Forget angel networks and private investors – it turns out that equity-based crowdfunding has now become the UK’s second most active funder type, according to a report by data firm Beauhurst which analysed investments and deals in the UK’s high-growth companies since 2011.
Equity crowdfunding has transformed the funding landscape in the last few years. When many people think about crowdfunding they think about platforms such as Kickstarter, where people pledge money in return for a reward, providing the project with the capital needed to fulfil the orders. But with equity crowdfunding, rather than pledging towards a reward, people invest in the company in return for shares.
In what looks like a radical shift for the future of raising finance, Crowdcube found itself ranked above Angels Den and the London Co-Investment Fund as the top venture-stage investor in 2015. Meanwhile, Seedrs ranked above Crowdcube in the ranking of the UK’s top technology investors. Crowdcube also found itself a serious competitor to established growth-stage investors such as Index Ventures.
Equity crowdfunding was the only investor type out of all of them where the deal numbers increased by a significant amount – 45% - between 2014 and 2015 – and was especially significant at early investment stages, making 228 seed-stage deals compared to the 116 made by private equity companies. So, what does this mean for startups?
Revealing a shift away from the traditional gatekeepers of funding, these figures show that the process of funding businesses could well be becoming altogether more democratic and collaborative. With crowdfunding increasing in popularity all the time and new platforms likely to emerge, this impact looks only set to increase. The impact on seed-round funding is particularly significant, as it suggests that more startups will be able to get that all-important funding to get them off the ground. As providers of early-stage funding ourselves this is especially important to us – here’s to even more startups getting the funding they need to get started!