Following reports from AltFi into the status of businesses that have raised finance using equity crowdfunding in the UK, Crowdcube co-founder Luke Lang calls for the industry to back recommendations for a common set of rules and principles for measuring the performance of crowdfunded businesses.
‘As the crowdfunding industry matures, we need a unified approach to reporting on the performance of crowdfunded businesses,” claims Lang.
He says, ‘The report is certainly a positive step for the industry and one we wholeheartedly endorse. Increased transparency of the due diligence process and ongoing performance of investments is critical for our maturing industry and investor confidence.’
Rupert Taylor, founder of AltFi Data, says, ‘Disclosure that encourages scrutiny of asset performance is in the interests of both platforms and investors. It allows investors to appraise historic returns. In turn it allows platforms to create trust amongst investors and confidence amongst issuers. This combination should encourage a more widespread adoption of the asset class.’
The report also claims an average industry rate of return for investors of 8.55 per cent. When taking into account the tax reliefs that are available for crowdfunding investors this figure jumps up to 19.14 per cent, showing that equity crowdfunding investments have the potential to outperform the market.
Lang continues, ‘Crowdcube has already delivered financial returns to investors; with three of the five exits highlighted in the report coming from businesses, like Camden Town Brewery, to raise on Crowdcube.
‘In the form of exits, follow on rounds on funding and businesses showing no signs of distress, we’re seeing success for 9 out of 10 companies to fund on Crowdcube, bucking the high failure rates often reported among early-stage businesses.’
Lang believes that the increasingly diverse range of businesses to seek finance on crowdfunding platforms can no longer be compared with other industry figures on SME failure rates.