Raising Finance

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Collaborative consumption is giving alternative finance a boost

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At KweekWeek’s Shared Economy Conference on 10 May, speakers came together to discuss our shift from the traditional market economy to a shared economy. The effect this trend has on business funding was clear: starting your own company may be cheaper and faster, but finding finance is tough.

Only one in ten businesses apply for a bank loan every year as the banks lend 29 per cent less than they did in 2008. Of these businesses, only six per cent are start-ups, according to Capital Enterprise.

Things are changing; the recession has caused people to think outside-the-box to find alternative and non-traditional ways to fund a business. 

Kristo Käärmann, co-founder of Transferwise, worries that people rely too much on banks without knowing how much money they lose in the process. According to Käärmann: “If you’re in London and you need to send money abroad, a bank will charge you extra for the exchange. What they don’t tell you is that they’re also going to change your money at an exchange rate which has quite a tight margin to it. They don’t even tell you what the exchange rate is! We’ve worked out that it’s five per cent of the money you send abroad.”

Despite a rapidly changing digital landscape, there is still a significant disconnect between technology and finance. Andrei Sandu, co-founder of Funding Planet, believes that “crowdfunding can actually be quite local. I don’t see any reason why there shouldn’t be local platforms connecting local investors to local start-ups. Is this going to create a new competitor? I think not. I think we need three European or global players that can actually move things around. It is very much a business that thrives on entrepreneurs and investors pushing this issue.”

The beauty of 2013 is that finance isn’t all down to venture capitalists or angels anymore, but new initiatives such as crowdfunding, donation-based platforms, peer-to-peer platforms and seed investment have joined the game with some power in their hands. It’s hard to believe that these companies – who have now provided millions of pounds to start-ups and small businesses last year – were only dots on the financial map in 2010.

When it comes to location, the UK and mainland Europe are doing a good job keeping up, according to Stefan Glaenzer of Passion Capital. He thinks that starting a business and seeking alternative finance in Europe is our best bet.

“Name me two European founders who have become successful in the Valley in the last seven years,” he asked the crowd. “I’ll name you 20 who have become successful here in London, another ten in Sweden, Italy, German and so on. We all think that everything’s much better in the US, but we should focus on starting our own businesses here in Europe.”

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