The big boys of the crowdfunding scene, Kickstarter, sent out a tweet last week announcing they will launch in the UK in the autumn. Kickstarter’s have not revealed their motives for launching in the UK. When we attempted to ask them their reply was that they had decided to ‘decline an interview’.
Of course Kickstarter will not be bringing crowdfunding to the UK. There are already a number of established UK based crowdfunding sites they will be competing against. Some of the best known of the UK based crowdfunding sites are:
Seedrs.com – Seedrs launched a couple of weeks ago. Rather than bypassing the rules that normally govern lending and investment Seedrs have spent over a year getting approval from the FSA for their business model. This makes them the first crowd funding site in the UK, and possibly the world, to be approved by major financial regulators. This means that Seedrs is able to let you to invest in companies in exchange for shares and earn dividends on them. (We tried to ask Kickstarter if they will be regulated by the FSA but they decided to ‘decline an interview’).
Crowd Cube – Crowd Cube operate a similar model to Seedrs in that you can invest in real businesses for real money and get equity in return. They are also keen to help investors take advantage of EIS and SEIS tax relief on their investments. Based in Exeter they buck the trend of tech start-ups congregating in East London. Along with Crowdfunder they are one of the few UK sites to have joined the Crowdfunding Accreditation for Platform Standards (CAPS) program.
Bloom VC – Bloom was founded and is run by two experienced entrepreneurs. They take on business as well as creative projects. Unlike Seedrs and Crowdcube this is not an investment site. Instead it works on promises. The funders promise to give a project money and in return the project promises to give them exclusive access to the product, t-shirts and the like.
Crowdfunder – Crowdfunder operates the standard model of asking for investments in return for gifts or products. They have a mix of projects on their site ranging from theatre productions to technology companies.
Buzzbnk.org – Buzzbnk is a specialist marketplace for social ventures. It allows people to contribute time as well as money to support charities and community organisations.
This is no-where near a comprehensive list of the UK based crowd funding platforms Kickstarter will be competing against. This is without even gaining into websites offering peer to peer lending for established businesses like Funding Circle.
Undoubtedly Kickstarter is the biggest and best known crowdfunding platform on the market and its launch in the UK will have a big impact. We can expect to see at least some of the UK based crowd funding platforms to disappear as the market consolidates. However there is time for the UK based crowdfunders to get organised, make a stand and take on the Americans.
Popularity: 1%
I think that saying that Kickstarter will compete with equity-based platforms is rather like saying that Amazon competes with eTrade. These are two very different businesses models: one (Kickstarter) is about purchasing items and/or making donations and the other (Seedrs, Crowdcube) is about investing capital for returns. As a result the customer bases (both in terms of the providers and the recipients of capital) are remarkably different. It’s convenient to label any business that allocates money from lots of people to a single recipient as “crowdfunding”, but actually it’s a hugely a broad term that covers a massive number of different types of businesses.
Our own view at Seedrs is that Kickstarter’s arrival in the UK will do lots to focus the media on this overall space, but we don’t think it’s competitive to us oer se: we’d be surprised to see investors suddenly deciding that they’d rather allocate their money through Kickstarter than Seedrs because they’re suddenly interested in receive a watch rather than upside returns. We could be wrong, but we think those a fundamentally different motivations that don’t really conflict with each other. Substantially stronger performance of public equity markets, however, would be much more of a competitive threat to models like ours…