London Fast Becoming the Global Crowdfunding Capital

rebuildingsociety does crowdlending or peer-to-business lending, but we like to keep an eye on our sister industry, crowdfunding.

In August George Osborne declared at the Innovate Finance initiative that ‘we stand at the dawn of a new era’. He was referring to the alternative finance space, which is blazing a trail across the world, but nowhere is that more concentrated than London, according to research from The Crowdfunding Centre.

At a recent seminar, some very impressive statistics about the growth of the start-up, rewards and equity crowdfunding space were revealed.

The Crowdfunding Centre takes data from 120,000 crowdfunds across the world, adding approximately 500 new ones to its data every day.

As you might expect, the US leads the way in the number of crowdfunds, and these are concentrated on the coasts, with Texas bucking that trend and placing highly in the leading US states. However, earlier this month, London originated 248 crowdfunds. The city in second place was Los Angeles with 158.

London has a 33% success rate compared to 30% across the rest of the UK and around 25% globally. It leads the way in big growth industries like gaming and films, which has fuelled a lot of growth in the US, is increasingly finding a home in the UK.

Evidence is also growing of the positive lasting effects of a crowdfunding round. These figures are from a recent report by Crowdfund Capital Partners:

–          Reward crowdfunders reported an average sales revenue rise of 25%

–          Equity crowdfunders reported an average sales revenue rise of 350%

–          An average of 2-3 new employees are taken on after crowdfunding

–          Just over half of firms that contributed to the report said crowdfunding was their first choice method for raising funds

–          Crowdfunding embraces diversity. Pitches lead by women and minority groups is 40%, compared to 8% in the ‘old economy’.

A fascinating study in Australia has revealed much higher rates of survival among crowdfunded firms than those without crowd finance.

Barry James, probably the UK’s most prominent advocate of crowdfunding, outlined the reasons behind why venture capitalists are increasingly favouring crowdfunded firms:

–          They already have a proven market

–          Institutions can come in earlier because the firm has already completed market research, marketing and raised funds all in one go. These processes used to be sequential.

–          It is helping to get products from the lab to the consumer. It is fuelling invention and innovation because people no longer have to trudge about looking for VC money, they can try the crowd first of all.

So the future looks bright for crowdfunding. We expect to see the first crowdfunded firms looking for debt finance in the next 12 months, which would be an exciting development for everyone!

If you want to keep track of the latest in this market, we recommend following The Crowdfunding Centre.

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