The Week In Crowdfunding: A Dozen Essential Reads


Crowdfinders1

Hello and welcome to the weekly feature that reprises the most important stories and events in the alternative-finance world. Our director of content and communications briefs Money&Co.'s executive team every day on the most important stories in crowdfunding, small-business funding, and alternative finance. Below we offer his distillation of the most interesting "must-read" stories of the week.

The stories are broken down by geographic area (UK, US, International) and by sub-sector (general crowdfunding, SME funding, alternative finance, peer-to-peer - P2P- crowdfunding [which is what we do], equity, and projects).

We offer the occasional excerpt - always making sure that we don't reproduce any more than might be deemed "fair use" - and encourage readers to click on the links and go to the original sites, and if relevant and necessary, subscribe.

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1. UK - P2P
The Telegraph's Time Wallace reports on LendInvest's preparations to become the first UK P2P platform to IPO:
"Peer-to-peer (P2P) group LendInvest has hired veteran financier Stephan Wilcke as an adviser to its board, in a move which takes the company one step closer to floating on the stock market – something no other firms in the UK sector have yet done.
Mr Wilcke was the executive chairman of OneSavings Bank until its flotation in 2014, and was the chief of HM Treasury's Asset Protection Agency from 2009 to 2012. He is currently chairman of Amigo Loans and a commissioner of the Jersey Financial Services Commission.
LendInvest is a marketplace in which savers and investors can match their cash with borrowers who want to invest in the property market.
The new adviser said he expects to help the firm with its IPO – which remains a long-term ambition rather than an imminent move – as well as regulation.
2. UK – P2P
"That sound, and the chart above*, is the growth of UK online lending pretty much grinding to a halt. The big five platforms have, in aggregate, not grown much since about September 2015; the smaller players are about where they were 18 months ago.
Over in the US, the industry is in a state of humble retrenchment. The Lending Club scandal has sullied the reputation of online lending, scaring off investors, and the heavy reliance on capital markets funding has left the sector exposed to broader market movements.
Already we have seen one startup shut down, another put itself up for sale, and the biggest US online lenders lay off employees in an effort to cut costs.
The UK startups are yet to see that level of direct carnage, and yet lending growth has stuttered."

 

3. UK – P2P

Trade finance media outlet Bridging and Commercial reports a novel new P2P model:
"Commercial lending platform Fundbay has announced the launch of a dating-style online marketplace, which will allow brokers to advertise property loans to a variety of lenders. Launching at the NACFB Broker Expo on 15th June, Fundbay will enable brokers to list any funding requirement under any terms.
James Booker, Director of Fundbay, said: "Fundbay is a dating platform for [brokers] and lenders to meet.
"Lenders can simply set their lending parameters, sit back and wait for suitable lending [scenarios] to be sent to them, it's a business development manager's dream!"
Fundbay is free to register and does not take a cut from the commission they pay to brokers.
Each listing costs £199, of which £100 cash-back goes to the broker.
To create a listing, brokers will identify the property using Google Street View or their own photos.
The listing goes live for a maximum of 21 days, or until the broker accepts an offer of funding on behalf of their client."

 

4. UK – P2P

Money Marketing looks at current attitudes to P2P – and offers some research on levels of contingency fund provision.
"Deep distrust of peer-to-peer lending from "battle weary" pension providers is holding back the market, but is this sensible protection or are clients potentially missing out on valuable returns?
Sipp firms and advisers remain sceptical as Money Marketing research reveals the wide of variation in attitudes to cash buffer funds in the event of loans defaulting.
Likewise, the Government's failure to resolve an issue around HMRC's connected party rules are blocking the development of a functioning market.
But some smaller providers have jumped at the opportunity, forging partnerships with P2P companies amid claims the industry is being overly cautious.
Advisers' reluctance to consider P2P means the asset class is likely to be pushed direct to consumers, so could non-advised clients be left exposed?...
... Money Marketing research shows the cash platforms' set aside to cover bad loans varies enormously.
While Zopa and Ratesetter hold £12.9m and £17.6m respectively against loans worth £2.8bn, Lending Works has just £325,000 set aside and Funding Circle holds nothing at all. A Funding Circle spokeswoman explains the rationale.
She says: "A provision fund introduces new risks; it either has too much money in it which means investors aren't earning the return they could be, or potentially not enough if losses increase significantly.
"Our investors diversify their lending across hundreds of businesses instead to manage risk."
The FCA regulates crowdfunding and P2P providers and does have financial requirements for fully-authorised firms. Currently this is the higher of £20,000, rising to £50,000 from April 2017, or a tiered amount as the value of loans increases, from 0.2 per cent of the first £50m to 0.05 per cent of any balance over £500m."

5. UK – P2P

The Financial Times reports on a major move by a P2P platform.

"RateSetter, one of the UK's largest peer-to-peer lenders, is breaking into small business loans with the aid of government backing.

The company, which has hired a specialist team, has built a technology platform to support business loans ahead of its launch into the market this week. It is the latest sign of peer-to-peer platforms moving into mainstream financial services.

RateSetter has already facilitated £1.3bn of lending to individuals and sole traders, but its move to business loans puts the company in direct competition with Funding Circle, a platform that focuses on lending to businesses. The government is providing support to RateSetter through the British Business Bank, which is channelling £10m to businesses through the company.

Peer-to-peer lenders operate online, connecting investors ??? including individuals ??? to borrowers.

 

6. UK – Crowdfunding/AltFi

AltFi reports:

"Institutional investors are not only funding the platforms but they are increasingly investing in businesses raising funds on the platforms.

Notable examples of companies getting institutional capital alongside the crowd:

  • Justpark- £3.7 million in 2014 with the crowd investing alongside Index and BMW i Ventures.
  • Rockaboxround was led by Notion Capital.
  • Emoov, the online estate agents, raising money alongside Episode 1 Ventures.

Venture capital (VC) is no longer seen as an 'either/or' option for businesses raising capital, we are frequently seeing fundraises that combine investments from VC's, angels and the crowd."

The full article is available here.

 

7. UK - Crowdfunding/AltFi

The Financial Times reports on cross-disciplinary moves between crowdfunders and venture capitalists. An extended excerpt is available below:
"Crowdfunding platforms and venture capital firms are going head to head to capture the growing interest in investing in early-stage companies in a move that could spark a round of consolidation between the two.
Venture capital specialist Downing recently issued more bonds to complement its existing crowdfunding platform, while Syndicate Room launched a fund that tracks the investments of business angels and VC investors on its platform.
The cross-sector moves are seen as part of a wider process that could lead to mergers between crowdfunding platforms, which allow investors to either take stakes in or lend to smaller companies, and venture capital firms."

 

8. UK – SMEs
"ICAEW and the British Business Bank (BBB) have teamed up with more than 20 other business organisations to help SMEs find the best options for financing growth
Together, they have released the latest version of the Business Finance Guide – a Journey from Start-up to Growth, in print and digital form, in an effort to persuade small businesses that there is finance out there beyond the high street banks.
Currently, the majority of SMEs contact just one provider – their main bank – when seeking finance, despite their growing frustration with the banks' unhelpfulness.
A recent survey from Amicus Finance showed that 16% of 400 SME business owners were turned down by a mainstream lender, while 31% said their inability to secure finance terms with the bank had meant they lost out on a deal or investment opportunity.
Yet there is a plethora of alternative finance sources available..."
9. UK – Equity
"At one level my legal background has been a barrier. I have tried to un-learn how to be a lawyer through the years! Lawyers are inherently risk-averse, but to run a start-up you have to be willing to assess and take risks when appropriate.
But at the same time my legal background plays a key role in much of what we do. I think anyone who knows Seedrs, knows that we have a strong focus on doing things properly and getting structures and legals right."
10. US – Equity
"HR 4855, or the Fix Crowdfunding Act, was approved by the House Financial Services Committee on a solidly bipartisan vote of 57-2. The bill, sponsored by Congressman Patrick McHenry, was created in response to multiple shortcomings intrinsic to existing Title III or Reg CF investment crowdfunding rules.
HR 4855 was described by the Committee;
"The bill makes important changes to address two urgent challenges that would deny small businesses the ability to economically benefit from Title III of the Jumpstart Our Business Startups Act (JOBS) Act, which allows for equity crowdfunding."
11. US – P2P
"JPMorgan Chase & Co. enabled Chase QuickPay, the bank's real-time peer-to-peer lending product on Sunday. The service enables customers to make instant money transfers between lenders.
In March, JPMorgan, Bank of America Corp., US Bancorp, and Wells Fargo & Co. jointly announced the acquisition of US' largest real-time money transfer network, clearXchange. Bank of America and US Bancorp have already rolled out their real-time P2P transaction service. JPMorgan Chase, according to Reuters, intends to launch the service later this year, while Wells Fargo is due to introduce it by mid-2016.
12. US - FinTech
"As millions of people continue to lose money in various markets across the globe, some have poured money into startups and continued to return 10x each year on their tech portfolios. For every day investors, the lack of transparency in the market place has led to a widening gap in the market place for information on tech. There are many information service providers who provide comprehensive coverage of information over publicly listed securities, with significant coverage from Bloomberg , Thomson Reuters ,FactSet and S&P Capital IQ, but there is limited amount of data available on startups. Times are rapidly changing as more focus is consolidated onto the secondary markets where equity crowdfunding and startup rating platforms are globally gaining traction."
13. International - P2P
"1. What is Leverage Ratio?

Leverage ratio in simple terms is the relation between the amount of equity that a company has and the amount of debt that it is carrying in its books. It is a measurement of the capacity of the company to meet its financial obligations.

2. How is it applied in the case of other financial institutions?

In case of payments banks, the RBI set a leverage ratio of 3% and in case of full service banks..."


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