Luke Davis

A year of opportunity for crowdfunding

After demonstrating their optimism and resilience last year, entrepreneurs, investors and crowdfunding platforms are well positioned to seize the opportunities for growth that lie ahead.

The two blockbuster events coming up in March – the likely triggering of Article 50 and the Spring Statement – afford the government new opportunities to more vigorously champion the vital role SMEs continue to play in driving economic growth nationwide.

We can expect a renewed focus on SME-led growth in 2017, with the Treasury-led patient capital review to return its findings this year. From this investigation into the barriers SMEs face in accessing growth capital, it is likely that the government will undertake ambitious actions to support scale-up finance. As she told the CBI in November, the Prime Minister Theresa May aims to improve the nation’s backing of growing businesses; at present the UK ranks only 13th in the OECD for scale-up support. As a result, SME and investor-friendly measures are predicted to follow as a matter of urgency for a Brexit government searching for a long-term growth strategy. 

This new focus will not be short on potential. With SME confidence resiliently high, the crowdfunding industry is likely to continue moving from strength to strength as the private and public sector enhance their focus on growth finance. However, to ensure businesses have access to the full depth of Britain’s funding pool, greater education and awareness will be necessary. In the wake of the EU referendum result, a survey by IW Capital and Crowdfinders found that 43% of consumers and investors in the UK do not feel as though they have sufficient knowledge of alternative finance to decide whether to incorporate this into their future investment strategy. This shows that while there is a huge cause for optimism – 30% of British investors said they are considering alternative finance as part of their investment plans over the next 12 months – there are evidently still strides to be made for the alternative finance industry to reach its full potential.

At both IW Capital and Crowdfinders, we will endeavour to communicate as widely as possible with investors and entrepreneurs alike to ensure SMEs do not feel the need to rely solely upon their own savings, the bank of mum and dad or increasingly hesitant high street banks to start or grow their business.  

After all, crowdfunding isn’t just for start-ups and over the course of the year we may well witness the end of that assumption. Our own recently launched online investment platform and £100m Race to Scale fund, although offering support to businesses large and small, were principally designed to support the generation of SMEs that already benefitted from the post-2008 alternative finance boom. These businesses now find themselves in a state of limbo – with their growth capital needs too large for traditional crowdfunding platforms, while remaining too small in size to attract institutional investment. For both the private sector and government, providing education and raising awareness of the platforms that exist to support the growth of businesses of all sizes will be a priority. Personally, I think the vital signs show that the crowdfunding sector has the potential to play an ever more expansionary role if platforms are able to adapt to the true state of British business and seize the opportunities upcoming government measures can create. 

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