Everyone is interested in the winners and which platforms will IPO. This year will show some clear winners in the space. By winners, I mean those companies that have done the numbers but also have had investments that actually worked and not just some person raising 500k to go and buy a boat in Monte Carlo and post a few Twitter updates.
My gut says, and I could be entirely wrong, that the likes of Crowdcube and Seedrs will start completing the necessary paperwork to IPO. I could be oh so wrong about this by the way. I was fortunate to meet Jeff Lynn, CEO of Seedrs at Sky News last summer and I have to say I like the platform and I like the fact they have success coming out from the investment rounds. I take my hat off to Crowdcube who have accelerated in the last 12 months and continue to push hard on the marketing side. Caterham F1 and all the adverts on the London tube were smart moves.
Who will the other winners be? Hard to say. There are some very specialised and focused crowdfunding platforms getting traction. A blatent bit of self promotion here but I am working with the Nineyards chaps who have a platform launching in March called Crowdstacker. Why do I like it, being a bit of an anti CF person. Well firstly everything I invest in is secured against an asset so I have some options if the bond goes south. Also they are specialising and not trying to do the whole world of crowdfunding and turning down deals, its about quality and not quantity.
I also like some of the platforms that are helping Eco projects get off the ground and indeed come across some examples that are helping charities that usually would struggle on raising funds against the bigger branded charities out there. The fact they have access to funds that might have been a challenge previously can only be good news.
The good news is that I think crowdfunding by default is far more interesting than banks or shares. Hopefully 2015 will see it becoming a little more mainstream and allow more people to understand it.
However I suspect we’ll see some negative news this year too, almost a blow up in the space. I have voiced on many occasions how some of the businesses that people like me wouldn’t touch with a bargepole will get funding this way instead. Much like in the 1990’s when mortgages and other financial miss selling hit the headlines, I fully expect the same to happen in the crowdfunding space. And it’s not a case of if but, when. There will be platforms out there held responsible for this aside from the actual businesses that took investment. If I were a crowdfunding platform owner, I would start doing the due diligence now for this instead of waiting to react when the proverbial hits the fan.
Let’s not forget there is a general election this year which always means more buy-in by politicians and, more importantly, governments. I was at Level 39 when George Osborne MP helped launch Innovate Finance last year. Five or so years ago you hardly saw Cabinet ministers involved with tech companies, today is very different. This may be a good thing, but may be a bad thing. The good news is that it can only mean 2015 will have more tax incentives and support in general. Whether that changes 2016 onwards waits to be seen.
The FCA. They have had one hell of a challenge for the last couple of years. And one that is not over yet. I get the feeling they are going to withdraw further crowdfunding licenses very soon and my guess is they don’t want to turn the space into another payday loan fiasco.
What will be interesting is how they manage those platforms out there that blatantly have a boardroom and investor group who keep pushing for numbers above checks and quality.
I fully expect that individuals lending through the many P2P platforms being able to offset losses against other P2P income which is great news. Expect it to work in a similar way to the EIS/SEIS model. By the way I still think the EIS/SEIS model needs an idiots guide as frankly most people don’t understand it out there and are probably missing out on the benefits.
The changes to ISA products. It’s pretty simple. Either we are going to see a lot of people driving around in Ferraris or Lamborghinis suddenly, in which case I need to buy a dealership, or individuals are going to want to use that money and have some fun on the crowdfunding platforms. Whilst that’s great and positive, I also worry about the noise out there and the platforms that are displaying bad investments.
Crowdfunding is here to stay there is no doubt about that. I think this year could be pretty massive and also start creating some normality in expectations around it. But do expect having to be very cautious about who you invest in, some bad press for some of the platforms and also some crazy valuations out there for some pre IPO companies.
Or I am completely wrong, which would not be the first time. Have a great 2015.
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