As a concept, equity crowdfunding took off in the UK in 2011 with the launch of Crowdcube. Since then, new equity crowdfunding platforms have been fast appearing on the UK funding scene, and they have captured the imagination of the media and the public.
Seeders was the first equity crowdfunding platform to be regulated by the Financial Conduct Authority. Since then the regulatory authority has taken an active role in monitoring all equity crowdfunding activities and offering a regulatory framework to facilitate these developments. Recently, three platforms have said that they have been fully licensed in the UK. These platforms are Lending Works, LendingCrowd and UK Bond Network.
From 2011 to 2014, there was an increase in the number of deals and amount invested in equity crowfunded transactions. In the fast half of 2014, 101 deals were recorded, up from 7 deals in 2011. Also, the amount invested rose from £1.6M in the whole of 2011 to £23.9M in only the first half of 2014.
For equity-based crowdfunding market, 2015 was the year of significant growth with the value of all investments up by 295 percent, from £84M in 2014 to £332M. A large proportion of the market for the sector came from real estate funds, contributing £87M in 2015. Equity-based crowdfunding (excluding real estate projects) for seed, start-up, and early-stage funding reached £245M in 2015. Throughout all four quarters of 2015, high growth rates were maintained, with the amount invested increasing from Q1 (£38.76M) to Q4 (£81.7M). The average deal size was £523,978, a significant increase from the 2014 average of £199,095,
The South East, the South West and London remain the most active areas, both in terms of fundraisers getting and funders offering investment. In 2015, 720 businesses successfully raised investment via equity-based crowdfunding platforms. Across platforms, the average acceptance rate was 20.59 percent. On the investor side, about 68,300 investors used equity-based crowdfunding platforms in 2015.
Currently, the UK has 41 equity crowdfunding platforms. Major platforms in the country include Crowdcube, Seedrs, Syndicate Room, Crowdfunder, CrowdShed , Venture Founders, Angels Den, Code Investing, and Spacehive. In terms of platform success, 71 percent of the platforms are still operating today.
The UK equity crowdfunding market is likely to end 2016 with full-year new equity issuance amounting to about £130 million, showing a slowdown in momentum for the first time. This figure comes from a report by AltFi Data. The report also includes data for equity crowdfunding in the UK from 2011, covering a total of 751 companies and 955 equity crowdfunding rounds. The data refers to several platforms that provide equity crowdfunding services.
Since the industry started in 2011, it has offered more than £368 million of equity capital to developing UK companies.
Today, the UK dominates equity crowdfunding market in Europe. Since Brexit, the market is being watched closely by industry practitioners. It is early and uncertain whether and how Brexit will impact the UK equity crowdfunding industry. Any outcome will depend on the country’s pre-exit strategy planning.