Yesterday, Crowdfund Insider covered the annual Deal report from Beauhurst. The research targeting equity investment in the UK provides a fascinating snapshot of the progress of capital formation for promising young firms in Great Britain. The authors note that while overall investment declined during 2018, in comparison to the year prior, crowdfunding is a stand out success in facilitating access to capital. In fact, in Q4 2018, crowdfunding issuers raised £105.7 million versus £66.8 million in Q4 of 2017 – nearly double.
Crowdcube played an important role in this success. The UK’s largest crowdfunding platform by funding total supported 168 offerings during the year raising £143.2 million. In Q4 2018 alone, Crowdcube enabled 64% of the UK crowdfunding industry’s investment, resulting in 53% for the whole of 2018. Crowdcube’s total for 2018 alone tops the entire amount ever raised in the US under the Reg CF securities exemption.
A post on the Crowdcube site adds some additional insight. It is interesting to note that during 2018, Crowdcube raised £20 million through its mobile app.
Additionally, Crowdcube has now completed more than 100 raises over £1 million, 32 of which were in 2018.
The trend of providing access to capital for more mature firms is a natural progression of the investment crowdfunding industry. Issuers benefit by gaining access to a wider investor audience while investors can back less risky – more established firms.
In the UK, you can raise as much funding as you want online and every investor, large or small, may participate. A growing number of institutional investors are joining in and investing alongside retail types as issuers see benefits of having a diversified shareholder base.
Under current UK law, a prospectus is required for issuers seeking more than €8 million (USD $ 9.1 million / £7.01 million). This creates a natural speed bump as disclosure is heightened for larger raises (along with the cost to issue the securities). Compare this to the US, a jurisdiction that has created a convoluted alphabet soup of securities exemptions which benefit the wealthy, while shorting the less fortunate, and it starts to make sense as to why the UK has the most robust ecosystem in the world for crowdfunding.