We have written previously on this blog about how new investors can broach the investment game through equity crowdfunding, informing would-be investors on the benefits of the burgeoning industry. As crowdfunding regulation worldwide continues to evolve, with platforms springing up across the E.U. and U.S.A., the direction in which the industry is headed becomes more clear. Today, Invesdor examines the ways equity crowdfunding benefits its investors, the diversity at play amid the scene of equity crowdfunding, and the possibilities of expansion the industry is able to offer.
The gender gap in the financial technology and startup industry remains a source of concern, the Financial Times even dedicated a series recently to the issue, entitled ‘Management’s Missing Women’. However, the equity crowdfunding sphere is unique in its opportunity for diversity both within and behind the campaigns.
The problem as it relates to funding is simple - attracting capital. As the Guardian stated in its piece, ‘Redefining the Status Quo: women closing the gender pay gap in Fintech’, ‘most venture capitalists are male, and they’ve tended to invest in male-owned businesses. According to the International Finance Corporation, there’s a global $300bn (£240bn) gap in financing for women-owned small businesses.’
The same World Bank Group report stated that over 70% of women owned SMEs either have inadequate or no access to financial services. However, a recent study by PwC and the Crowdfunding Centre showed that, from seed campaigns in the UK over a 2 year period, 20% of male-led campaigns were successful compared to 26% of female-led campaigns. This echoes results in North America, where 23% of female-led campaigns met their targets, compared with 20% of male-led ones.
Unfortunately, due to the inequality inherent in the finance industry, the total sums raised are not yet at parity – according to Forbes, “male entrepreneurs picked up $654m of seed crowdfunding over the course of 2015 and 2016, against only $196m raised by women. This reflected statistics showing that 139,000 men had launched campaigns compared to only 55,000 women.” Nonetheless the higher rates of success for women in the industry, as well as personal accounts, such as this one from DatePlay founder for Fortune, demonstrate the capacity for equity crowdfunding platforms to disrupt the status quo.
Much has been made of the equity crowdfunding industry’s most renowned success stories – aka, those companies that have proceeded to IPOs. From Europcar’s acquisition of E-Car Club to the Camden Town Brewery’s acquisition by Anheuser-Busch InBev, the unicorn equity crowdfunding raise is no longer the stuff of myth.
But how common or frequent should investors expect IPOs of this ilk to become?
At the close of 2016, the UK witnessed a company proceed from crowdfunding to IPO in 16 months – a staggering time frame, and one for the record books. Freeagent, the cloud-based software as a service accounting company has acquired mythic status as a result of this swift progression, having initially raised £1.2 million via Seedrs in July 2015. Similarly in Finland fintech company Heeros raised €660,000 on Invesdor in 2015 and went on to IPO through the platform only twelve months later, even faster than Freeagent.
The early stage investment process is swiftly maturing and the openness of the market towards fintech companies is expanding. It will be fascinating to see, as we approach the close of 2017, whether there will be any more crowdfunded companies to meet their match.