Interviews

BankToTheFuture.com: The first financial institute social network

7 min read

03 September 2012

It's also a crowdfunding platform which aims to make business funding a lot easier. We spoke to CEO and founder Simon Dixon.

There’s not enough money to lend in recession times? That’s a lie. “Over the last eight years, money supply in the UK has doubled. There’s a lot out there – it’s just being redistributed to the wealthy, not making its way to business.”

That’s a problem Simon Dixon wants to solve. The founder of BankToTheFuture.com made a living as an investment banker before he realised that he was sitting at the wrong end of the desk and decided to build his own business. So, Dixon traded his high banker’s salary for no pay at all.

BankToTheFuture.com is the world’s first social network financial institution and crowdfunding platform. It allows businesses to raise donations, equity and debts from consumers and investors in one place. In other words, entrepreneurs fund entrepreneurs.

The underlying vision of the platform is that those who really believe in a project they’re funding will make better investors than those who don’t. Clearly, they are often the ones who know what it’s like to struggle for finance. 

Currently, the funding landscape in the UK is suffering from great shortcomings. The big three funding sources – banks, angel investors and venture capital – are failing miserably in bridging the gap between available capital and the small businesses that are responsible for at least 60 per cent of all jobs.

All of this was predictable. Before founding BankToTheFuture.com, Dixon worked with non-profit research group Positive Money, an organisation that criticised the way finance was structured. In the years before 2007, Positive Money predicted a big, inevitable crisis in banking.

After the financial crisis hit Dixon and Positive Banking’s reputation changed from ridicule to being overwhelmed with invitations to panels, TV appearances and book contracts. Having built himself a name, the closest issue to Dixon’s heart was still sustainable banking for businesses; an area crying for disruption.

“Banks are going to completely exit the business lending market, because its limited liability is too risky for them,” Dixon predicts. Currently, only eight per cent of bank loans are going to businesses.

Dixon is sceptical of angel investment for young businesses too. “BankToTheFuture.com was angel funded. One week before the launch the investors said they wanted a third more equity and pay a third less for it; after we had done all the due diligence, paid the legal bills and arranged the agreement in the six months before. I’ve been in finance my whole life and it still happened to us! I thought, there has to be a better way.”

After this dilemma the team released a private pitch on their own platform and raised finance from other entrepreneurs who wanted to work alongside them.

But what about venture capital? “The venture capital market is a lot bigger in the US, where there is a much higher appetite for risk than in the UK. The only businesses in the UK that are able to get venture capital are the ones with 15 years of corporate experience, who tick all the boxes. There’s a genuine funding gap.”

BankToTheFuture.com aims to fill this gap by creating a platform that’s a lot like selective crowdfunding. Entrepreneurs who join the platform are assessed by their social capital: a rating that combines their online influence, social engagement, activity on various networks, and traditional credit rating. Investors still assume a high risk, granted – but the very is diversified across a lot of individuals. It’s a risk venture capitalists don’t want to take and the entrepreneurs’ family and friends often can’t afford to take.

“The typical financing procedure for a new business used to be: loans from friends and family, then angel investments, bank overdrafts, and venture capital,” so Dixon. “Now that has turned into crowdfunding, crowdinvesting – which allows you to consolidate angels with people interested in the business -, crowdlending, and then venture capital, which will provide large growth eventually.”

Crowdfunding itself – the concept of presenting a business or product on an online platform, which can be funded by the public – is a “brilliant way to test a new business or product”. If people fund it, even if it’s only with small sums, it proves that there’s an interest; and ergo, a market. 

Crowdinvesting, the next step, is based on offering shares to the crowd. Once a business is creditworthy, borrowing is acceptable. BankToTheFuture.com offers rewards, equity or debt depending on the situation and advises entrepreneurs of the most appropriate way of funding for them.

“We want to walk them through the whole lifecycle of building the financial future of their business,” Dixon tells Real Business. “15 years from now we want to have created an alternative bank.”

Until then, BanktoTheFuture.com aims to create a lot of success stories along the way. It will surely help that the organisation has already been backed by Sir Richard Branson in his global Virgin Unite “Screw Business as Usual” competition. Branson is backing it for its openness and transparency.

If the enthusiasm for BankToTheFuture.com holds, many more high-profile supporters will follow in Sir Branson’s steps. Dixon, for certain, is positive that they’re on the right track.

“Entrepreneurs are the true heroes of the world,” he says. “They create jobs, take more risks, delay gratification – but they’re not being served well enough by financial institutions, so we want to serve them now.”