DOCSLIB.ORG

Complete Guide to Crowdfunding

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Complete Guide to Crowdfunding Peer-to-peer lending ›› INVESTING COMPLETE GUIDE TO CROWDFUNDING Pooling your resources with other investors ›BY CATHY ADAMS owadays, everything is about the power to back start-up companies can provide of the crowd – whether that’s booking holiday accommodation through stellar returns but it is a high-risk strategy Airbnb or finding out the latest news on Twitter. It’s tipped over into investment Ntoo, and now anyone can invest in a start-up venture through crowdfunding. Crowdfunding – also called democratic finance – works by pooling small amounts of money from multiple investors to invest in small businesses or projects on an online platform, usually in return for equity in the company or a perk. Given cash returns are languishing, it’s hugely popular: last year more than £1,700 was raised every hour, according to the UK Crowdfunding Association. WHAT IS CROWDFUNDING? Crowdfunding is exciting, can offer stellar returns and is growing rapidly but it also comes with a huge amount of risk. Innovation charity Nesta predicts the alternative finance industry will grow to £4.4 billion this year, according to its 2014 Alternative Finance report. There are four main types of crowdfunding options. Probably the most familiar is the rewards-based scheme – epitomised by the likes of Kickstarter – where contributions are swapped for future services or products. Perks can range from loyalty cards to free products – past ventures have given away anything from free coffee or T-shirts to having your name credited on a film. Donation-based giving does exactly what it says on the tin – it’s purely philanthropic, and all you’ll get is a warm, fuzzy feeling of giving to a venture you believe in. If you’re looking for a return from crowdfunding, then there are two main options: equity- and debt-based schemes. Equity-based schemes involve investing in small, unlisted businesses in return for a slice of future profits – as well as a possible perk as a sweetener. Current projects on platform Seedrs range from: investing in a French vineyard, in return for around 30% of shared equity and membership of an exclusive wine club; a company making steel bike frames in return for around 14% equity; and an online property portal for 5% of stock. An estimated £84 million was raised through equity crowdfunding last year, according to the Nesta report, with two-thirds of investors investing more than £1,000. The report also found that the average investor had a portfolio size of £5,414, spread across 2.48 ventures. Debt-based crowdfunding – also known as peer- to-peer lending – involves investors lending money MAY 2015 | MONEYWISE.CO.UK 67 INVESTING Peer-to-peer lending ›› “I am investing in renewable energy” David Molony, an equity analyst from Bromley, invested £250 in e2 Energy, a wind energy project in Yorkshire and South Teeside, through Trillion Fund, a crowdfunding platform for the renewable energy sector. “It feels like it makes more of a difference to help start-up Chilango raised money on the platform last year, paying companies or projects that are cooperative and community-based,” 8% a year plus free burritos – which offer investors a Molony says. “The global climate crisis galvanised me too, and I fixed rate of return over a set period, plus initial capital, wanted to get more targeted on renewable energy.” although the companies are unlisted and therefore He has just received his first credit from e2 Energy – £10.91 – after much riskier. around nine months, and as a perk for investing early, he receives an Meanwhile, Funding Circle and Lending Works are extra 0.25% a year. debt-based schemes, or peer-to-peer lenders, and are Molony has also invested in e5 Energy, another wind energy project, typically choosier about who raises money on their as well as some solar energy projects in Kent, and considers these platforms. Funding Circle recommends investors lend investments as half social responsibility and half a business decision. to at least 100 companies, so no more than 1% of your “You shouldn’t only think about financial returns,” Molony adds. “My capital is with any one business. Lending Works is very similar and will match investors with creditworthy intention is to spread investments across a hundred local projects.” businesses for a fixed return. The minimum investment varies from platform to platform but some start from as low as £5 – meaning to both individuals and businesses in return for a regular you can effectively spread your capital around many income. This crowdfunding sector is growing particularly crowdfunded projects at once. quickly, with £1.2 billion lent last year, according to the Peer-to-Peer Finance Association. Around 30% of people WHAT ARE THE RISKS? will lend between £1,000 and £5,000 to businesses in There’s no getting around the fact that crowdfunding is this way, with almost 23% lending between £20,000 and a risky investment route. The nature of investing in an £100,000, according to Nesta. unlisted start-up business means that many are likely to fail and even if they are successful, returns can take years HOW CAN YOU INVEST IN A CROWDFUNDED to realise. Jeff Lynn, chief executive of Seedrs, estimates PROJECT? that investors will wait on average between five and seven There are many online crowdfunding platforms, years to see a return from an early-stage business. catering to all kinds of schemes and projects. Lending to a company through a debt-based scheme Kickstarter and Indiegogo are pure donation- and is less risky, as many peer-to-peer lenders have a slush rewards-based platforms. Since Kickstarter’s launch in fund that kicks in if a company is unable to meet 2009, more than 83,000 projects have been successfully payments. Figures from the Peer-to-Peer Finance funded using the power of the crowd, with a total of Association estimate that the lifetime bad debt rate of more than $1.6 billion (£1 billion) donated. money lent through these platforms is 4.2%. CrowdCube and Seedrs are equity-based platforms, These debt-based platforms usually insist on offering investment in a start-up business in return for strict controls to ensure only the best businesses, or future equity. Schemes available on these platforms can individuals, are allowed to borrow. Some equity-based range from frozen yoghurt companies, through craft schemes will do this to some degree but many will breweries, to estate agencies. CrowdCube also offers leave the decision about whether or not it’s a sound mini-bonds as a crowdfunded investment – food chain investment completely down to the investor. Platforms 68 MONEYWISE.CO.UK | MAY 2015 investments and get as much information as possible Even if a start-up is successful, it before making a crowdfunding investment decision.” can be difficult to sell the shares WHAT ARE THE BENEFITS? Alongside blockbuster returns if the company is will make it clear that investing in start-up companies is successful, the promise of a free perk from the business incredibly high-risk, though – Seedrs says on its website you’re investing in is a huge benefit, especially if it’s that business failure is “more likely to happen than not”, something you use often. Equity-based platforms don’t for example. tend to offer regular perks – although when available It’s a “high-risk, high-return” asset class, according they can be anything from discounts on wine and beer to Seedrs’ Jeff Lynn. “You should only invest if you can to nursery equipment – while rewards-based platforms afford to lose the money invested but at the same time, such as Kickstarter offer perks instead of a financial you stand the chance of significantly outperforming return, and they can range from having an ice-cream other types of investments,” he says. “The key thing flavour named in your honour to having a song written to remember is diversification: you shouldn’t invest in for you to use. While they are clever incentives, treat it as just one or two businesses. You should look to build a a sweetener rather than a reason to invest. portfolio over time of 20 or more investments.” Plus, there are tax benefits. Equity-based One important point to note about equity crowdfunding is eligible to be included in a Seed crowdfunding is that as the industry is so young, it’s hard Enterprise Investment Scheme or an Enterprise to quantify default rates, losses and average returns. Investment Scheme, where investors can claim back While projects will usually detail the equity return, it’s 50% of their investment back in income tax relief. not an exact science, and Nesta notes in its report that A general rule of thumb is to never invest more than “most equity crowdfunding investors are yet to see what around 10% of your portfolio in crowdfunded ventures returns their investments can bring”. and stretch that across as many places as possible. There’s also a limited secondary market for these Patrick Connolly, a certified financial planner at businesses, and even if a business is successful, it can Chase de Vere, agrees: “For those who want to utilise be more difficult to sell the shares on if the company crowdfunding, for most people this should be only for is unlisted. And while debt- and equity-based a small part of their overall portfolio. Any investment crowdfunding platforms are regulated by the Financial that promises higher returns usually comes with greater Conduct Authority, neither are covered by the Financial risk and so it would be a mistake to directly compare Services Compensation Scheme, which would usually crowdfunding with bank and building society accounts.” pay out if a company goes bust.
Load more

Recommended publications
  • Equity Crowdfunding: a New Phenomena$
    Journal of Business Venturing Insights 5 (2016) 37–49 Contents lists available at ScienceDirect Journal of Business Venturing Insights journal homepage: www.elsevier.com/locate/jbvi Equity crowdfunding: A new phenomena$ Nir Vulkan a,n, Thomas Åstebro b, Manuel Fernandez Sierra c a Said Business School Oxford University, United Kingdom b HEC Paris, France c Economics department Oxford University, United Kingdom article info abstract Article history: Crowdfunding has recently become available for entrepreneurs. Most academic studies Received 1 December 2015 analyse data from rewards-based (pre-selling) campaigns. In contrast, in this paper we Received in revised form analyse 636 campaigns, encompassing 17,188 investors and 64,831 investments between 30 January 2016 2012 and 2015, from one of the leading European equity crowdfunding platforms. We Accepted 4 February 2016 provide descriptive statistics and carry out cross-campaign regression analysis. The de- Available online 4 March 2016 scriptive statistics address its size, growth and geographic distributions in the UK. The Keywords: regressions analyse which factors are associated with the probability of a successful Equity crowdfunding campaign. We find some similarities and some interesting dissimilarities when comparing UK the descriptive statistics and regression results to research on rewards-based crowding. Campaign success The data show that equity crowdfunding will likely pose great challenges to VC and business angel financiers in the near future. We discuss some research challenges and opportunities with these kind of data. & 2016 Elsevier Inc. All rights reserved. 1. Introduction In recent years crowdfunding has emerged as a viable and popular alternative channel for entrepreneurs to fund their early stage businesses.
    [Show full text]
  • CEP Discussion Paper No 1498 September 2017 Equity
    ISSN 2042-2695 CEP Discussion Paper No 1498 September 2017 Equity Crowdfunding and Early Stage Entrepreneurial Finance: Damaging or Disruptive? Saul Estrin Daniel Gozman Susanna Khavul Abstract Equity crowdfunding (ECF) offers founders of new ventures an online social media marketplace where they can access a large number of investors who, in exchange for an ownership stake, provide finance for business opportunities that they find attractive. In this paper, we first quantify the evolution of the ECF market in the UK, the world leader, as well as the benign regulatory environment. ECF already represents more than 15% of British early stage entrepreneurial finance. We then use qualitative methods to explore three research questions. First, do these large financial flows via ECF platforms supplement or merely divert more traditional forms of funding for entrepreneurs? Second, do investors understand and appropriately evaluate the risks that they are bearing by investing in this new asset class? Finally, does ECF finance bring with it the spillovers, e.g. advice and guidance critical to entrepreneurial success, associated with other sources of funding such as Venture Capital? Our study is based on extensive interviews with investors, entrepreneurs (including some who chose not to use ECF in favour of traditional funding sources) and regulators. We conclude that ECF provides real additionality to the sources of entrepreneurial finance while not bringing major new risks for investors. This suggests other jurisdictions might consider implementing the British “principles based” regulatory framework. Keywords: equity crowdfunding, early stage entrepreneurial finance, financial regulation, investor choices JEL: G3; G21; L26; M21 This paper was produced as part of the Centre’s Growth Programme.
    [Show full text]
  • Equity Crowd Funding Report Pdf 275.1 KB
    Equity CrowdFunding Resource 2 Equity CrowdFunding has established itself as a real complement and alternative to traditional equity funding sources for High Growth Potential Start-Up and Growth Stage businesses in the UK and Ireland in recent years. Disclaimer: This Resource should not be considered in any way as a recommendation for companies to use/access Equity CrowdFunding platforms. Any companies considering taking such a route to raise capital do so at their own risk. While the promoters of the case studies profiled here have all said they would be prepared to undertake an Equity CrowdFunding campaign again, this assertion should not be considered an explicit recommendation by those companies or InterTradeIreland of Equity CrowdFunding per se, or the actual platform used by that company. This Resource should not be considered in any way as a recommendation to any investors considering investing via such a platform. Such investors do so at their own risk. This Resource does not deal with other CrowdFunding platform models used by start-up or growth stage companies – such as loan based (eg. FundingCircle, LinkedFinance etc) or donation/pre-sales platforms (eg. KickStarter etc). 3 Contents 1 Introduction 04 1.1 Equity CrowdFunding 04 1.2 Why The Resource? 05 2 Is Equity CrowdFunding very different than usual sources of Start-Up Funding? 08 3 Some things to consider 10 4 Case Studies 12 i. HouseMyDog 12 ii. See.Sense 14 iii. Flender 16 iv. Re-Vana Therapeutics 18 5 Current Active Players – Snapshot 20 4 Equity CrowdFunding Resource 1. Introduction 1.1 Equity CrowdFunding Equity CrowdFunding has established itself as a real SyndicateRoom defines Equity CrowdFunding complement and alternative to traditional equity funding on their website as follows: sources for High Growth Potential Start-Up and Growth Stage businesses in the UK and Ireland in recent years.
    [Show full text]
  • Equity Crowdfunding a New Phenomena
    Journal of Business Venturing Insights 5 (2016) 37–49 Contents lists available at ScienceDirect Journal of Business Venturing Insights journal homepage: www.elsevier.com/locate/jbvi Equity crowdfunding: A new phenomena$ Nir Vulkan a,n, Thomas Åstebro b, Manuel Fernandez Sierra c a Said Business School Oxford University, United Kingdom b HEC Paris, France c Economics department Oxford University, United Kingdom article info abstract Article history: Crowdfunding has recently become available for entrepreneurs. Most academic studies Received 1 December 2015 analyse data from rewards-based (pre-selling) campaigns. In contrast, in this paper we Received in revised form analyse 636 campaigns, encompassing 17,188 investors and 64,831 investments between 30 January 2016 2012 and 2015, from one of the leading European equity crowdfunding platforms. We Accepted 4 February 2016 provide descriptive statistics and carry out cross-campaign regression analysis. The de- Available online 4 March 2016 scriptive statistics address its size, growth and geographic distributions in the UK. The Keywords: regressions analyse which factors are associated with the probability of a successful Equity crowdfunding campaign. We find some similarities and some interesting dissimilarities when comparing UK the descriptive statistics and regression results to research on rewards-based crowding. Campaign success The data show that equity crowdfunding will likely pose great challenges to VC and business angel financiers in the near future. We discuss some research challenges and opportunities with these kind of data. & 2016 Elsevier Inc. All rights reserved. 1. Introduction In recent years crowdfunding has emerged as a viable and popular alternative channel for entrepreneurs to fund their early stage businesses.
    [Show full text]
  • Pushing Boundaries: the 2015 UK Alternative Finance Industry Report
    PUSHING BOUNDARIES THE 2015 UK ALTERNATIVE FINANCE INDUSTRY REPORT February 2016 Bryan Zhang, Peter Baeck, Tania Ziegler, Jonathan Bone and Kieran Garvey In partnership with with the support of CONTENTS Forewords 04 Introduction 10 About this study 12 The Size and Growth of the UK Online Alternative 13 Finance Market Market Size and Growth by Alternative Financing 14 Models Increasing Share of the Market for Business Funding 19 Market Trends in Alternative Finance 22 Expanding Base of Funders and Fundraisers 23 Market Entrants and Partnership strategies 25 Seeking Growth Through Awareness, Increased 26 Marketing and Forging Partnerships 27 Institutionalisation of the Market Cross-Border Transactions and Internationalisation 30 The Geography and Industries & Sectors of 31 Alternative Finance Industry Perspectives on Regulation, Tax Incentives 33 and Risks Size and Growth of the Different Online 38 Alternative Finance Models Peer-to-Peer Business Lending 39 Peer-to-Peer Business Lending (Real Estate) 40 Peer-to-Peer Consumer Lending 41 Invoice Trading 42 Equity-based Crowdfunding 43 Equity-based Crowdfunding (Real Estate) 44 Reward-based Crowdfunding 45 Community Shares 46 Donation-based Crowdfunding 46 Pension-led Funding 47 Debt-based Securities 47 Conclusion 48 Acknowledgements 50 Endnotes 51 3 ABOUT THE AUTHORS BRYAN ZHANG Bryan Zhang is a Director of the Cambridge Centre for Alternative Finance and a Research Fellow at the Cambridge Judge Business School. He has co-authored !ve industry reports on alternative !nance. PETER BAECK Peter Baeck is a researcher at Nesta, where he focuses on crowdfunding, peer-to-peer lending and the role of digital technologies in public and social innovation.
    [Show full text]
  • Summary of Provisional Findings
    ANTICIPATED ACQUISITION BY CROWDCUBE LIMITED OF SEEDRS LIMITED Summary of provisional findings Notified: 24 March 2021 Overview 1. The Competition and Markets Authority (CMA) has provisionally found that the proposed merger (the Merger) between Crowdcube Limited (Crowdcube) and Seedrs Limited (Seedrs) (together, the Parties or Party where appropriate) may be expected to result in a substantial lessening of competition (SLC) within the supply of equity crowdfunding (ECF) platforms to SMEs and investors in the UK. 2. We invite submissions from any interested parties on these provisional findings by 5pm on Wednesday 14 April 2021. 3. As we have provisionally found an SLC, we are also setting out our provisional views on possible remedies and we invite submissions on our notice of remedies by 5pm on Wednesday 7 April 2021. At this stage, our view is that the only effective remedy is likely to be prohibition of the Merger. Conduct of the inquiry 4. In reaching this provisional decision, we have considered submissions from the Parties. We have also considered a wide range of evidence including: market share estimates; data from the Parties on lost business opportunities; the Parties’ internal documents; questionnaire evidence from customers of the Parties (both SMEs and investors) as well as from competitors and other providers of equity finance supplemented with calls with customers and competitors; and information in relation to the appropriate counterfactual. We held formal hearings with the Parties and received separate presentations from both Parties in lieu of in-person ‘site visits’. 1 Jurisdiction 5. We have provisionally found that the Merger, if carried into effect, will result in the creation of a relevant merger situation on the basis of the share of supply test as the Parties have a combined share in the supply of ECF platforms to SMEs and investors in the UK of [90–100%], with an increment arising from the Merger of [40–50%].
    [Show full text]
  • Financial Technology Sector Summary
    Financial Technology Sector Summary September 30, 2015 Financial Technology Sector Summary Financial Technology Sector Summary Table of Contents I. GCA Savvian Overview II. Market Summary III. Payments / Banking IV. Securities / Capital Markets / Data & Analytics V. Healthcare / Insurance 2 Financial Technology Sector Summary I. GCA Savvian Overview 3 Financial Technology Sector Summary GCA Savvian Overview An independent investment bank focused on the growth sectors of the global economy 7+ A R E A S O F TECHNOLOGY EXPERTISE . Provider of mergers and acquisitions, private capital agency and capital markets Financial Technology Business & Tech Enabled Services advisory services, and private funds services Media & Digital Media Industrial Technology . Headquarters in San Francisco and offices in Telecommunications Healthcare New York, London, Tokyo, Osaka, Singapore, Mumbai, and Shanghai . Majority of U.S. senior bankers previously with Goldman Sachs, Morgan Stanley, Robertson Stephens, and JPMorgan 100+ CROSS - BORDER TRANSACTIONS . Senior level attention and focus, extensive transaction experience and deep domain insight 20+ REPRESENTATIVE COUNTRIES . Focused on providing strategic advice for our clients’ long-term success 580+ CLOSED TRANSACTIONS . 225+ professionals $145BN+ OF TRANSACTION VALUE 4 Financial Technology Sector Summary GCA Savvian Overview Financial Technology Landscape . GCA Savvian divides Financial Technology Financial Technology into three broad categories − Payments & Banking − Securities & Capital Markets Payments & Banking Securities & Capital Markets Healthcare & Insurance − Healthcare & Analytics Insurance Crowd Funding BPO / IT Services ATMs Bill Payment Digital Media Brokerage Collections e-Brokerage Claims Processing Core Processing Exchanges Collections Financial Outsourcing Hedge Fund Administration CRM Information Processing Index Businesses Document Management Issuer Processing Mutual Fund Processing eCommerce Marketing / Offers Merchant Acquiring Personal Financial Mgmt.
    [Show full text]
  • Download the Report
    It is a great pleasure for me to introduce CFTE's first research report "Fintech 50: 5 Years in Fintech". Our mission at CFTE is to help organisations and people transform themselves at a time when technology is quickly reshaping financial services. Some organisations will leverage technology and thrive. Others will not be able to adapt, and fall behind. The same will apply to people. But we hope that with the right knowledge, mindset and network, many will make the most of today's opportunities in finance. This report will hopefully help towards this goal, and give readers an understanding of how Fintech has evolved during the last 5 years - and give them some hints on how Fintech will further develop in the future. For the tens of thousands of CFTE participants around the world, you will notice that many of the concepts discussed in the courses can explain the developments mentioned in this report. Although the future is hard to predict, there are definitely some important trends that will continue to shape financial services. For me, if there was only one to mention, that would be the democratisation of financial services through technology, and that makes me very hopeful about the next 5 years in Fintech. Enjoy reading the report, and hope to see you join the CFTE community around the world. Tram Anh Nguyen, Co-founder, CFTE The Selection Process .................................................................................................................................... 4 Sectors ..........................................................................................................................................................
    [Show full text]
  • Equity Crowdfunding: a New Phenomena
    View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Oxford University, Saïd Business School: Eureka Saïd Business School Research Papers November 2015 Equity crowdfunding: A new phenomena Nir Vulkan Saïd Business School, University of Oxford Thomas Åstebro HEC Paris Manuel Fernandez Sierra Economics Department, University of Oxford Saïd Business School RP 2015-21 The Saïd Business School’s working paper series aims to provide early access to high-quality and rigorous academic research. Oxford Saïd’s working papers reflect a commitment to excellence, and an interdisciplinary scope that is appropriate to a business school embedded in one of the world’s major research universities.. This paper is authorised or co-authored by Oxford Saïd faculty. It is circulated for comment and discussion only. Contents should be considered preliminary, and are not to be quoted or reproduced without the author’s permission. Equity crowdfunding: A new phenomena1 Nir Vulkan Said Business School Oxford University Thomas Åstebro HEC Paris Manuel Fernandez Sierra Economics department Oxford University November 2015 Abstract Crowdfunding has recently become available for entrepreneurs. Most academic studies analyse data from rewards-based (pre-selling) campaigns. In contrast, in this paper we analyse 636 campaigns, encompassing 17,188 investors and 64,831 investments between 2012 and 2015, from one of the leading European equity crowdfunding platforms. We provide descriptive statistics and carry out cross-campaign regression analysis. The descriptive statistics address its size, growth and geographic distributions in the UK. The regressions analyse which factors are associated with the probability of a successful campaign.
    [Show full text]
  • 1 Equity Crowdfunding: New Evidence from US and UK Markets Alice
    Equity crowdfunding: New evidence from US and UK markets Alice Rossi [email protected] Department of Management, Information and Production Engineering University of Bergamo Viale Marconi, 5 - 24044 Dalmine (BG), Italy Tom Vanacker [email protected] Faculty of Economics and Business Administration Ghent University Sint-Pietersplein 7, 9000 Gent, Belgium [email protected] University of Exeter Business School University of Exeter Rennes Drive, Exeter, EX4 4ST, United Kingdom Silvio Vismara* [email protected] Department of Management University of Bergamo Via dei Caniana, 2 - 24127Bergamo, Italy Acknowledgements: We thank the editor (Chelsea Liu) and the reviewers of Review of Corporate Finance for their constructive feedback and comments. We further thank the participants and the discussant (Feng Zhan) at the Boca Corporate Finance and Governance Conference for their valuable comments. Alice Rossi acknowledges support from Ghent University in the form of a visiting period as incoming PhD student at the Faculty of Economics and Business Administration. * Contact author: Silvio Vismara, Department of Management, University of Bergamo, Italy; via dei Caniana 2, 24127 Bergamo, Italy. Ph. +39.035.2052352. Email: [email protected]. 1 Equity crowdfunding: New evidence from US and UK markets Abstract This paper offers insights into 3,576 initial equity crowdfunding offerings in the UK and US markets from 2012 to 2019. We investigate the factors influencing three outcomes: the success of the offering, the fundraising target, and matching between entrepreneurial ventures and crowdfunding platforms. In all markets, higher equity retention by original entrepreneurs positively affects the chances of success of the offerings and amount of capital raised.
    [Show full text]
  • Market Analysis, Economics and Success Drivers of Equity Crowdfunding
    Dipartimento di Impresa e Cattedra di Advanced Corporate Management Finance MARKET ANALYSIS, ECONOMICS AND SUCCESS DRIVERS OF EQUITY CROWDFUNDING RELATORE: CANDIDATO: Prof. Cristiano Cannarsa Salvatore Luciano Furnari CORRELATORE: Matr. 691441 Prof. Raffaele Oriani Anno Accademico 2016/2017 1 Contents Introduction ............................................................................................................. 4 Chapter 1 – Equity crowdfunding ............................................................................. 6 1.1 Definition and origins ..................................................................................... 6 1.2 Classification .................................................................................................. 8 1.2.1 Equity crowdfunding and other crowdfunding models .............................. 8 1.2.2 Definition of the target and type of campaign: All-Or-Nothing vs Keep-It- All .................................................................................................................. 16 1.3. Equity crowdfunding benefits ...................................................................... 23 1.3.1 Advantages for investors ........................................................................ 24 1.3.2 Advantages for issuers............................................................................ 26 1.4 Equity crowdfunding risks ............................................................................ 30 1.4.1 Risk for investors ..................................................................................
    [Show full text]
  • Corporate Social Responsibility and Crowdfunding: the Experience of the Colectual Platform in Empowering Economic and Sustainable Projects
    sustainability Article Corporate Social Responsibility and Crowdfunding: The Experience of the Colectual Platform in Empowering Economic and Sustainable Projects Jesús Mauricio Flórez-Parra 1,* , Gracia Rubio Martín 2 and Carmen Rapallo Serrano 2 1 Department of Accounting and Finance, Faculty of Economics and Business Sciences, University of Granada, 18071 Granada, Spain 2 Department of Accounting and Finance, Faculty of Economics and Business Sciences, University of Complutense de Madrid, 28223 Madrid, Spain; [email protected] (G.R.M.); [email protected] (C.R.S.) * Correspondence: [email protected] Received: 25 May 2020; Accepted: 27 June 2020; Published: 29 June 2020 Abstract: In recent years, sustainable crowdfunding has been one of the key elements in the search for new sources of financing. This has involved eliminating financial barriers and intermediaries, bringing entrepreneurs’ projects closer to fund providers, and thus instigating changes in traditional investment and profitability parameters. Among these indicators, the sustainable business return and its relationship with Corporate Social Responsibility (CSR) could be a relevant factor to improve the cost of funding, to explain the return on assets (ROA), and, consequently, impacting on the return on equity (ROE). In this context, this paper takes as a reference 101 projects that are part of Colectual’s lending. We analyze factors such as sustainability—the application of CSR across a social responsibility index; the financial characteristics of the company—liquidity, leverage, and solvency; and the characteristics of the loans related to crowdfunding—amount, maturity, and charge rate of the loan. Our study provides empirical evidence that, besides financial characteristics, the commitment to CSR can improve collective lending and the management of resources, as well as enhance the capital wealth of companies, by improving shareholder profitability or ROE.
    [Show full text]