{ CROWDFUNDING }
THE TRUTH ABOUT CROWDFUNDING Benita Matofska is the Founder and CEO of Compare and Share and a global expert on the Sharing Economy. Compare and Share is currently raising its second round of funding on Crowdcube. www.compareandshare.com
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rowdfunding… it’s the buzz word of the moment; a new, disruptive sector that’s fast becoming mainstream, now valued at over £3 billion worldwide. The sector boasts growth rates of 557% since 2010, and according to Google, 2014 saw 21-times more searches performed than in 2013. This year is set to be even bigger, with a predicted valuation of £4.4 billion in the UK alone by the end of 2015. But what exactly is this new trend that’s shaking up the finance business and voluntary sectors and impacting the economy at large? Simply put, crowdfunding means funding a project or venture by raising many small amounts of money from a large number of
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people, typically via the internet. This alternative finance market is filling a big gap in the capitalraising landscape. Previously, startups were reliant on the “three Fs” - Friends, Family and Fools - to kick start a venture, before finding angel investment and then climbing the ladder to VC funding. Crowdfunding’s entrance onto the scene has made it possible for a start-up to test a product, raise money, engage customers, generate PR and then decide whether to take an already validated idea to VCs. Until recently, financing a business involved asking a few people for big sums of money. Crowdfunding is a classic disruptive innovation and turns this idea on its head by democratising
finance. It allows businesses and projects of all shapes and sizes, access to money while bypassing traditional banks. Investing in small businesses was previously the domain of the wealthy with many investors finding it difficult to identify and invest in private businesses. Now anyone can reap the benefits of investing in fledgling start-ups. Want to risk £25,000 or £5? You decide. It works by allowing innovators, creators, entrepreneurs and businesses to list their project on a crowdfunding platform and use their social networks to talk to thousands, or millions, of potential funders. Professional crowdfunding platforms take each business through a process