Crowdfunding has come of age and offers huge potential to established businesses as well as startups, says Adam Blaskey, founder of The Clubhouse, a chain of private members business clubs in London.
He said: “If you were launching a business two years ago and couldn’t fund it any other way you would crowdfund it and it looked a bit desperate. It was a bit like speed dating. But now no-one is embarrassed about using crowdfunding to raise money and there is no stigma attached to it because it is a proven and viable alternative. We are now seeing more mature businesses including some big names use it and it is really exciting.”
Crowdfunding works by amassing small amounts of investment from a large number of individual investors via an online platform to create a sum large enough to be of use to a business. Crowdfunding platforms operating in the UK currently include Crowdcube, Seedrs and Kickstarter.
Blaskey, who says he is considering raising finance for his own business via crowdfunding, added: “The crowdfunding industry is coming of age. It is no longer a place that somebody would go to because they couldn’t get money from traditional sources. Now crowdfunding finance is on a par with bank lending.”
He pointed out that as well as providing finance, crowdfunding provides a great way for established businesses to market and promote their business to customers. He says: “If you raise money from a bank, one person knows about it – the bank. But by crowdfunding it you are getting the added benefits of exposure at the same time, so it is a win-win – you get the money you need to grow and you get a new customer base. It has many advantages.”
Blaskey said that the recent creation of retail bonds by Crowdcube and other crowdfunding platforms offers particular appeal for established businesses, who can use them to raise money without having to give away equity.
He said: “Previously bonds were only something that sovereign nations and multinational blue chip companies would issue, but a crowdfunded bond is fantastic for many reasons. You don’t have to give equity away and by crowdfunding it you are getting exposure and awareness of your business.”
Blaskey said that crowdfunding offers huge untapped potential for businesses to raise money for different needs too, pointing out that when the Caterham Formula One team went bust recently, the administrators used crowdfunding to raise £2 million to enable the team to take part in the last race of the season, offering advertising space on the car in return for investment