crowdfunding, and so is Lily Cole. In March 2014, Facebook bought a crowdfunded startup company for two billion dollars. So, what is this thing called 'Crowdfunding' and why should you care?
The earliest example of crowdfunding we can remember is an English rock band called Marillion. In 1997 American fans used the World Wide Web to raise $60,000 to pay for the band to tour in the States.
Then a friend reminded us of the Statue of Liberty In 1884, the newspaper magnate Joseph Pulitzer raised money for the statue's pedestal. 125,000 people contributed, and most donations being US$1 or less. And somebody else pointed out that if you went back to the eighteenth century, ptetty much the entire Industrial Revolution was started by people asking their friends for money to build steam engines, while Jane Austen asked their wives and lady friends to sponsor her next novel.
The basic appeal of crowdfunding is that, if you can get a thousand people to give you ten pounds each, you've got ten thousand pounds, and a lot of social validation that your business venture is worth supporting.
People started to take an interest in alternative ways of raising investment money after the 2008 financial crisis. Some people wanted to replace the banking systems with something better, some people wanted to revive the old 'mutuals', like the building societies, which diappeared in the Eighties; some people wanted to borrow, and found the banks wouldn't lend, and some people wanted to save, and found the interest rates were tiny.
According to NESTA, the London based innovation foundation which commisions research into the UK economy, crowdfunding raised $1.5 billion for businesses in 2011, and in 2012 one project raised over $1 million. At the start of 2013, NESTA predicted that
the real growth lies ahead. It is possible that within three years, crowdfunding could provide around £15 billion of finance per year in the UK. With the right frameworks and standards, this could grow even further, and a day could come where crowdfunding replaces a large proportion of the £115 billion financial services industry.
We put together Another Crowd because we think that crowdfunding is an interesting, and even enjoyable form of investing, that delivers better partnerships between businesses and their backers, and has potential to deliver real value for investors, and the UK economy as a whole.