Read more on crowdfunding in the UK:
- Soon-to-launch challenger bank Mondo seeks £1m investment from customers
- Just eight per cent of firms running crowdfunding campaigns are profitable
- Jamie Laing’s premium sweet brand Candy Kittens on track for sales of £2.5m by 2017
To that end, it’s believed that crowdfunding and the digitisation of investments are the key to open the door to financial aid that has long been closed to entrepreneurs.“The findings suggest that this new virtual market can solve the persistent market failures in funding entrepreneurial ventures,” said Estrin and Khavul. “What’s more, this financial innovation reduces the biases in traditional forms of early stage entrepreneurial finance – such as the sector or location of the business or the entrepreneur’s gender,” they added, a nod to VC and angel investors.
Luke Lang, Crowdcube’s co-founder, said: “We’ve always known that investors are smart, and it’s great to have this confirmed by LSE. The findings quash concerns that the crowd is made up of naïve ‘dabblers’ who stampede into supporting pitches that seem popular or cool.
“Crowdfunding is a rational marketplace, with investors and entrepreneurs collaborating and sharing knowledge in a way that leads to sound, well-informed decisions.”The world’s crowdfunding sector is set to reach $93bn by 2025, and equity crowdfunding is expected to play a key role in that growth. Estrin and Khavel concluded: “By moving from the physical space to the digital space, equity crowdfunding engages larger networks of entrepreneurs, offering entry points across populations and locations. In the process, it may also help to socialise entrepreneurial finance.”
The UK’s equity crowdfunding industry has been so powerful and successful that it’s set to drive global tech investments alone to $8.2bn by 2020.
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