InvestingZone’s Chief Executive, Jean Miller, spoke to money reporter Judith Evans in her piece ‘Corporate finance houses turn to crowdfunding’ found on the Financial Times website. (This article is behind a paywall).
Corporate finance houses including FinnCap and Grant Thornton are to list early-stage equity deals on a crowdfunding website in the first tie-up of its kind.
The brokers plan to list a portion of investments that have typically only been available to wealthy investors and venture capitalists, offering the same terms to individual investors as institutions. People will be able to invest as little as £100.
The arrangement demonstrates the extent to which City firms have begun to take equity and debt crowdfunding seriously as its growth accelerates.
InvestingZone, a crowdfunding site backed by venture capitalist Jon Moulton, will begin by offering equity in Every Cloud, a UK-based cloud computing company, through the Manchester-based broker Acceleris.
“These are deals that the public wouldn’t normally get to see, deals that have already had quite a bit of institutional investment,” said InvestingZone chief executive Jean Miller.
Ms Miller said the brokers, which also include Nexus and CMR, agreed to take part because companies are increasingly turning to crowdfunding for finance in their early stages.
“They [the brokers] realised that if they don’t have a profile in this growing market they could lose out. This is a good way to get sensible companies in the pipeline and it also increases investment capacity.”
Some £84m was raised through online equity crowdfunding platforms last year, according to Nesta, an innovation charity, while three big platforms have between them done £38m of deals this year, according to the data provider AltFi.
The Financial Conduct Authority has warned that crowdfunding is very risky for investors, saying “you are very likely to lose all your money” in the asset class, as most start-ups fail.
Simon Thorn, corporate finance executive at Acceleris — which advised on the £15m Aim flotation of RedX Pharma in March — said his company expected to offer about five deals through InvestingZone this year.
The company is keen to support efforts to professionalise crowdfunding, he added. “Crowdfunding is a fantastic way for early-stage or start-up companies to attract a first round of funding. But if that’s not carried out professionally — if it was at, say, a very high valuation — then that could be a problem later. It needs to be done with a common sense approach.”
“Companies need to understand that taking on investment is serious, it’s not just cheap cash,” said Ms Miller.