Tag: crowdfunding platform

Are Institutional Investors Good or Bad for P2P Lending?

Author
Hugo Smyly
Date

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In the UK there has been a notable shift in the P2P Lending model over the last year towards increased involvement from institutional investors. The UK market is sometimes said to be two years behind the US P2P market, and this statement certainly holds true when it comes to attracting funds from this class of investor. Indeed, in the US it is estimated that around 80% of loans made through the two largest platforms, Lending Club and Prosper, are currently taken by institutional investors replacing the retail lenders that previously dominated the space.

There are two principal explanations for this shift beginning to occur in the UK: firstly, institutions are seeking access to new asset classes, and secondly, institutions see in P2P a scalable opportunity. Return is also key. With record low interest rates, volatile stock markets, and low bond yields, the P2P lending space offers investors the chance to earn considerably better returns without a proportionate increase in risk – an undeniable positive.

Thus far there have already been some high profile institutional involvements. In October, Eaglewood Capital finalized a $75 million securitization of P2P loans that were originated by Lending Club.  In addition to this, Funding Circle has  done a deal with KLS Diversified Asset Management, a US fixed income fund, to lend £132 million to UK businesses. This is the first time a US investment firm has lent money to British business on a P2P platform, further proof that the UK lending model is following the trends in the US but also that institutional money in the UK is not solely limited to UK institutions.

There is an obvious argument that institutional involvement could signify the end of ‘P2P’ and the ‘democratisation of finance,’ but in the author’s opinion this is simply not the case. Firstly, institutional involvement signifies an extra layer of due diligence, a form of due diligence that individuals are realistically unlikely to have available. This allows individuals to follow the smart money. Furthermore, the weight of additional institutional capital allows for larger loans to be funded over platforms, allowing more businesses to gain access to the financing they are sorely lacking. Lastly, it allows platforms to scale and reach targets at a far superior rate to relying on retail investment alone. In short, everyone’s a winner.

So whilst institutional money may currently represent only 30% of P2P funds in the UK, I expect that figure to be much, much higher in 2015.

Crowdfunding records keep tumbling!

Author
Hugo Smyly
Date

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Another day, another record. Not a week seems to have passed in 2014 without Crowdfunding records being beaten and milestones being reached. Alternative Finance seems to know no bounds! The latest eye catching record has been achieved by an English winery called Chapel Down.

They turned to Crowdfunding in a bid to raise £1,667,507 with 6.48% equity offered, they have smashed their target raising £4m for 14.11% equity, the largest ever Crowdfunding campaign in the UK to date. Chapel Down have said that they intend on using the money raised to plant more vines to satisfy the current demand, to build a new winery and a brewery. In addition to this it plans on extending its Tenterden hospitality facility.

The CEO, Frazer Thompson, has stated that he wanted “to provide an opportunity for his customers to share in the success of the business”. The 1,400 private investors will not only become shareholders in Chapel Down but will also enjoy some great discounts and offers on a range of their products.

“The needs of the many outweigh the needs of the few.” – Spock

Author
Hugo Smyly
Date

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Vulcan, the “Star Trek Capital of Canada” has turned to Indiegogo in a bid to raise an ambitious $2billion so that they can construct a real life working version of the USS Enterprise. You can certainly be excused for having never heard of Vulcan as it is a tiny Canadian town that has a population of just 1,836. That said the self-proclaimed spiritual centre of the Star Trek universe has attracted various Star Trek actors, such as Leonard Nimoy, to its annual celebration called Spock Days.

A donation of just $10 is described as effectively a contribution to the future of humankind whilst for a slightly bigger donation of $1,000,000,000 you can have the spaceport named in your honour. This donation amount is targeted at Messer’s Bill Gates, Richard Branson and Elon Musk, sadly they have yet to pledge!

It’s not all doom and gloom though as so far 92 people have backed the project and have raised $2,727. However, with only 33 days to go this original fixed-funding project looks destined to finish…yes you guessed it…unfunded – meaning the 92 people to have backed the project will get their money back.

If you genuinely believed that this was a realistic project then I am the bearer of bad news. As is becoming more and more apparent people are turning to Crowdfunding as a cheap, quick and easy marketing tool. The Vulcan tourism board state on their website that “The Indiegogo campaign currently running to help Vulcan build the U.S.S Enterprise is a marketing campaign to advertise the Canadian Badlands region of Alberta and feature Vulcan.”

It has to be without a doubt one of the strangest Crowdfunding projects to date!

A Hungry Crowd

Author
Hugo Smyly
Date

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With 80% of food sales going through 5 major retailers you could be forgiven for thinking that this oligopoly is irreversible, however there has been a recent, dramatic rise in the popularity of farmers markets with UK consumers seemingly showing a keen interest in sourcing and buying their food directly from producers.

Farmdrop, a click and collect farmers market, was founded in 2012 with the aim of providing a space where people who make or grow food can sell it direct. One of the biggest problems faced by farmers in the UK is that by selling their produce to major retailers they are making significantly lower profit than if they were to sell it directly. One of the co-founders Ben Pugh reaffirms this by stating that Farmdrop allows for suppliers to keep ‘80% of the retail price of their goods, rather than the 50% they might make through traditional retailers’.

Farmdrop have turned to equity Crowdfunding in a bid to expand their number of ‘hubs’ across the UK from 5 to 60 with an end goal of 400 by 2017. They reached their £400,000 target within just eight days and have extended the campaign, it has currently raised £473,250 with 42 days left.

In what has been one of the most successful Crowdfunding campaigns in the UK to date it appears the Crowd are backing this innovative new approach to buying and selling food.