While in the midst of celebrating Crowdcube’s fifth birthday, co-founder and CEO of the crowdfunding platform, Darren Westlake, took some time to address issues and rumors that have surfaced over the years.
In recent news, sources claimed that the crowdfunding platform misled investors by “drip-feeding” money from other sources onto the platform to create the artificial impression that there was “demand for investment.” The recent collapse of Rebus, a company that raised money on Crowdcube in 2015, has also fueled detractors of the nascent investment crowdfunding sector.
Westlake defended his equity crowdfunding platform by clearing the air about these accusations:
“Some of you may have seen the recent press coverage on Crowdcube and, in the interest of being fair, clear and not misleading, we wanted to directly address the concerns that have been raised.
“It is frustrating that after five years there is still a deep misunderstanding from some about how crowdfunding works. Since day one, Crowdcube has always been a platform that enables entrepreneurs to harness the power of their own crowd of family, friends, customers, contacts and angel investors, as well as engaging with Crowdcube’s growing crowd of registered members.
“This is materially no different to how the world operated before Crowdcube. Friends and family have always been a source of seed funding, while angel and venture capital investors have acted as cornerstone or lead investors since time immemorial and should be viewed as a positive sign of confidence in the business, rather than some kind of attempt to “trick” investors. The distinction is that crowdfunding has democratised this funding process by enabling everyday investors to back businesses they believe in, alongside professionals and venture capital firms.
“As part of the crowdfunding process it is commonplace for savvy entrepreneurs to seek investment from their own network while raising finance on Crowdcube, or any other crowdfunding platform. Whilst this can happen at any point before and/or during the raise, all investments become legally binding at the end of the round.”
Continuing to clear the air of any misinformation, Westlake noted:
“There have also been claims made that Crowdcube encourages entrepreneurs to ‘drip-feed’ investment into their pitch. This is simply not true, we do not advise businesses to hold back investment and ‘drip-feed’ it during the campaign.
“We take deliberate investment manipulation very seriously and have systems and processes in place to prevent this from happening. For instance, if a member invests more than three times into the same pitch then it will trigger an alert to our due diligence and compliance team to investigate its validity and integrity.”
He then added:
“Investors on Crowdcube can be assured that we are committed to ensuring transparency and have rigorous due diligence processes in place, which are spearheaded by an experienced team of legal and compliance professionals.”