1. What would be the first advice you would offer to individuals looking to become alternative finance investors?
Consider the security provided. Alternative finance covers a wide range of investment opportunities and, as with any investment, balancing the security and the reward to suit your portfolio is essential. Equity crowdfunding provides the least security and the highest potential returns, though arguably some losses are inevitable with funding focused on start-ups and early stage businesses. Conversely marketplace lending has low default rates but returns start from a more modest 4%.
2. How do you see alternative finance changing the funding landscape for new businesses?
The big change has already taken place with disintermediation having opened up multiple sources of funding. As the sector grows it will be interesting to see if the ‘hidden experts’ within the crowd are motivated to support young business in other ways; perhaps providing sector expertise, business acumen or even introducing business opportunities. Platforms will need to encourage and foster communication.
3. What has been the biggest development in the alternative finance space in the last year?
Growth and diversification; the phenomenal growth of the sector and the increase in institutional investment has led to alternative finance lending appearing in the UK Government quarterly figures for the first time. What really excites us is the diversification of offerings from innovative platforms challenging pre-existing finance models.
4. Is alternative finance a truly global phenomenon and to what degree are alternative finance providers bound to their national/ local areas?
From Moscow to Brazil and a thousand platforms in-between crowdfunding is already truly global. However, it is not yet globalized, as legislation is still playing catch-up in many markets which means that platforms are often contained within their jurisdiction. As legislation develops it is inevitable that platforms will expand their operations and become more multinational.
5. In the coming years, do you see forms of alternative finance and investment becoming more diverse?
Yes. Both investor demand and the desire to be noticed by fundraisers will see many new ‘splinter’ platforms developing away from behemoth catch all crowd sites that were first to market. Already specialist investment sites in technology, pharma and education appealing to specialist crowds are upon us and new lending models suited to specific businesses are cropping up constantly.