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Equity crowdfunding on fast growth track

Buying shares in start-ups is now the fastest growing form of crowdfunding in Britain, according to a new report.

Figures from the innovation charity Nesta and the University of Cambridge show investments rising by 201% in the past year.

The average equity investment was £1,599 and the average amount raised by companies £199,000. On average it takes 125 investors to fund an equity finance deal, and the average investor has 2.48 projects in their portfolio.

Crucially, 95% of projects were eligible for the Enterprise Investment Scheme (EIS) or the Seed Enterprise Investment Scheme (SEIS) which can give upfront tax breaks of up to 50% to encourage investment.

The predicted growth of equity crowd funding has encouraged private equity guru Jon Moulton to acquire 25% of Investingzone so that he has exposure to this market.

Jean Miller, chief executive of Investingzone, says: “Allowing investors to browse and research genuinely innovative ideas on to a website, where they have time to research the market and decide for themselves whether it is worth a small investment, means that entrepreneurs get a far wider pool of capital and investors have a whole new world of investment opportunities to choose from. This is a natural evolution of equity investment and as the stats show it is taking the country by storm.

“This is already revolutionising the way companies get off the ground and expand and it will boost the economy and employment enormously – remember, small businesses account for almost 60% of private sector employment so it’s crucial they have better access to affordable finance.”

The report published by Nesta and University of Cambridge ‘Understanding Alternative Finance: The UK Alternative Finance Industry Report 2014’ can be found here.

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