2015 was an exciting year in the world of crowdfunding, most notably because we saw the first exit on a UK crowdfunding platform, when E-Car Club was acquired by Europcar, Europe’s leading car rental company. In crowdfunding terms, it was important milestone in the industry, and saw crowdfunding come of age. But what has next year got in store for the world of investment crowdfunding?
The crowd gets even smarter
More people are taking a closer interest in what is happening in crowdfunding and how the industry is operating – and this will continue into 2016. One realisation will be that ‘the crowd’ is much more sophisticated and a lot smarter than people give them credit for. In the past there has been a sense that crowdfunding investors are unsophisticated, irrational and follow a herd mentality, when in fact our data shows that the crowd tends to be highly educated, smart individuals who make rational decisions. This will be backed up by individuals investing very large amounts of the kind we saw this year when one senior executive at a private equity firm invested £1m into Sugru.
Investment rounds will get bigger
As crowdfunding continues to mature, investment rounds will get larger, with the average amount raised going up. We’ve done more than 20 raises over one million pounds this year, firmly placing crowdfunding as a way to secure Series A funding. That trend will continue and we may see crowdfunding become part of more Series B and Series C fundraising. Made.com, for example, raised £30m this year through institutional and VC funding, but an ambitious, high-growth, online business like this could so easily include an element of crowdfunding within its investment plans, helping them to better engage with their community and customer base.
Bigger firms see the light
Two years ago crowdfunding was often the subject of scepticism and criticism within traditional investor circles, but that has really changed in recent times. Attitudes among well-known brands and bigger companies will also evolve. I predict that crowdfunding will reach a critical turning point and become more of a mainstream option, rather than a form of ‘alternative investment’, and one that works well combined with other forms of funding. We already have more enlightened trailblazing brands like BrewDog, Camden Town Brewery and JustPark, which raised £3.7m this year, the largest amount ever on Crowdcube, making crowdfunding their first choice source of fundraising; this is set to continue.
Partnering will be key
Next year there will more partnering between so-called alternative investment, traditional investment and major brands. Funding Circle has partnered with Santander already, and I am certain that we will see more activity in this space as in the peer-to-peer industry looking to team up with institutional investors. This year Crowdcube also teamed up with Amazon Launchpad, an online platform for UK start-ups to sell and market their products, which will also partner with VC groups like Andreessen Horowitz.