Who prospers after emerging from the Dragons’ Den of crowdfunding?

Making successful investment decisions requires accurate data on performance, risk and returns. That’s something that's desperately needed in crowdfunding, says David C Stevenson.

I suspect most people see equity crowdfunding as either a risky waste of cash, or a fun way to punt a few bob. But, in time, its proponents hope it'll be seen as a potentially good long-term investment, enabling small investors to profit by backing private businesses in the UK. One thing holding crowdfunding back is the absence of data on the success or otherwise of such investments. A new report by my colleagues at AltFi.com, with law firm Nabarro, changes that. They've used Companies House records to look at the performance of 431 equity crowdfunding campaigns from 367 companies on platforms Crowdcube, Seedrs, SyndicateRoom, Venture Founders and CrowdBnk. The report covers 2011 to June this year.

The bottom line? A total of £18m was raised on equity crowdfunding platforms between 2011 and 2013. One in five companies who raised money in this period has gone bust (these are small firms after all), and on top of that 20% failure rate, another big group don't seem any closer to a wonderfully profitable exit the AltFi report suggests that only 22% have gone on to raise funds at a higher valuation. Indeed, the researchers reckon the internal rate of return (IRR) on equity crowdfunding investments via the five major platforms since February 2011 averages just 2.17%.

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David C. Stevenson
Contributor

David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire. He writes his own widely read Adventurous Investor SubStack newsletter at davidstevenson.substack.com

David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit www.altfi.com as well as www.etfstream.com in the asset management space. 

Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business. 

David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust. 

In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.