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August 2, 2013

Crowdfunding provides startups with alternative cashflow

Group financing method could be crucial to kickstart economy.

By Cbr Rolling Blog

August has started as a good month for burgeoning startups.

Yesterday came the news that Crowdcube, the UK-based equity crowdfunding firm, was the first such company to pass the £10m mark.

That cash went towards 59 different companies, which on average grew from 400-odd employees to more than a thousand within three years of the cash influx.

It was notable that co-founder Luke Lang spoke about banks in his statement on the achievement, saying: ""Today’s banking system is outdated. It doesn’t give early stage small businesses and startups access to the funding they need to grow and drive the desperately needed economic recovery.

"Even when the banks do offer to lend, the interest rates and other terms and conditions are often crippling. It’s no wonder more businesses are finding funds through alternative finance sources such as Crowdcube."

The fact is, while the economy finally seems to be getting back on its feet, as much as the downturn was the banking sector’s fault, it can lay no claim to spurring this tentative revival.

Small businesses, unsteady on their feet, need two things: cash and time. And crowdfunding seems to be at least part of the answer to the question of how to give them these things.

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While banks are stubborn to lend, Crowdcube has taken the initiative, and others aren’t far behind.

Seedrs, another equity crowdfunding company, funded 27 campaigns in its first year (ending in July) and attracted 17,000 users.

Another, InvestingZone, has sprang up, and Angellist, and American endeavour, is having a similar effect across the pond.

It all points to alternative ways to kickstart the economy, and it feels good to know we don’t have to rely on the frigid conservatism of the banking sector to pull us out of the mess it made.

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