Kiki Loizou: Brexit: A Good Thing for Crowdfunding?

Since June 24 I’ve been speaking to small and medium-sized business owners about their fears following Britain’s shock decision to split from the European Union. Entrepreneurs tend to keep their heads down, rarely rising above the parapet. In the run up to the referendum day however, many came together to campaign for a future within the EU.

Now few have anything positive to say. In the wake of the vote, some companies have benefited from non-European customers wanting to bag a bargain as the value of the pound dipped. But many are still unsure what Brexit means for the ventures they have spent years building. They worry that the hardships endured during the last recession could be repeated. Entrepreneurs may struggle to obtain funds for starting up or for expansion. They are used to having an array of options in front of them and a pool of investors happy to take risks. Uncertainty provoked by Brexit will undoubtedly bring changes to the status quo.

But for crowdfunding, an industry conceived after the last financial meltdown, Brexit could do more good than harm. Sceptics have long criticised the sector for producing laughable valuations, one too many failures and the wrong kind of investor. This could be the catalyst for correction. From now on, investors will be thinking much harder about where they put their money. For those wishing to help fund an exciting venture through an equity crowdfunding site, the small print will now be larger. The financials attached to a crowdfunding campaign will be scrutinised more than ever before. Deals will be fewer. And as investors take fewer risks while they call more shots, eye-watering valuations will be driven down.

It’s no secret that the most promising businesses tend to find the cash they need to grow. Maybe Brexit means only the best ones will. For peer-to-peer lenders, business could boom as the banks tighten their belts, just as they did following Lehman Brothers’ collapse in 2008. “There is likely to be a good opportunity for us to look outwards and build our customer base at their expense,” said Peter Behrens, co-founder of Ratesetter, the UK’s largest consumer peer-to-peer lender.

After 2008, savvy entrepreneurs were boldly launching the crowdfunding sites they hoped would revolutionise the stale finance game. Against all odds they achieved their goal. Now could be the time we see what they are really made of. Britain’s future post-Brexit remains a big question. What is certain though, is that the crowdfunding industry stands ready to serve budding entrepreneurs with promising proposals.

Kiki Loizou is the Small Business Editor at The Sunday Times