Exactly what is Crowd Funding?

The Power of the Crowd

Does anyone remember Marillion? They are rock band from Aylesbury who had a number of hits in the mid 1980’s and who still have a loyal and not insubstantial army of determined fans. Now, most bands have fanatical support but few bands can muster that support as Marillion have done in the past. Way back in 1997 they needed money to tour the US. But way back then they weren’t as successful as they had been 10 years earlier and access to the money was harder to find. Then someone in the fan base struck upon the brilliant idea of asking the fans to help. Fortunately, there was the internet and email and before long the $60,000 required to underwrite the tour was raised. This mechanism was then used to raise more funds to allow the band to record several albums over the coming years. Fan power, indeed.

Linking the Crowd to Business

This early example of crowd funding is an interesting one. It shows that ordinary people, who can see a reasonable return from their money - seeing the band live or accessing a new album in Marillion’s case -, will put their hands on their mice and invest. The key is the ease with which this can be done, the small amount of investment required from each participant and the interest in a possible return that can be gained in the future.

It has taken crowd funding many years to become more than a flash in the musicians’ pan. It has taken a global financial crisis combined with the stellar growth of businesses such as Google, Facebook and Twitter to make the business community aware that there are alternative ways for small businesses in particular to raise the finances they need to become established and successful. 

Government Backing

Now crowd funding is moving into the mainstream, particularly here in the UK where such investments in return for share capital is permitted and schemes such as EIS actively encourage angel investors to support small business growth. Even recent noises from government seem to be encouraging crowd funding as a legitimate alternative to hard-to-find and expensive bank lending. And as its popularity starts to increase, people who would not have thought of themselves as traditional business investors are interested in getting into potential high growth companies at an early stage hoping they become significant game changers. With investment levels starting at £10 the new investment community could become massive with everyone becoming a potential 'armchair dragon' and supporting small business growth in the UK.

First North East Business now on Crowdcube

UK businesses such as uBrands are ideally placed to benefit from such financing. Not only does the business have a strong base build on extensive IPR and trademarks but it has found a niche opportunity that will change the way small businesses across the globe attract their customers. It just needs the funds to make it happen. Sites such as crowdcube.com are the perfect place to bring together this new investor community with the small business with great thinking that need access to finance. Welcome to the brave new world of crowd funding. Or as Marillion might say, ‘A penny for your thoughts’.