Crowd funding: pushing the FMSA boundaries? Business Secretary Vince Cable announced recently what we have known for a while: “There is a serious problem with lending to good, small companies”.
It is a catch 22: the Government sees entrepreneurship as essential to longer-term economic recovery, but the funding is not available to facilitate this. So what can companies do if they are struggling to raise the funds that they require? One possible solution coming to the fore is a concept known as crowd funding. Crowd funding uses the platform and reach afforded by the Internet and social networking to enable small and early stage companies to seek funding. The companies are generally looking for a large number of smaller investors to raise relatively small sums of money, instead of the more conventional approach to fundraising of targeting a smaller number of larger investors. UKIE Seeks to Legalize Crowdfunding. By now you've no doubt heard the amazing story of the Double Fine Kickstarter , which has so far raised more than $750,000 for the production of "Double Fine Adventure" in less than a day.
Yet as that number keeps rising and people start talking about funding amounts in the millions rather than the thousands, a very interesting point has come to light: a project like this would be "restricted by the current legal and regulatory framework in the U.K. " The hangup stems from U.K. Financial Services Authority regulations on who can legally invest in crowdfunded projects and even how such projects are defined under the law.
To stay on the right side of legality, invitations to invest are typically restricted to "high net worth individuals," accredited investors or people with existing relationships with the startup. Chancellor looks at 'crowd funding' for entrepreneurs. By Simon WatkinsUPDATED: 09:31 GMT, 22 January 2012 It started as a way for artists and good causes to raise money from the public through the internet.
But now ‘crowd funding’ is being taken seriously by the Treasury. The Government’s Business Funding Taskforce is expected to report on ways to promote the idea to growing businesses, without undermining protection for small investors.