On 22 October 2015, Tracey McDermott – acting Chief Executive of the FCA – was asked by the Treasury Select Committee if she could provide a number representing the level of losses suffered by investors in UK equity crowdfunding to date. That number was not available at the time and Tracey had to admit as much. Now, for the first time, AltFi Data can provide the answer to that question.
In a report supported by Nabarro, AltFi Data has combined Companies House filings with its own extensive survey evidence to establish the current status of the 367 companies that have crowdfunded at the 5 major UK equity crowdfunding platforms since the industry’s inception in 2011.
The five crowdfunding platforms were: Crowdcube, Seedrs, SyndicateRoom, VentureFounders and Crowdbnk.
– Over 80% of the companies that crowdfunded between 2011 and 2013 are still trading.
– The cohort of companies funded in 2013 provides the most representative sample for analysis. It contains enough companies (82) to be statistically significant and enough time has passed since funding to allow business plans to have been executed. In this cohort, 22% of the companies have gone on to either raise further funds at a higher valuation or have realized a return for investors via a successful exit. At the other end of the scale 28% of the companies in this cohort have either failed or are showing signs of difficulty.
– The portfolio return of the industry since inception, measured as an IRR, amounts to 17%. Assuming that SEIS and EIS tax reliefs are fully utilised, that return increases to 33.79%.
– AltFi Data see this report as a significant step forward in allowing the sector to transparently demonstrate both the risks and the returns available from equity crowdfunding.
– Establishing a track record for the industry serves two valuable purposes:
– It brings credibility and improved profile to this new asset class
– It allows investors to asses the historic investor returns delivered by the sector
– AltFi Data believes that accessing the crowd for finance brings with it an obligation to represent risks accurately by transparently revealing the status of companies that have previously raised money using equity crowdfunding
– In such a way investors can make a better assessment of the risk that they could lose their investment
The full report can be downloaded here.
SyndicateRoom CEO Gonçalo de Vasconcelos has welcomed this spotlight on a dynamic and emerging industry, commenting: “Equity crowdfunding is powering a new generation of dynamic growth businesses, but true sustainability will only by achieved by delivering returns to investors. As crowdfunded businesses are reaching maturity it’s time to shine a light on their progress and investor returns. As such, I warmly welcome this report from AltFi Data, which offers a fascinating and highly credible overview of success rates across the UK’s leading platforms.
“The report states that transparency must be improved, particularly in relation to equity crowdfunded businesses that fail. Openness and transparency have been central to my vision for SyndicateRoom from day one, and the report makes clear that we have a proud record on this. But we can’t rest on our laurels, and we encourage the wider equity crowdfunding industry to embrace the “best practice” which concludes AltFi Data’s report”.
Read more here.