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Scotland Racing Ahead in Crowdfunding

Scotland Racing Ahead in Crowdfunding

The Scottish Crowdfunding Report 2016 was published this month and provides a fascinating update on the benchmarks established in the 2013 report and demonstrates Scotland’s rapid advance in UK crowdfunding.

Scottish Crowdfunding Reporttwintangibles was pleased to be commissioned to research and write both of these important reports on the specific and distinctive characteristics of crowdfunding in Scotland.

Significant progress has been made in the past three years from a position where we suggested that the low adoption rates of crowdfunding in Scotland  were perhaps a missed opportunity to a position where Scotland is outstripping the rest of the UK in its growth rates.

The report is focused on the use and impact of crowdfunding on business and has used a consistent approach across the two reports to ensure comparability. Drawing on crowdfunding activity data analysis, survey material and expensive interviews and focus groups the report highlights a number of key feature. Notably it demonstrates a significant the increase in the Scottish share of the value created from crowdfunding in the UK.  Scotland has jumped from a position of less than 1% of the UK total to 4% and this at a time when the UK crowdfunding sector has been growing at a remarkable rate. In the period the data was gathered Scotland raised some £27 million pounds through crowdfunding. The bulk of that, some £20 million, was raised through the Lending model. The dominance of the lending model is not a surprise and is in common with the rest of the UK but it is worth noting that in the Reward space Scotland commands around 7% of the UK totals raised.

Scottish Crowdfunding Report

Through the course of the three years the sector has matured significantly with both the size and nature of campaigns growing along with the range of sectors accessing these funds and the stage in a business life cycle where the funding is being sourced. For example we can see evidence of more mature businesses accessing crowdfunding, no longer is it considered simply for start-ups. A particularly interesting case included in the report highlights an investor exit using a crowd loan to finance the deal.

We suggested back in 2013 that it was not unreasonable to see Scotland’s share of the UK crowdfunding totals to reach around 8%. Some disagreed with this but the evidence seems to suggest that Scotland is getting there and we still stand by that aspiration.

The report was once again supported by the Glasgow Chamber of Commerce along with three new partners for this edition, those being Harper Macleod the law firm that has done so much to champion equity crowdfunding north of the border, LendingCrowd the Edinburgh based innovative crowdlending platform and Santander which as  one of teh major high street banks is demonstrating considerable engagement and openness to the crowdfunding sector, not least through their support of the report.

The full report is available for download free of charge in soft copy for the Glasgow Chamber of Commerce website.

The Current State of Crowdfunding in Europe

We contributed to the freely available Current State of Crowdfunding in Europe Report. It coincides with a call for better standards of data sharing and an agreed taxonomy. We agree!

Cover Current State Crowdfunding EuropeThe report, which is free to download, was created by the CrowdfundingHub in Amsterdam and incorporated contributions from  some 30 collaborators of which twintangibles was proud and honoured to be one. Setting out a comprehensive overview of the state of crowdfunding in a range of different countries it is an impressive and valuable source of information and a testament to the growing importance of crowdfunding and alternative finance across a great deal of Europe and the wider world.

The report makes a number of overarching observations including the importance of a positive regulatory stance in the growth of crowdfunding and presents a  general upbeat and optimistic view of the possibilities of crowdfunding.

Another key observation is that of the need to create more a more defined  taxonomy for the sector and better standards of data sharing/reporting. I would wholeheartedly agree with both of these items. This has ever greater relevance as increasing numbers of old world finance operators ride on the coattails of crowdfunding to popularise new product offerings which have neither the  awareness nor the benefits of crowd finance. This is a problem as it distorts people’s understanding of the sector and, more importantly perhaps, deprives the users of the specific and distinctive benefits that crowdfunding brings. At the same time many platforms  exaggerate and distort their performance to position themselves more positively in an ever increasingly competitive marketplace and, in so doing, make the reporting of activity levels unclear and less than useful.  It is essential for consumers, researchers, administrators, regulators and indeed all participants in the market place,  to get access to a more coherent and comparable set of data based around shared standards in the interests of transparency, choice, measurement and practicality. Some kind of Dublin Core for data exchange and a manifesto for the crowd defining what is required for inclusion in the pantheon of crowdfunding, and the wider alternative finance sectors is a call we would echo and support.

What we would say in addition is that it cannot be left to vested interests or partisan actors to do this work as in such an immature market it would be unlikely to succeed! It might be that regulators might have a role to play in bringing this about but as few if any have any grasp of the subject matter they can’t operate alone and they must avoid being captured by lobby groups masquerading as sector representatives.

How do you raise more than $20 million to develop a computer game?

The answer is to run a successful DIY crowdfunding campaign to utilise your existing crowd asset and build on a smaller successful campaign on a platform

Of course there is much more to it than that but choosing to run a DIY campaign – one that you take “off platform” and run on your own website – is a very rapidly developing trend in crowdfunding. It is the approach adopted by Star Citizen which, in some estimations, is the world record crowd fund.

Surprisingly diverse DIY crowdfunding can be utilised in all forms of crowdfunding – including equity models – and we predict it will continue to expand rapidly in certain conditions.

Our new report is a comprehensive survey of this novel and growing approach to raising funds. The report covers its origins, key drivers, risks and considerations when running DIY projects and includes a listing of many of the rapidly expanding range of tools that permit people to undertake DIY or direct crowdfunding.

The report is available in digital format in English and Italian and is the most comprehensive survey of DIY crowdfunding to date and a must have for anyone considering using this form of funding.

To get your copy and for more information follow this link

Italian Crowdfunding Market: Fast and Furious. Results of the latest Analysis of Italian Crowdfunding Platforms

After exactly one year from the first edition of Crowdfuture, the Italian crowdfunding community met again in Rome last Saturday. Five tracks with 45 speakers came together to explore and discuss  the,  still emerging but already disruptive,  phenomenon of crowdfunding. It was also the opportunity to present the updated edition of the “Analysis of Italian Crowdfunding Market”, to date the most complete report on the sector. Ivana Pais, from the Cattolica University, and I presented it during one of the afternoon seminars, in front of a very active and curious audience (you can find the slides here) and we’ve just published the full report that you can view and download for free here (only available in Italian at the moment).

Main points:

– The number of platforms has almost tripled in a year

The availability of platforms is currently outstripping the availability of suitably prepared projects: rejection rate is very high

– Half of the total value raised by successful projects in the history of Italian crowdfunding  has been collected in the last year (11 million Euros)

– There’s a clear and marked predominance of the social lending model: of the total value raised, the 80% is brought in by lending-based portals

Among the trends: localvesting, niche platforms, hybrid platforms and DIY crowdfunding

Italian crowdfunding market is growing fast but it has still a long way to go, especially in overcoming cultural barriers and norms

The Italian market for crowdfunding seems to be growing at a very fast pace.  From 16 platforms in 2012 we now have 41, of which 27 are active and 14 in their launch phase. Among the active platforms, more than half are reward-based, one-third donation- based and only three are lending-based. Among those launching, the vast majority are equity-based, pushed by the recent publication of the Consob Regulation.

Data were collected from 30 platforms. The number of projects submitted to platforms totaled more than 52,000, of which the vast majority to lending-based platforms. Of these 52,000 projects, less than 15,000 were actually published and the majority of these being reward-based projects. The cumulative value of the projects is growing but remains modest part of the overall global totals raised. This would suggest that the availability of platforms is currently outstripping the availability of suitably prepared projects in Italy. As for the success rate, it’s an average 54% in lending -based, 44% in donations and 24 % in reward -based.

The total value raised by successful projects in the history of Italian crowdfunding amounts to almost 23 million euro, of which more than 11 million has been collected in the last year. Of this total, 80% is brought in by lending-based portals, which also have the highest average value of financed projects (€ 7,892 /project). It should be noted that in Italy lending is consumer lending as commercial (to business lending) is not currently permitted.

Among the trends of crowdfunding in Italy are the growing presence of local and niche platforms and we noted also the emergence of hybrid platforms. ” Do It Yourself ” Crowdfunding is also spreading widely  too: two of the most funded projects to date in Italy have been DIY campaigns.

These trends, which in part follow global trends, have ” taken root ” well in Italy probably because (excluding hybrid platforms) they have a strong tie with the community and the territory. This appears to be a necessary aspect for a successful crowdfunding project in Italy, given an apparent lack of trust in the online world whilst, on the other hand, an  inclination amongst Italians to be very open and trusting towards people who are part of their more immediate community.

The rapid growth of Italian crowdfunding is not to be seen only from a positive point of view. The clear and marked predominance of social lending perhaps is a reflection of existing cultural norms and a willingness to  invest only in projects with a financial return. The high rejection rate of projects would seem to indicate a lack of understanding on the part of project owners as to what is required to successfully run a crowdfunding campaign.” Not surprisingly, the platforms continue to lament the lack of knowledge of crowdfunding at all levels. However, unlike last year,  the newer platforms in particular are very active in their educator role, organising events, initiatives and providing resources of various types on their portals. The number of events on crowdfunding has significantly increased and crowdfunding as a subject has featured on the radio and even on national TV in recent months.

However, understandably, the focus of media attention in recent months has concentrated on the equity crowdfunding model and this has had the effect of confusing many to think this is the only option available. The CONSOB regulation has had the great benefit of stimulating further debate on crowdfunding and particularly bringing it to the attention of institutions and Italian mainstream media. There’s still a long way to go. I particularly liked two comments from two of the platforms owners who replied to our questionnaire, which sum up my view on the state of crowdfunding in Italy now and its major obstacle. The first comment said “We are at an embryonic stage of crowdfunding so everything is needed for the later stages“. The other was a response to a question to platforms “Who is your main competitor?”. The answer – “the priest!”.

Crowdfunding – The Scottish Perspective

This morning a report, commissioned by the Glasgow Chamber of Commerce, was released at a breakfast event in Society M in Glasgow. Called “Crowdfunding – The Scottish Perspective” the report was produced by twintangibles and sets out the findings of a comprehensive review of the Scottish business communities awareness of, and attitude to, crowdfunding and how well it might fit the finance shortfall that persists post the financial and economic crisis of 2008

Amongst its key findings is that there is an ongoing need for finance particularly in the SME sector. This will come a no surprise to even a casual observer of the UK wide business environment. But what is much more interesting is that the size of funding typically sought, and the purpose to which it will be put, both fit well with crowdfunding.

Firms in the survey sought a range of sums which averaged at c.£50,000 and in many cases the funds were sought for innovation and new product or service development. Crowdfunding in its many forms is well able to provide this  sort of sum for a well managed project, and the crowdvalidation element of a crowdfunding project can bring considerable benefit to those developing innovative and new products or service.

However, it is also apparent that Scotland is significantly under utilising the opportunity presented by crowdfunding, and there is no simple answer as to why this is.

It does seem that the awareness and deeper understanding of the potential for crowdfunding needs to be more widely embedded in the business community to build the confidence to turn an interest in crowdfunding into active engagement.

We believe the commissioning of the report and its release today was a far sighted act by the Glasgow Chamber of Commerce and we hope that it marks the beginning of a process that we hope will lead to Scotland taking up a greater share of the crowdfunding opportunity available.

You can find much more detail and food for thought in the complete survey and, best of all, its free!

You can download and read the report here

You can hear what Tim had to say about the report on BBC Good Morning Scotland

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