“Crowdfunding isn’t just for startups”

Crowdfunding regulation

Recent regulations imposed on the industry by the Financial Conduct Authority (FCA) have been controversial, but Lang sees them as a positive step.

He says: “I think it’s a major first step forward that an industry that only started three years ago has been able to advance in such a short period of time and essentially forced the FCA into redefining how their regulations work.

“What it does is it safeguards the industry and the longevity of the industry. Having our own bespoke regulation is a stake in the ground that crowdfunding is here to stay.”
In fact Lang suggests that FCA support is what makes the UK a world-leader in crowdfunding – with America’s Securities Exchange Commission 3-4 years behind.

“When you look around the world, there aren’t any other countries as advanced as the UK,” he says.

“That’s partly because we trailblazed but also the Government has been a real supporter of crowdfunding, and I think that’s helped to ensure the FCA move in the right direction.

“Also the British people have a really strong appetite for investing in British businesses and you can’t hide away from how important that is.”

Future growth for Crowdcube will be partly based on overseas expansion – the company is exploring partnerships in a number of countries – but also from product development.

“We’ve got lots of other really exciting ideas and products up our sleeves,” Lang says. “I can’t say anything about them at the moment but there will be several new products and announcements this year.”

How it works

Crowdcube funding is a “pretty straightforward equity investment” Lang says. Businesses typically offer between 10 and 30 per cent of equity shares in their company in a combination of “A-class” shares, which offer voting and pre-emption rights and standard “B-class shares” which offer all the normal protections for minority investors.

You put together a pitch on the website and offer the shares out to Crowdcube’s 70,000 registered investors. If you reach your funding target then the pitch is successful but if not then the investors keep their money. In the first quarter of 2014 around one third of businesses was successful.

Lang says a combination of great talent and a strong business model is key to a successful crowdfunding pitch.

“What all of them have in common is the tenacity of the entrepreneurs. First and foremost they have a great business idea and a clearly addressable market opportunity. Also the entrepreneur and teams behind the business show a great deal of skill.”

More: Ten tips for a successful crowdfunding round

More from Real Business on the future of funding

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