U.K. equity crowdfunding platform Crowdcube announced that it planned to raise £5 million ($7 million) from its members in July and attracted around £39 million ($51 million) in pledges on its preregistration site.
Last week, itrevealed that the final volume raised was £8 million ($11 million). This is the largest UK crowdfunding round to date, and more than double the previous record of £4 million ($5 million), raised by money management fintech GoHenry.
It plans to use the money to create a platform for secondary trading. Investors who buy a stake in a private company, via equity crowdfunding or other means, typically only get a return if the company is sold or listed. Crowdcube plans to create a platform that will enable shareholders in any UK private company to sell their stake to other investors, offering a quicker route to returns. Both professional investors and the inexperienced investors who make up the bulk of Crowdcube's "crowd" will be able to use the platform. This concept is similar to that used by US firm NASDAQ Private Market, which enables investors to trade stakes in private companies.
But there are a number of hurdles that Crowdcube's platform will have to overcome in order to be successful:
- Protecting investors' tax breaks. In the UK, investors who buy shares in small businesses qualify for certain tax breaks. But in order to realise those benefits, investors must hold onto the shares for at least three years. Crowdcube will have to find a way to make sure investors who sell early don't lose out, otherwise trading volumes on the secondary market would likely be limited.
A secondary market could cause fluctuations in valuation. This is would likely cause a problem for startups that have a larger portion of equity in the hands of investors — like some of those funded by Crowdcube. If the shares that make up this equity are included on the secondary platform, and the value of those shares dip, it could lower the overall valuation of the startup. This might make future financing rounds more difficult.
- The need to protect inexperienced investors. Private businesses don't legally have to report financials or other performance metrics — and when they do, the numbers are not always validated by a third party. This makes it especially hard for inexperienced investors to fully understand the risks of investing and could result in significant personal losses — which would likely catch regulators' attention. In this scenario, Crowdcube would have to convince regulators that the investors were adequately educated. This could result in Crowdcube having to bring in an independant third party to audit company reports.
We’ve entered the most profound era of change for financial services companies since the 1970s brought us index mutual funds, discount brokers and ATMs.
No firm is immune from the coming disruption and every company must have a strategy to harness the powerful advantages of the new fintech revolution.
The battle already underway will create surprising winners and stunned losers among some of the most powerful names in the financial world: The most contentious conflicts (and partnerships) will be between startups that are completely reengineering decades-old practices, traditional power players who are furiously trying to adapt with their own innovations, and total disruption of established technology & processes:
- Traditional Retail Banks vs. Online-Only Banks: Traditional retail banks provide a valuable service, but online-only banks can offer many of the same services with higher rates and lower fees
- Traditional Lenders vs. Peer-to-Peer Marketplaces: P2P lending marketplaces are growing much faster than traditional lenders—only time will tell if the banks strategy of creating their own small loan networks will be successful
- Traditional Asset Managers vs. Robo-Advisors: Robo-advisors like Betterment offer lower fees, lower minimums and solid returns to investors, but the much larger traditional asset managers are creating their own robo-products while providing the kind of handholding that high net worth clients are willing to pay handsomely for.
As you can see, this very fluid environment is creating winners and losers before your eyes…and it’s also creating the potential for new cost savings or growth opportunities for both you and your company.
After months of researching and reporting this important trend, Evan Bakker, research analyst for BI Intelligence, Business Insider's premium research service, has put together an essential report on the fintech ecosystem that explains the new landscape, identifies the ripest areas for disruption, and highlights the some of the most exciting new companies. These new players have the potential to become the next Visa, Paypal or Charles Schwab because they have the potential to transform important areas of the financial services industry like:
- Retail banking
- Lending and Financing
- Payments and Transfers
- Wealth and Asset Management
- Markets and Exchanges
- Blockchain Transactions
If you work in any of these sectors, it’s important for you to understand how the fintech revolution will change your business and possibly even your career. And if you’re employed in any part of the digital economy, you’ll want to know how you can exploit these new technologies to make your employer more efficient, flexible and profitable.
Among the big picture insights you'll get from The Fintech Ecosystem Report: Measuring the effects of technology on the entire financial services industry:
- Why financial technology is so disruptive to financial services—it will soon change the nature of almost every financial activity, from banking to payments to wealth management.
- The basic conflict will be between old firms and new—startups are re-imagining financial services processes from top to bottom, while incumbent financial services firms are trying to keep up with new products of their own.
- Both sides face serious obstacles—traditional banks and financial services firms are investing heavily in innovation, but leveraging their investments is difficult with so much invested in legacy systems and profit centers.
- Meanwhile, startups are struggling to navigate a rapidly-changing regulatory landscape and must scale up quickly with limited resources.
- The blockchain is a wild card that could completely overhaul financial services. Both major banks and startups around the world are exploring the technology behind the blockchain, which stores and records Bitcoin transactions. This technology could lower the cost of many financial activities to near-zero and could wipe away many traditional banking activities completely.
This exclusive report also:
- Explains the main growth drivers of the exploding fintech ecosystem.
- Frames the challenges and opportunities faced by incumbents and startups.
- Breaks down global and regional fintech investments, including which regions are the most significant and which are poised for the highest growth.
- Reveals which two financial services are garnering the most investment, and are therefore likely to be transformed first and fastest by fintech
- Explains why blockchain technology is critically important to banks and startups, and assesses which players stand to gain the most from it.
- Explores the financial sectors facing disruption and breaks them down in terms of investments, vulnerabilities and growth opportunities.
- And much more.
The Fintech Ecosystem Report: Measuring the effects of technology on the entire financial services industry is how you get the full story on the fintech revolution.
To get your copy of this invaluable guide to the fintech revolution, choose one of these options:
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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of the fast-moving world of financial technology.