Glasgow Business . 23 www.glasgowchamberofcommerce.com


important way of funding new and growing businesses in future. “It is a very big opportunity for the business


community in the city. Scotland can be a major player in crowdfunding and Glasgow and the West of Scotland can have an absolutely key role in that.” Yet despite the existing lack of take-up in


Scotland, the UK is an acknowledged leader in crowdfunding and operates all four forms of crowdfunding, while in the US only two are operating at any scale. Te four types of crowdfunding are: » Reward – where a reward, typically a product or service, is offered in return for a


pledge of money » Equity – where small parcels of non-tradable shares are offered to the crowd in return for investment » Peer 2 Peer (P2P) lending – a loan is made up of many small contributions and made available to a borrower » Donation based – where money is pledged for a cause and for no specific tangible return. One other striking finding of the research


is that no Scotish company has succeeded in an equity-based campaign on any of the main online platforms. Tis is despite the fact that Brewdog, the north east of Scotland-based brewer, is widely regarded as having been at the forefront of pioneering the idea of equity-based crowdfunding. Te UK Government is directly involved with


crowdfunding and is using £30 million from the Business Finance Partnership to invest directly in


COOKING UP A STORM


UNION OF GENIUS


Elaine Mason opened Edinburgh-based soup café Union of Genius 9 (www.unionofgenius.com) in October 2011. Its success led to the establishment of a wholesale business in May 2012, but they quickly found that the demand from their wholesale clients meant that they outgrew the capacity of their kitchens. To fund the refit of an expanded commercial kitchen, Elaine and partner Bruce were attracted


companies through P2P online funding platforms Funding Circle and Zopa. Te way this works is that the Business


Industry and Skills Department meets the first 20 per cent of any eligible loan that manages to fund the remaining 80 per cent from other lenders via the platforms. Other match-funding bodies, including the


West of Scotland Loans Fund, are increasingly prepared to match against amounts raised through crowdfunding. Other civic bodies, including universities and councils, are geting involved in crowdfunding. Glasgow Chamber of Commerce research


shows that Scotish SMEs seem to have a reasonably high level of at least basic awareness of the term crowdfunding, with around 76 per cent of those surveyed having said they had heard of it.


Alison MacRae


”Crowdfunding is a very big opportunity for the business community in Glasgow “


to the idea of crowdfunding the £10,000 investment they were looking for. “Crowdfunding is not just about financial


returns. Our business is nothing without the community it works with and serves, and being on Kickstarter simply strengthened that and made it wider,” Elaine said. The number of rewards on offer grew to 19 over the campaign, in response to what people asked for and to offer something suitable to those who were buying from afar as well as those who were more local. They chose the “All or


Nothing model” of Kickstarter as they felt it added a “tension and narrative” to the project. Through


Kickstarter, they eventually achieved £20,000 in funding investment.


Te survey also showed that 54 per cent of


SMEs would consider crowdfunding as a way of raising money, but they currently do not appear to be using it. Typical sums sought by Scotish firms,


our survey suggests, are in the range £5,000 to £50,000. Te report said: “Tese sums are well


within the commonly raised totals by crowdfunding campaigns in their various forms, and so it seems a well-suited mechanism to provide funds to the market.” Scotland currently has only one active


crowdfunding platform – BloomVC, a Reward-based platform – but there are at least two new Scotish platforms, Sharein and Squareknot, due for imminent launch. However, all existing UK platforms are open to Scotish businesses. Te report also says that while P2P


lending will fall under the regulation of the Financial Conduct Authority (the body replacing the Financial Services Authority) in 2014, there is litle current call for further regulation of the crowdfunding sector. Te major research project that


resulted in the Crowdfunding – Te Scotish Perspective report was carried out for Glasgow Chamber of Commerce by digital business consultancy twintangibles led by Director Tim Wright, who is an adviser to the OECD on crowdfunding.


See below and turn the page for case studies.


SPREADING THE WORD ABOUT NEW BUSINESS


Crowdfunding is a method of raising money by collecting a large number of small investments together to form a significant sum, typically using the Internet and social media.


It is bringing a new group of investors into the finance market who bring with them both funds and new ideas and, often, different expectations of return than more traditional investors.


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