David Murray-Hundley, aka The Grumpy Entrepreneur, is a staple panel guest at Crowdfinders Live events. He always delivers his insights into the evolution of alternative finance from an investor’s perspective and in this opinion piece he talks crowdfunding returns and company IPOs.
It’s May 2012. Facebook has just IPO’d for a gizzilion dollars and you can still remember when you could put money in a bank and actually get some interest. Crowdfunding seems to come up every so often in the Sunday Times and you think, I know what, some of these companies they have on their platform could be the next Facebook. It’s worth a £20k investment and I am bound to get some return by 2016.
Roll forward four years. You were smart because everyone talks about crowdfunding now and those companies you invested in are fast becoming household names. Although Google just told you that the same company is now not going to IPO in 2017 and indeed you should probably wait until 2020 but that’s not confirmed. I wouldn’t mind my £20k back. Actually, I invested into a tonne of companies over the years so where’s my return?
This might be a tad exaggerated but, for me, in order for crowdfunding to enjoy further growth and success, the equity side needs to show some return. P2P has already done this, even if on a smaller scale of return.
So when I hear a lot of people saying “Crowdfunding is going to be bigger and better than the VC markets”, I respond saying VCs get return on their investments and, if we took the current crowdfunding model on returns, they would be struggling to pay for their boats in Monaco.
What’s also concerning for Mr Joe Bloggs back in 2012 is that we are reading more and more that most of the early adopters possibly were not worth as much as they were pitched at and, because it was such early days, some of the numbers don’t stack. So is my £20k even worth £20k anymore?
I fully expect, if this is not already happening, that there must be a large number of people who are questioning their investments and wondering just when they will see any return and actually what the crowdfunding platforms will come up with in order to secure returns for their investors. Interestingly enough, Crowdcube has come up with some imaginative ways to do this but when you look at the exits for some of the main platforms – one well-known platform has had 300+ companies and no exits, and another, 300+ and two exits.
Time will tell and, at the end of the day, in many ways the early platforms had the balls to go out there and hustle business. It’s still early days and there are still a lot of early adopters, so I am sure the rollercoaster is only just starting. Even a grumpy old git like myself has warmed to crowdfunding in the past year so there is hope yet.
The Grumpy Entrepreneur