Crowd Funding.

SailorSam

I've just been listening to an interesting feature on Bbc 4 Moneybox about Crowd Funding. They described it as a Dragons Den online when businesses who were struggling to borrow from the banks looked for other sources. One of the places they spoke to who had borrowed like this was the Eden Project in Cornwall, but it seemed mostly small start-up companies. One man had loaned £500 to some young people to start a business and when asked if he was worried he may not get anything back he suggested that it was more important to help young people learn about business and give them a start.
Unless i had a pet subject that i'd like to help out i don't think i'd go for this type investment. I wondered had anyone else here taken a chance, or would you.

Porcupine

There's things like Kickstarter, but those are a bit more like 'I'm starting a business making <Things> which you can't buy at the moment. Here's my proposition, if you pay me $X then you'll be first in the queue to get <a Thing>/<a Thing with a cherry on top>/<some tat vaguely related to Things>.' There may be some that offer a return on investment, I haven't seen those.

The problem is that 'investors' come along and think 'hey, it would be cool to have a Thing'. What they don't do is look at the business side. So they're suggesting it's going to be manufactured in a factory in China. Do they have a factory lined up? Do they speak Chinese? Do they have a prototype? What are the production costs? What's the market price going to be? Who are the management? Have they done something like this before?

All too often people invest due to a neat idea, the vendor goes quiet for a bit, then announces 'unexpected delays'. Investors start getting unsettled. Then a few years down the track everything disappears in a puff of smoke. But then the project gets forgotten about and the next great idea comes along and gets all the publicity. Rinse and repeat.

[Deleted User]

I think the OP is confusing crowdfunding with peer-to-peer lending.

SailorSam

No i'm not confusing the two, although they seem similar.
I'm a regular Moneybox listener and they've talked several times in the past about P2P, and we've had threads here on Mse about the Pros and Cons of it. But today the Moneybox team featured Crowd Funding, and i just woundered what peoples thoughts were on it.

ChesterDog

I use The House Crowd, which is crowd-funded property development rather than business start-up or development.

It is less than 5% of my total portfolio, but it has done a good, reliable job for me thus far, at 6% pa plus a share of profit on sale of the property. Gut feeling says it is a little riskier than my peer-to-peer lending (also paying 6%), but the additional potential payout makes that worthwhile for me.

Biggles

SailorSam wrote: »

No i'm not confusing the two, although they seem similar.

But your OP talks about 'borrowed' and 'loaned', which sounds like P2P.

Crowdfunding is not usually loans, it's investing money in a business, ie giving it. You may be promised various types of future returns, eg goods or dividends but the money isn't normally repayable to you with (or without) interest like a loan.

amandajc

I have money in Abundance which matches individual investors with sustainable energy projects. The project I am currently invested in has an IRR of 7.5%.

Abundance is described as an "equity based crowdfunding" service so I think there is a bit of a grey area between crowdfunding and P2P.

Mistermeaner

amandajc wrote: »

I have money in Abundance

:beer:


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Thrugelmir

SailorSam wrote: »

They described it as a Dragons Den online when businesses who were struggling to borrow from the banks looked for other sources.

How many investments do the Dragons Den make from the number of pitches made?

Banks lend money to those that are likely to repay the debt and/or have a degree of security. As banks are not in the business of providing risk capital.

In the hope of making a high return the whole risk book appears to be thrown out of the window by investors. The FCA is concerned that investors are being sucked in. With minimal information on the sites explaining the downsides.

Archi_Bald

Thrugelmir wrote: »

How many investments do the Dragons Den make from the number of pitches made?

Interesting article in the Telegraph on this http://www.telegraph.co.uk/finance/businessclub/money/11425328/Half-of-Dragons-Den-investments-fall-through-after-the-show.html

Thrugelmir

Archi_Bald wrote: »

Interesting article in the Telegraph on this http://www.telegraph.co.uk/finance/businessclub/money/11425328/Half-of-Dragons-Den-investments-fall-through-after-the-show.html

That's the nature of start ups.