The Rapid Growth of Crowdfunding for Equity
Crowdfunding for equity may not be the most obvious investment option available, but it’s hard to argue against its ever increasing rise in popularity with investors.
Since 2011, when it first started gathering pace in the UK, equity crowdfunding has been viewed as an attractive opportunity for investors. However, all investments come with a certain amount of risk and the more innovative the investment model, the more scepticism there is from investors.
That’s why analysing the growth behind crowdfunding for equity is an important step in assuring investors that it’s a model worth investing in.
The Early Days of Crowdfunding for Equity
Crowdfunding for equity first started to grow in the US market during the middle period of the 2000s; towards the end of that decade the first crowdfunding platforms were launched. These investment opportunities mostly centred on technology ventures and the success soon spread to the UK.
In 2011 the UK saw the launch of its first crowdfunding platforms and, since then, the market has continued to grow.
Continued Growth of Crowdfunding for Equity
During the model’s initial popularity in 2011, around £1.6m was invested amongst 7 projects. By 2014, however, a total of £24m was invested across 101 projects and that was just in the first 6 months of the year. This figure may not sound industry shaking when you consider that peer-to-peer lending generated £193m in 2013, but those half yearly 2014 figures reported for equity crowdfunding made up 18% of all visible deals in the UK.
When you consider that, in 2011, crowdfunding for equity only accounted for 2% of all visible deals in the UK, you begin to appreciate the sharp rise in the model’s fortunes. And this growth, of course, fuels interest in the model even further to attract newer investors to the model and continue its expansion.
However, analysing the actual investment at play in crowdfunding for equity would appear to be less successful than the hype preceding it lets on. 2.2% of total visible UK equity investment was attributed to crowdfunding for equity in the first half of 2014, but this was only a rise of 2% when compared to the same figures from 2011.
The small percentages at play, though, are misleading; equity for crowdfunding actually grew quicker between 2011 to 2013 than the total UK equity investment from the same period. This highlights the pace at which crowdfunding for equity is growing and why it remains a highly lucrative means of funding.
The Future of Crowdfunding for Equity
Crowdfunding for equity is becoming more and more recognisable to investors in the UK due to its rapid growth over the last four years. This has been further strengthened by the Financial Conduct Authority’s involvement in regulating crowdfunding for equity to ensure the model is correctly monitored and investors are offered protection. Although the majority of small to medium businesses are yet to dip their toe into equity crowdfunding, it’s expected that more and more of them will turn to this investment model in the near future.