FinTech profile: Crowdcube - innovation in crowdfunding
Crowdcube was built on a simple premise: that entrepreneurs should be able to dream big, push the boundaries and make a difference.
However, most of these innovators still find it difficult to raise money in order to bring their products, their businesses or their ideas to fruition.
This is where Crowdcube comes in.
According to the company, it was “spurred on by making equity investment accessible, so exciting businesses could harness the belief they get from customers, investors and friends to fuel a more wonderful tomorrow”.
Crowdcube offers it services in two core areas: investing and raising.
For the former, it acts as a platform through which those interested in investing in businesses can do so.
To date, Crowdcube has helped more than 800 businesses through 1,000 funded raises turn their supporters into shareholders.
Of those businesses, 26% are startups, 46% early-stage and 28% growth-stage businesses. More than 100 are based outside of the UK.
In addition, more than 13,000 investors through Crowdcube have realised returns of over £30mn from 23 businesses.
Take fintech Revolut, for example. Investors in the mobile banking firm saw a1,900% return on their investment into the bank after just two years.
Revolut is now a unicorn and worth more than £1bn. It raised with Crowcube a year after its launch in a funding round that was led by venture capital firms who had also invested in companies including Facebook and Dropbox.
The platform runs a live investment thread, through which potential investors can view those businesses that may offer an opportunity.
Investors are also able to benefit from tax breaks through Crowdcube. For example, they can receive initial tax relief of 50% on investments up to £100,000 and Capital Gains Tax exemption for any gains on the Seed Enterprise Investment Scheme.
Similarly, investors can invest up to £1mn in any tax year and receive 30% tax relief on their investment.
The company’s technology makes investing simple, too. Once registered on the Crowdcube platform, potential investors can make an investment - a minimum of £10 is set, although investors must make their investment an exact multiple of the company’s share price.
Crowdcube: raising investment
Crowdcube exists to support visionaries. Those companies or entrepreneurs looking to raise funds can do so through equity crowdfunding and private funding rounds.
On the latter, the company works to provide an open, honest and transparent method of raising funds, regardless of business or sector.
Crowdcube offers private funding rounds, which are a streamlined funding option that enables the raising of funds quicker with limited internal resources from existing shareholders and networks.
Community rounds are also available, These allow business to limit public exposure of any funding round and make it accessible to shareholders and potential investors who have a meaningful interest in the business and its growth ambitions.
Any business raising funds through Crowdcube gains several benefits. For example the technology platform enables flexible raising. This allows entrepreneurs to set target and timeframe, with access to early drawdown of funds that are raised.
Similarly, the process is streamlined and simple, meaning that companies can access capital in under three weeks with limited resources.
FInd out more about Crowcube here.
FIVE things fintechs must do to keep investors onboard
New investors flocked to the stock market during the COVID-19 pandemic. Thirty-eight percent of investors said they had never had a brokerage or similar account before opening one in 2020.
Low or no-fee trading options have helped accelerate the trend – nearly half of new investors said they accessed their account primarily through a mobile app. As FinTechs, how do we create the trust needed to keep new investors in the market and create a fruitful customer experience for them?
The financial industry does a disservice to individual investors if we merely offer tools that focus on making money quickly, an approach that usually backfires. Instead, the surge of interest presents an enormous opportunity for those who want to help more consumers use financial technology to educate them on responsible spending, saving, and investing in order to achieve financial wellness current fintech tools have welcomed individual investors in the door.
Now, it’s time to focus on education and improving their experience going forward. There are several ways those of us in fintech can step up to shape the future of retail investing so that it works better for everyone, starting with the following areas.
Equal access to financial wellness education
Financial health should be available to everyone — but today, not everyone has the educational resources to achieve it. One study shows that only 3.9% of students from low-income schools were required to take a personal finance class. What they aren’t learning in school or from family members, fintech companies can provide on their platforms.
The companies should move from solely offering financial services to a more responsible model of education, advice, and prescriptive choices to help consumers develop better habits and make wiser financial decisions. Not only can they empower consumers and bridge historical wealth divides, but they can also stimulate growth by opening up new consumer segments.
Just as we’ve come to expect that our fitness routines are tailored to our individual bodies, we’re also ready for finance tools that go beyond one-size-fits-all solutions. But only six percent of financial institutions say they’re using the kind of technology that allows them to deliver a deeply personalized experience. Fintech tools need to reflect that financial success looks different for each of us.
For one consumer, it may mean providing guidance on how to pay off student loans early; for another, it may mean prescriptive actions that enable them to stick to a budget for the first time; for a third, it could look like prioritizing environmental, social and governance (ESG) investments, so that her portfolio aligns with her political beliefs.
Now, we are seeing financial technology beginning to meet the demands of personalized finance in a substantial and meaningful way.
The rise of AI-Powered Advice
Big-picture advice and predictive guidance used to be a feature of high-end financial advisory firms — a perk only available to those who could afford it. But thanks to rapid advancements in data analytics and artificial intelligence (AI), that kind of holistic advice is now more accessible than ever. AI-driven robo-advisors can parse many different streams of financial information, delivering customized answers to key questions: Is it time to buy a home, or is it smarter to keep renting? Can I afford to take out another student loan?
Intelligent connectivity powered by AI can anticipate consumers’ needs and next steps, making proactive suggestions that guide them along the path to financial wellbeing. Fintech companies can also help consumers identify when their financial picture becomes too complex for a robo-advisor, and help them find a human financial advisor to meet their needs.
Focus on financial mental health
New investors are quickly finding that the market can be overwhelming. That’s not surprising, financial anxiety is common and studies show that financial stress can have an impact on mental health for some.
It’s not enough for fintech companies to give retail investors access; they also must provide the guidance and support that help consumers manage their financial well-being. Educational tools can ensure that consumers are well informed about their options.
Predictive analytics can anticipate consumers’ questions, serving them key information and insights before they ask. Features that emphasize a comprehensive notion of financial well-being, rather than short-term wins and losses, can also help ensure that consumers are keeping their eyes on the bigger picture.
Gamification for good
The surge of gamification apps has done an impressive job making investing as engaging as playing a video game or joining a social media platform.
Much of the current use of gamification emphasizes short-term thinking, but there’s also an opportunity to help consumers think more broadly about their overall financial picture. One example is peer benchmarking, a feature that enables help consumers to see how their financial habits compare to those of friends and fellow consumers.
Gamification can also be used to incentivize making smaller, smarter choices — for example, rewarding saving over making an impulse buy.
The future of fintech is about more than just broadening access to the markets. It’s about making sure more individuals have access to the tools that can help improve their financial well-being—in the ways that suit their own circumstances and needs. The potential to act within their own set of individual priorities, with their long-term financial wellness in mind is much more empowering to a consumer than simply relying on short-term, high-risk investments.